Delhi HC stays guidelines barring levying of service charge by restaurants & hotels

The Delhi High Court on Wednesday stayed the recent guidelines issued by the Central Consumer Protection Authority (CCPA) prohibiting restaurants and hotels from levying service charge on food bills.

Justice Yashwant Varma, while dealing with petitions by the National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India challenging the CCPA's July 4 guidelines, said the issue requires consideration and directed the authorities to file their reply.

Meanwhile, government sources told CNBC-TV18 that they were waiting for the exact written order given by the High Court on the service charge matter. "The CCPA guidelines are extremely clear. They were issued to protect, strengthen and safeguard the consumer rights. If required, the CCPA will file and appeal against any adverse observation by the HC," the sources said, adding that the HC observations are unfortunate as they are diluting consumer rights.

The Central Consumer Protection Authority (CCPA) on July 4 barred hotels and restaurants from levying service charge on customers and issued guidelines in this regard to prevent unfair trade practices and protect the interest of the consumers.

"The matter requires consideration. Consequently, until the next date of listing the directions as contained in para 7 of the impugned guideline of July 4, 2022, shall remain stayed," the court ordered on Wednesday.

The court said that the stay is subject to the members of the petitioners ensuring that the levy of service charge in addition to the price and taxes and obligation of a customer to pay the same is duly and prominently displayed on the menu or other places.

Further, the members will also not levy service charges on any take-away items, it added. "If you don't want to pay, don't enter the restaurant. It is ultimately a question of choice. I have stayed the para 7 guidelines subject to these two conditions," the court said.

The court listed the matter for further hearing on November 25. The NRAI has claimed in the petition that the prohibition under the July 4 order was arbitrary, untenable and ought to be quashed as it has been issued without an appreciation of the facts and circumstances.

"The NRAI has always been steadfast in its assertion that there is nothing illegal in levying of service charge and it is a very transparent system. We are very glad that the Delhi High Court has upheld and confirmed this view," the National Restaurant Association of India (NRAI) said in a statement.