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4w ago

Delhi High Court Upholds Ban on Mandatory Service Charges in Restaurants

The court ruled that service charges must remain voluntary, dismissing industry petitions and reinforcing consumer rights under the CCPA guidelines.

The high court said that the imposition of a service charge in a mandatory manner is “violative of consumer rights and the collection of service charge in various names amounts to unfair trade practices.”
Eateries can’t impose service charge, rules Delhi high court (Representative image)
The high court observed that the imposition of a service charge in a compulsory manner is violative of consumer rights and the collection of service charge in various names amounts to unfair trade practices.
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Overview

  • The Delhi High Court upheld the Central Consumer Protection Authority's 2022 guidelines prohibiting automatic service charges in restaurants and hotels.
  • Justice Prathiba M Singh ruled that mandatory service charges violate consumer rights and constitute unfair trade practices.
  • The court dismissed petitions from the FHRAI and NRAI challenging the guidelines and imposed a penalty of ₹1 lakh on each organization for consumer welfare.
  • Service charges and tips are deemed voluntary, with the court emphasizing that they cannot be misleadingly presented as government-imposed taxes like GST.
  • The ruling affirms the CCPA's authority under the Consumer Protection Act, 2019, to enforce guidelines protecting consumers from unfair contracts and practices.