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5mo ago

Delhi High Court Upholds Ban on Mandatory Service Charges in Restaurants

The court ruled that service charges must be voluntary, dismissed industry petitions, and imposed penalties for consumer rights violations.

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 affirmed the Central Consumer Protection Authority's (CCPA) 2022 guidelines prohibiting automatic service charges on food bills.
  • Justice Prathiba M Singh ruled that mandatory service charges violate consumer rights and constitute unfair trade practices.
  • Petitions from the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI) challenging the guidelines were dismissed.
  • The court imposed penalties of ₹1 lakh each on the FHRAI and NRAI, to be used for consumer welfare initiatives.
  • The ruling clarified that service charges are voluntary and allowed the CCPA to rename them as 'voluntary contribution' or 'staff contribution' to avoid consumer confusion.