The Delhi High Court has reserved its judgment on petitions from restaurant bodies contesting the CCPA’s prohibition on automatic service charges. The FHRAI argued that the CCPA overstepped its jurisdiction, while the Centre claimed the service charges often lacked justification for the benefit provided. The court previously stayed the CCPA’s guidelines, allowing service charges to continue temporarily.
New Delhi: The Delhi High Court on Friday (Dec 13th) reserved its verdict on petitions filed by restaurant bodies challenging the guidelines that prohibit hotels and restaurants from automatically levying service charges on food bills. Justice Prathiba M. Singh, after hearing arguments, announced, “Arguments heard. Judgment reserved.“
The petitions were filed in 2022 by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI), challenging the guidelines issued by the Central Consumer Protection Authority (CCPA) on July 4, 2022. The guidelines were temporarily stayed by the Delhi High Court later that month, allowing restaurants to continue imposing service charges until further notice.
In their submissions on Friday, FHRAI’s counsel argued that the CCPA had no jurisdiction to impose such a ban without following the principles of natural justice. He contended that merely holding a meeting with industry bodies was insufficient to comply with natural justice, and that the guidelines should only be advisory in nature. The counsel also emphasized that the service charge was levied to benefit restaurant staff, which aligned with the owners’ fundamental right to conduct their business.
On the other hand, the Centre’s standing counsel argued that the petitioners failed to provide any evidence demonstrating that the service charge actually benefitted the staff. The CCPA’s counter-affidavit stated that the petitioners had “totally failed” to recognize the rights of consumers, who were often charged an automatic service fee without adequate service in return.
The CCPA described the mandatory collection of the service charge as “unlawful,” as it argued no proportionate service was being provided to customers in exchange for the additional charge.
The petitioners maintain that the service charge was a longstanding practice, prominently displayed on menu cards and restaurant premises, and that it was an accepted traditional charge that had been in place for years. They have requested that the CCPA’s order be quashed, calling it arbitrary and untenable.
In a prior order, the Delhi High Court had stayed the CCPA’s guidelines, with the condition that restaurants clearly display the obligation for customers to pay the service charge, alongside the price of food and applicable taxes, on menus and other visible places.
FOLLOW US ON YOUTUBE FOR MORE LEGAL UPDATES
