Delhi High Court Adjourns Appeal Against Order Precluding Restaurants From Levying Mandatory Service Charge, Says 'Board Very Heavy'

The Delhi High Court on Friday said that it will hear on May 23 the appeals filed against a single judge ruling which held that service charge and tips are voluntary payments by consumers and cannot be made compulsory or mandatory on food bills by restaurants or hotels.

The appeals have been filed by National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India (FHRAI).

A division bench comprising Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela could not take up the matter today as it was hearing a time fixed batch of petitions in the post lunch session.

The appeals were listed as items 4 and 5 in the advanced list.

Senior Advocate Siddharth Luthra appeared for the restaurant bodies and requested the Court to list the matter at the earliest as they were praying for interim relief- of staying the ruling.

“Our board is very heavy,” said the Bench on Luthra's urgency request. The Court initially said that the matter will have to go after the vacations but thereafter listed it on May 23.

The appeals were listed for the first time before the Court on April 29 but could not be heard VC system of the Court was facing technical issues.

In March, the single judge rejected the pleas filed by the restaurant bodies challenging CCPA guidelines of 2022 prohibiting hotels and restaurants from levying service charges “automatically or by default” on food bills.

Upholding the guidelines, the single judge had dismissed the writ petitions with Rs. 1 lakh each to be deposited with CCPA for utilization for consumer welfare.

The single judge had clarified that mandatory collection of service charge on food bills is contrary to law and if consumers wish to pay any voluntary tip, the same is not barred. The amount however, ought not to be added by default in the bill/invoice and should be left to the customer's discretion, it added.

The single judge had observed that the manner of enforcement of payment of service charge is coercive in nature as in some cases, it is confused by the customers with service tax or a mandatory tax imposed by the government.

It had held that collecting a mandatory service charge as a matter of default without giving a choice to the consumer, cannot be contended to be contractually binding in nature.

The single judge had asked the CCPA to consider permitting change in the nomenclature for Service Charge which is nothing but a 'Tip or a gratuity or a voluntary contribution'. It said that terminology such as 'voluntary contribution', 'staff contribution', 'staff welfare fund' or similar terminology can be permitted.

Title: National Restaurant Association v. Union Of India & Anr