The Delhi High Court (HC) has taken a stern stance against non-compliance with service charge directives by restaurants and hotel associations. The court on Thursday (July 27) imposed a hefty penalty of Rs 1 lakh on both the National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI) for their failure to adhere to the prescribed guidelines pertaining to service charge collections.
The imposed penalty is to be paid to the Department of Consumer Affairs, Government of India.
The court's decision was prompted by a rising tide of complaints from consumers concerning the mandatory levying of service charges, which all too often remain obscured as hidden costs even in the face of subpar service quality.
Since the issuance of guidelines by the Central Consumer Protection Authority (CCPA), over 4,000 complaints have been registered on the National Consumer Helpline (NCH), indicating the magnitude of the issue faced by consumers across the country.
The court's previous order from April 12, 2023, had mandated that both associations submit a comprehensive list of their members supporting the present writ petitions by 30 April, 2023. Additionally, they were required to file specific affidavits addressing various aspects related to service charge imposition.
These included disclosing the percentage of members imposing service charge as a mandatory condition on bills, indicating their stance on replacing the term "service charge" with alternative names to prevent confusion, and revealing the percentage of members willing to make service charge voluntary, allowing consumers the option to contribute willingly up to a maximum percentage.
Despite these clear directions, both the NRAI and FHRAI failed to file the necessary affidavits within the given timeframe, leading to the impression of complete non-compliance with the court's orders.
As a final chance to rectify their actions, the court granted a four-day extension for submitting the affidavits. However, to emphasise the seriousness of the matter, the court mandated that each association must pay Rs 1,00,000 as costs in each of the petitions.
This amount is to be deposited with the Pay and Accounts Office of the Department of Consumer Affairs in New Delhi via Demand Draft. Failure to comply with this directive will result in the affidavits not being accepted.
The ongoing case has exposed several complaints from consumers registered on the NCH regarding the forceful collection of service charge since the issuance of guidelines by the CCPA in July 2022. Over 4,000 complaints have been lodged, shedding light on several issues:
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