Restaurants Can't Levy Mandatory Service Charge in Food Bills: Delhi High Court

SN Thyagarajan (Bar and Bench) 28 March 2025

Consumer Interest

The Delhi High Court on Friday upheld guidelines issued by the Central Consumer Protection Authority (CCPA) in 2022 stipulating that hotels and restaurants should not add service charge automatically or by default to food bills.

Justice Prathiba M Singh imposed costs of 1 lakh on the restaurant associations that challenged the guideline.

The order was passed on pleas filed by the National Restaurants Association of India (NRAI) and the Federation of Hotel and Restaurant Association of India (FHRAI). These guidelines were stayed by the High Court on July 20, 2022.

The CCPA had issued guidelines with the aim of preventing unfair trade practices and violation of consumer rights.

The guidelines stipulated the following:

Hotels or restaurant shall not add service charge automatically or by default in the food bill;
No collection of service charge shall be done by any other name;
No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion;
No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers; and
Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.

The plea by NRAI contended that there is no law which disallows restaurants from levying service charge and there has been no amendment to the existing laws which would render levy of the service charge illegal.

"In the absence of due authentication and promulgation of the guidelines, the contents thereof cannot be treated as an order of the Government," the plea stated.

The petitioner-association contended that the guidelines are arbitrary, untenable and ought to be set aside.

Courtesy: Bar & Bench (https://www.barandbench.com/news/litigation/restaurants-cant-levy-mandatory-service-charge-in-food-bills-delhi-high-court)

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