Delhi HC stays service charge guidelines; notice to CCPA, Consumer Affairs Ministry

New Delhi [India], July 20 : The Delhi High court on Wednesday stayed the operation of guidelines issued by the Central Consumer Protection Authority (CCPA) restraining the levying of service charge by restaurants and hotels.
The High court also issued notice on the petition challenging the guidelines.
Justice Yashwant Varma issued notice to the Ministry of consumer affairs, CCPA on the petition moved by the Federation of hotels and restaurants of India (FHRI).
The High court directed the respondents to file their reply by the next date of hearing on November 25, 2022.
The High court while issuing the notice set down conditions that restaurants prominently display the service charge component in the price of the food.
Restaurants will not charge service charge on takeaway or delivery of food, the High court said.
The counsel for CCPA while objecting said, "Consumers should not be forced to pay. Anything beyond the maximum retail price (MRP) is unfair trade practice. The guidelines were issued to protect the right of the consumer."
The counsel also said that various complaints were received that restaurants were restraining the entry of customers who were not paying the service charge.
HC said, " It's a matter of choice. Don't enter the restaurant if you don't want to pay."
The petition moved by FHRI stated that CCPA can only issue guidelines and the latest guidelines restraining levying of service charge is arbitrary.
The high court noted that the main objection that seems to be taken by the CCPA is the levy of charge in addition to the price of the items.
According to the CCPA, charging anything beyond the printed amount is unfair trade practice.
On the other hand, the counsel for the petitioner said that the report of the 1968 Wage grievance board had recommended the implementation of service charges. That allowed a levy of service charge of 5-10% of the bill. That collection was to be distributed 45% of the collection to the workmen, and a percentage to the workmen welfare fund.
On a more fundamental claim, the court noted that there would be serious doubts as to whether the service charge would fall within the ambit of the consumer protection act, particularly in light of the NCDRC order where the commission had upheld the service charge.
This matter requires consideration, the high court said.
Another similar petition challenging the new guidelines is also pending before the bench. This petition has been moved by the National Restaurant Association of India (NRAI). This petition is also fixed for hearing on November 25, 2022.