Today, On 28th March, The Delhi High Court ruled that service charges on food bills are voluntary and cannot be imposed mandatorily by restaurants. The court emphasized that customers have the right to choose whether to pay the charge. It rejected any practice of forcing diners to bear additional costs. This decision reinforces consumer rights in the hospitality sector.
New Delhi: The Delhi High Court ruled on Friday that the imposition of a service charge on food bills is at the discretion of customers, and establishments cannot force Customers to pay it.
Justice Prathiba M Singh issued the verdict while dismissing petitions from restaurant associations that challenged the Central Consumer Protection Authority’s directives, which prohibited hotels and restaurants from mandating service charges.
The bench stated,
“Restaurants are not permitted to impose a mandatory service charge on food bills, as this violates the rules of the Consumer Protection Act,”
The high court affirmed the validity of the Central Consumer Protection Authority (CCPA) guideline that instructs restaurants not to include a service charge in the bill.
Also Read: Delhi HC Reserves Verdict on Restaurant Petition Against Service Charge Guidelines
In December 2024, the high court had reserved its judgment on the petitions from restaurant bodies contesting the guidelines that prohibit hotels and restaurants from automatically charging a service fee on food.
The establishments aimed to overturn these regulatory guidelines, which clearly forbade the compulsory collection of service charges from customers.
The Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI) approached the court in 2022 with two separate petitions.
The guidelines issued by the Central Consumer Protection Authority (CCPA) on July 4, 2022, were temporarily suspended by the high court later that same month. In his rebuttal submissions, the counsel for FHRAI argued that the CCPA lacked the authority or jurisdiction to enforce such a ban without adhering to the principles of natural justice.
A service charge on food bills is an additional fee that restaurants may add to a customer’s bill for services provided, such as table service.
However, it differs from a tip, which is voluntary and given directly to staff. In India, the Delhi High Court has ruled that service charges are voluntary, meaning restaurants cannot mandate them or enforce payment. Customers have the right to refuse a service charge if they do not wish to pay it.
Many restaurants automatically include a service charge ranging from 5% to 15% on food bills, leading to complaints from customers. The Central Consumer Protection Authority (CCPA) had previously issued guidelines in July 2022, stating that restaurants cannot force customers to pay a service charge.
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However, several restaurant associations challenged these guidelines, arguing that the charge was essential to compensate staff and maintain service quality. Despite this, the Delhi High Court has now ruled that while restaurants can suggest a service charge, customers must have the option to refuse it if they choose.
Key Provisions and Legal Standpoint
- Voluntary Nature: The court emphasized that service charges are not a legal requirement and should be left to the discretion of diners.
- Consumer Protection: The ruling aligns with the Consumer Protection Act, 2019, which safeguards consumers against unfair trade practices.
- Transparency: Restaurants must inform customers upfront about the voluntary nature of service charges and cannot include them by default.
Also Read: Karnataka HC Upholds 5% Service Charge for App-Based Auto Rickshaw Rides
This ruling strengthens consumer rights, ensuring that no diner is compelled to pay an extra charge beyond the food and GST.
Consumers are encouraged to report violations to consumer forums if restaurants impose service charges without consent.
Consumer rights protection refers to laws and regulations that safeguard consumers from unfair business practices, fraud, and exploitation. Governments and regulatory bodies enforce these protections to ensure fair trade, transparency, and accountability in the marketplace.
The FHRAI represented by a team of advocates including Sameer Parekh, Sumit Goel, Sonal Gupta, Swati Bhardwaj, and Abhishek Thakral.
On the other hand, the Union of India was represented by Central Government Standing Counsel Sandeep Mahapatra and Ashish Dixit, along with advocates Abhinav Bansal, Vikramaditya Singh Tribhuvan, Shubham Sharma, Amit Gupta, Ishan Malhotra, Chandan, Deepak Tanwar, and Shivam Tiwari.