On row over service charge at restaurants, Delhi high court has a suggestion
Justice Pratibha Singh asked restaurant owners to discuss the issue among themselves and see if an alternative terminology such as staff welfare charge or fund could be used to describe the current ‘service charge’
NEW DELHI: The Delhi high court on Wednesday told restaurant owners not to display the court’s interim order relating to a service charge on their menu cards or display boards in a manner to mislead the consumers that the service charge has been finally approved by the court.
The court also asked them to explore if they could use a different phrase for the charge that didn’t appear to be 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 that 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 Pratibha Singh observed in course of Wednesday’s hearing.
The bench asked the restaurant owners to discuss the issue among themselves and see if an alternative terminology such as staff welfare charge or fund could be used to describe the current ‘service charge’ so that it does not look like a government levy.
Justice Singh also took note of additional solicitor general Chetan Sharma’s submission on behalf of the Central Consumer Protection Authority (CCPA) that restaurants were ‘misinterpreting” the high court’s “interim order’ and publicising it as if the court has approved the levy of service charge.
“It is clarified that the interim order shall not be shown on the display board or menu card in a manner to mislead the consumer that the service charge has been approved by this court, “ justice Singh said after Sharma shared photographs of boards put up by restaurants that referred to the high court ruling.
For years, the government and consumer bodies have argued that a service charge is illegal even as the restaurant lobby has claimed that it is standard practice in the hospitality industry. On July 4, 2022, the CCPA formalised its stand when the authority issued a notification that barred restaurants from automatically adding service charges to food bills.
On July 20, 2022, the high court put the CCPA order on hold following petitions by the National Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI). The CCPA challenged this decision, contending that the single-judge bench of justice Yashwant Varma passed the order in “haste” and without giving them enough opportunity to present their stand.
The division bench remitted the case back to a single judge.
In course of the hearing on Wednesday, justice Singh told the NRAI and FHRAI to file affidavits within two weeks that indicate the percentage of their members who impose the service charge as a mandatory condition on food bills and members who support its petitions.
“The affidavit shall also indicate the percentage of members who are willing to inform the consumers that the service charge is not mandatory and they can contribute voluntarily, “ the court said in its oral order.
The case will be taken up next on July 24.