HC: Dont display verdict allowing service charge on restaurant menus
Justice Prathiba M Singh gave the clarification after the court was informed that various restaurants are “misinterpreting the interim order” by using it to give legitimacy to levy of the service charge
The Delhi high court on Wednesday clarified that its interim order, allowing restaurants across the country to automatically charge service charge above the bill, will not be displayed on the menu cards or on display boards in a manner to mislead the consumers that service charge has been finally approved by the court.
Justice Prathiba M Singh gave the clarification after taking note of submissions by additional solicitor general (ASG) Chetan Sharma, appearing for the Central Consumer Protection Authority (CCPA), that various restaurants are “misinterpreting the interim order” by using it to give legitimacy to levy of the service charge.
“It is clarified that the interim order shall not be shown in the display board or menu card in a manner to mislead the consumer that the service charge has been approved by this court,” the judge said.
The court’s clarification came while hearing pleas by the National Restaurant Association of India (NRAI) and the Federation of Indian Hotels and Restaurants (FIHR) against the July 4, 2022 guidelines issued by the CCPA that barred restaurants from automatically adding service charges to food bills — the latest chapter of a controversy that has raged for years.
During the hearing, the court asked the petitioner associations to figure out with its members and pass a resolution on whether any alternate terminology such as staff welfare charge could be used for describing service charge on the menu card, so that it does not look like a government levy.
“For a long time, most of us thought that the service charge is being taken by the government. That is where the problem is because people think service charge is like a service tax. A consumer doesn’t know the difference between service tax, GST etc. because people think it is being taken by the government. I have come across a lot of people who think like that,” justice Singh observed.
Posting the matter for further hearing on July 24, the court also directed the petitioners to file within two weeks, a complete list of all the members who support the petitions.
Appearing for the petitioners, counsel Sameer Parikh and Lalit Bhasin told the court that the ban on collecting service charge infringes on their right to free trade.
“The establishment ought to have the freedom to price its goods in the manner it so chooses, either at the price of the food product itself or distributing it between the product and the service charge,” Parikh said.
Bhasin told the court that the practice of levying service charge has been going on for the last 80-90 years, and has been recognised by the Supreme Court and various high courts over the year.
Earlier, on July 20, 2022, a single judge bench of the high court had put on hold guidelines issued by the CCPA that barred restaurants from automatically adding service charges to bills. The court said all eateries must prominently display the levy of service charge on menus and other places. The court also recorded a submission by counsels of the petitioners that they would not impose this charge on takeaway orders.
Challenging the order, the CCPA contended that a consumer should not be forced to pay service charges. However, on August 18, 2022, a division bench of chief justice Satish Chandra Sharma and justice Subramonium Prasad, declined to stay the single judge’s order and asked the CCPA to voice their grievance before the single judge.