Delhi HC slaps Rs 2 lakh penalty on two restaurant association on service charge plea

The Delhi High Court has imposed a penalty of Rs 2 lakh on two restaurant associations for their failure to disclose the complete list of members who levy service charge as a mandatory condition and those who do it voluntarily. As per a ToI report, the Federation of Hotel and Restaurant Associations of India (FHRAI) has already deposited the fine of Rs 1 lakh with the Department of Consumer Affairs.

The court's decision came in response to a plea filed by FHRAI and the National Restaurant Association of India (NRAI), challenging the guidelines issued by the Central Consumer Protection Authority (CCPA), which prohibited hotels and restaurants from automatically levying service charges on food bills.

Back in April, the court had directed both associations to provide a complete list of their members supporting the petitions and disclose the percentage of members imposing service charges mandatorily and those who were willing to make it a voluntary contribution. It also sought their opinion on replacing the term 'service charge' with alternative terminology such as 'staff welfare fund' to avoid consumer confusion regarding the nature of the charge.


However, in the order passed on July 24, Justice Prathiba M Singh noted that the petitioners were in "complete non-compliance" with the directions and had filed their affidavits without properly serving the Centre, seemingly attempting to hinder the proceedings. The court granted one last chance to the associations to submit the affidavits correctly.

Rohit Kumar Singh, the Union consumer affairs secretary, told ToI that the fine imposed by the Delhi HC had been paid by the association and deposited in the Consumer Welfare Fund (CWF). He also emphasized that all restaurants should immediately cease levying service charges.

The Consumer Affairs Department reported that since the CCPA's issuance of service charge guidelines in July 2022, the National Consumer Helpline has received over 4,000 complaints. Consumers have raised concerns about being forced to pay service charges even when dissatisfied with the service and being charged under different names like 'S/C', 'SC', 'SCR', or 'S CHARGE'.