The Delhi High Court has imposed a fine of Rs 1,00,000 on restaurant and hotel associations for failing to comply with its directions on service charge as per an order issued on April 12. The cost will have to be paid to the department of consumer affairs.
The National Consumer Helpline has received more than 4,000 complaints against service charges levied by hotels and restaurants, since the Central Consumer Protection Authority (CCPA) issued guidelines to ban the practice altogether in July last year. The high court had stayed the ban on April 12 but made it clear that the stay order cannot be shown by restaurants to customers in a manner that suggests that the charge was approved by the court.
The levy of service charge has long been a contentious issue after the HC stayed the ban issued by the CCPA, which has led to a lot of confusion among customers on whether they have to pay the service charges or refuse to do so. An argument between customers and restaurant staff over this also led to a brawl at a Noida restaurant last month.
The CCPA’s ban was challenged by National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations (FHRAI). The HC, however, after issuing the stay order said it was subject to petitioners ensuring that the levy of service charges, in addition to the price and taxes, and the obligation of the customer to pay the same is duly and prominently displayed on the menu or other places.
The court passed the order on July 24, directing NRAI and FHRAI to pay Rs 1,00,000 each as costs for complete non-compliance of directions as per its order dated April 12. Here is what the HC order directed:
- Both associations shall file a complete list of all their members supporting the present writ petitions by April 30
- Both associations shall place their stand and file a specific affidavit on the following aspects: Percentage of members who impose service charge as a mandatory condition in their bills; whether the associations shall have objection in the term service charge being replaced with alternative terminology so as to prevent confusion in the minds of the consumer that it is not a government levy; and percentage of members willing to make service charge as voluntary and not mandatory, with option to the consumer to make a contribution to the extent that they are voluntarily willing subject to a maximum percentage that may be charged.
The HC observed that the hotel and restaurant associations had not filed the required affidavits for necessary compliance of the directions. It noted that because of this, it was clear that the associations are in complete non-compliance of its orders on April 12.
The court granted one last opportunity to the associations to properly file these affidavits in four days subject to a payment of Rs 1,00,000 as costs in each of the petitions. If, even after this, there is any non-compliance, it will result in the affidavits not being taken on record. The matter is now up for hearing on September 5.
Since the guidelines issued by the CCPA in July 2022, over 4,000 complaints have been registered. Here is what a majority of consumers have to say:
- Forcing consumers to pay service charge involuntarily even when they are dissatisfied with the service provided by the restaurant/hotel
- Making payment of service charge mandatory
- Portraying service charge as a charge levied by or has the approval of the government
- Embarrassing and harassing consumers, including by bouncers, in case they resist paying service charge
- Charging exorbitant amount of money in the name of such charge as 15% or 14%
- Service charge has also been collected by disguising it under other terms such as ‘S/C.’, ‘SC’, ‘S.C.R.’ or ‘S. CHARGE’.
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