The Delhi High Court recently postponed an appeal against a ruling that prohibited restaurants and hotels from imposing mandatory service charges on food bills. The appeal, which was filed by the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI), will be heard on May 23.
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The division bench, led by Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela, was unable to hear the appeal on the scheduled date as it was preoccupied with a batch of petitions in the post-lunch session. Senior Advocate Siddharth Luthra, representing the restaurant bodies, requested the Court to list the matter urgently, citing the need for an interim relief to stay the ruling.
The Court acknowledged the urgency of the request, but also noted that its schedule was quite heavy. “Our board is very heavy,” said the bench in response. Despite this, the matter was eventually listed for May 23.
This appeal follows a March ruling from a single judge, who dismissed the NRAI and FHRAI’s petitions challenging the guidelines issued by the Central Consumer Protection Authority (CCPA) in 2022. The guidelines prohibit the automatic or default inclusion of service charges on food bills. The single judge ruled that such charges are voluntary and cannot be made mandatory for consumers.
The ruling also noted that if consumers wish to leave a tip, it should be done voluntarily and should not be automatically added to the bill. Furthermore, the judge stated that the mandatory collection of service charges often confuses customers, with some mistakenly viewing it as a government-imposed tax.
“Mandatory collection of service charge as a matter of default without giving a choice to the consumer cannot be contended to be contractually binding in nature,” the judge stated.
The single judge also suggested that the CCPA could consider changing the terminology used for service charges, allowing terms like “voluntary contribution,” “staff welfare fund,” or “tip” instead.
With the appeal scheduled for May 23, the future of service charge regulations in restaurants and hotels remains uncertain.
Title: National Restaurant Association v. Union Of India & Anr
