The National Restaurant Association of India (NRAI) informed the Delhi High Court on October 3 that no law in the country bans restaurants from imposing a service charge along with the food bill.
Lawyer Lalit Bhasin, who represented the NRAI, argued that the service charge is an agreement between restaurant management and its staff, making it a labor issue that can only be addressed by labor authorities. According to Bhasin, the Department of Consumer Affairs lacks jurisdiction to issue a directive prohibiting restaurants from imposing service charges.
Bhasin contended that Labor Courts and the Monopolies and Restrictive Trade Practices (MRTP) Commission have upheld the practice of restaurants levying service charges. He further emphasized that a service charge can be applied as long as the customer is informed about it. However, the NRAI clarified to the court that they do not endorse the inclusion of a 'hidden service charge' on the bill without the customer's knowledge.
The hearing of the case is likely to continue on November 8 and 9. The Federation of Hotel and Restaurant Associations of India (FHRAI) is also expected to advance its arguments on November 8.
The above transpired in writ petitions by FHRAI and NRAI challenging the guidelines of the Central Consumer Protection Authority (CCPA), which barred the levy of service charges by restaurants.
On September 5, Delhi HC permitted restaurants and hotels affiliated to the Federation of Hotel and Restaurant Associations of India (FHRAI) a 'staff contribution' in the place of service charge.
Justice Prathiba Singh, who passed the order, however, made it clear that this was only an interim order and not a final one. The judge further capped the levy of staff contribution to 10 percent of the bill and directed the restaurants to mention the same in their menu cards. The order is restricted only to members of FHRAI and does not apply to members of associations such as the National Restaurant Association of India (NRAI).
In July 2023, the Delhi HC fined FHRAI and NRAI Rs 1 lakh each for not complying with its orders.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
