Consumer Connect: 'No Restaurant Should Collect Service Charge From Consumers,' Says Expert

Q. I recently read in the newspapers that the Delhi HC has declared the collection of ‘service charges’ in hotels and restaurants illegal. I thought the Hotel & Restaurants’ Associations might have instructed all their members not to charge the same. However, the same old practice is being done against the customers’ wishes. In one restaurant, when I objected, the manager agreed to remove the service charge and issued a fresh bill without it. In another restaurant in Navi Mumbai, the manager refused, stating they had mentioned a 5% service charge in the menu, making it binding. He also claimed the judgment is of the Delhi HC and not applicable in Maharashtra. I, therefore, want to know: (a) Is the Delhi HC judgment applicable in Maharashtra? (b) Is the customer bound by the service charges mentioned in the menu card? (c) If hotels and restaurants continue to recover service charges, where should they complain?

— Yogesh Joshi, Panvel

A. The Delhi HC dismissed the writ petitions of the National Restaurant Association of India and the Federation of Hotel & Restaurant Associations of India challenging the Central Consumer Protection Authority’s (CCPA) Guidelines July 4, 2022 under the Consumer Protection Act, 2019 (CPA, 2019). The CCPA’s guidelines prohibit the automatic inclusion of service charges, treating it as a “restrictive trade practice.” They mandate that service charges must be voluntary, optional, and clearly communicated to consumers.

The Delhi High Court upheld these guidelines, imposing an exemplary cost of Rs 1 lakh each on the petitioner associations for consumer welfare. To answer your first question on the applicability of the Delhi High Court judgment in Maharashtra, I quote para 176 of this judgment which explicitly states, “All restaurant establishments would have to adhere to the guidelines passed by CCPA. If there is any violation of the same, action would be liable to be taken by law. CCPA is free to enforce its guidelines by law.” Thus, this judgment is applicable all over India and not restricted to the Delhi region alone.

Your second question — that with the mention of a certain amount of service charge in the menu card, the consumer is bound by such a term — has been specifically answered by the Delhi HC in para 174 (vi) of the judgment. It reads thus: “The fact that service charge can be collected as it forms part of a voluntary contract/agreement made by the consumer who enters the establishment and avails service after seeing the chargeability of service charge on the menu card is an argument not tenable, as such a condition is onerous and constitutes an unfair contractual condition under section 2 (46) of the CPA, 2019.”

Hence, now onwards, such mention that “we collect 5% or 10% service charge” has to be removed from the hotel menu cards. In case any hotel/restaurant is now found to be including and recovering service charges through their bills, it is a violation of guidelines issued under CPA, 2019, and hence actionable. If anyone has a complaint about recovering service charges through the bill against their wishes, they can complain with the National Consumer Helpline (NCH) on 1915 along with a copy of the bill and the full name and address of such a restaurant.

Alternatively, they can complain directly to the CCPA at ccpa-doca@gov.in with a copy to Mumbai Grahak Panchayat at mpanchayat@gmail.com, enclosing a copy of the bill. It was the Mumbai Grahak Panchayat (MGP) that had pursued this issue since 2017 with the Department of Consumer Affairs and then with the CCPA. MGP will, therefore, continue monitoring the implementation of these guidelines in the near future as well.

(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)