Delhi High Court Rules Against Compulsory Service Charges in Restaurants

The Delhi High Court has deemed the mandatory service charge on food bills as unlawful, asserting consumer rights. The court dismissed petitions from restaurant associations and backed CCPA guidelines, emphasizing fair consumer treatment. The ruling supports voluntary tipping and imposes penalties on petitioners.

The Delhi High Court has ruled that service charges on food bills in restaurants are voluntary, dismissing petitions from industry bodies challenging Central Consumer Protection Authority (CCPA) guidelines. This decision marks a significant win for consumer rights, ensuring customers are not obligated to pay service charges.

Justice Prathiba M Singh's judgment emphasized that mandatory service charges mislead consumers, suggesting unfair trade practices by equating them with GST or service tax. The court rebuked the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI), imposing a Rs 1 lakh penalty on each for ignoring consumer welfare.

The CCPA guidelines were initially stayed in 2022 but have now been upheld as the court affirmed the authority's role in curbing unfair practices. While restaurants argued service charges benefited staff, the court found no supporting evidence. This verdict underscores the precedence of consumer rights over commercial interests in trade practices.

(With inputs from agencies.)