Judge Pratibha M Singh gave this verdict while dismissing the petition filed by restaurant associations challenging the guidelines of the Central Consumer Protection Authority (CCPA).
The Delhi High Court has given a big decision on Friday. The High Court said that payment of service charge on food bill is not mandatory and it cannot be collected by the restaurant or hotel at its own will. The court said in its order that its collection is akin to unfair trade practice.
While giving this verdict, Judge Pratibha M Singh dismissed the petitions filed by restaurant associations challenging the guidelines of the Central Consumer Protection Authority (CCPA). In this petition, the order of CCPA was described as arbitrary. On which the court said that the rules of CCPA should be followed. Service charge cannot be charged compulsorily on the food bill of hotels and restaurants. It depends on the will of the customers.
The High Court also imposed a fine of Rs 1 lakh on the restaurant association challenging the CCPA guidelines. The High Court upheld the guidelines of CCPA and said that the authority is not only an advisory body, but it has the right to issue guidelines for the prevention of unfair trade practices and protection of consumer interests.
What instructions did the CCPA give in the year 2022
The CCPA had issued guidelines in 2022, directing that restaurants cannot automatically or by default add a service charge to the food bill, nor can it be hidden under any other name. The CCPA said that hotels and restaurants are also prohibited from forcing consumers to pay service charge and they should clearly state that it is voluntary, optional and entirely at the discretion of the consumer.
According to legal news portal Bar & Bench, the authority had further directed that no restriction can be imposed on entry or service on the basis of service charge collection and the service charge cannot be added to the food bill and cannot be subjected to GST on the total amount.
The High Court rejected the objections to these guidelines and upheld the decision. The High Court said that the CCPA is an authority that has the right to pass guidelines under the CPA 2019. Issuing guidelines is an essential function of the CCPA. It must be mandatorily complied with.
Authority’s instructions are arbitrary: Restaurant Association
The bench also said that mandatory collection creates an impression among consumers that they are paying service tax or GST. Restaurant associations argued that the guidelines are arbitrary and capricious. They also said that the instructions cannot be considered as government orders.
