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The Times of India
The Times of India
Abhinav Garg and Dipak K Dash | TNN

Delhi HC stays service charge order, relief for hotels & restaurants

NEW DELHI: In a major relief for hotel and restaurant owners, Delhi High Court on Wednesday stayed the Centre’s recent guidelines prohibiting them from levying service charge automatically on food bills. However, it directed hotels and restaurants not to levy service charge on takeaway items.

Justice Yashwant Varma, hearing petitions by National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India (FHRAI) challenging the July 4 guidelines of Central Consumer Protection Authority (CCPA), said the issue requires consideration and directed the authorities to file their reply.

“Until the next date of listing, the directions as contained in para 7 of the impugned guideline of July 4, 2022 shall remain stayed,” HC said.

Listing the matter for November 25, it said the guidelines will remain on hold till then, provided the members of these associations ensure that the levy of service charge in addition to the price and taxes as an obligation for customers to pay is “duly and prominently” displayed on the menu or other places.

However, the CCPA counsel opposed the plea saying “consumers should not be forced to pay. Anything beyond the maximum retail price is unfair trade practice. The guidelines were issued to protect the rights of the consumer”. It added it has received several complaints that restaurants were restraining the entry of customers who were unwilling to pay this charge.

“If you don’t want to pay, don’t enter the restaurant. It is ultimately a question of choice. I have stayed the para 7 guidelines subject to these two conditions,” the court observed. CCPA said it is examining the HC order and “will take legal advice for appropriate action”.

FHRAI vice-president Gurbaxish Singh Kohli said the order offers huge relief to the hospitality industry. “FHRAI had filed its writ petition in Delhi HC contesting CCPA’s guidelines as it was curtailing hospitality establishments’ right to conduct business in the manner suitable to them. It is entirely the prerogative of a hotel or a restaurant to decide on the structure of the menu and its pricing to best suit the business model. Hotels are also bound by wages contracts with employees which specify benefits of service charge. FHRAI and its members will ensure patrons are well informed about the levy of service charge.”

NRAI had said in its plea the July 4 order was “arbitrary, untenable and ought to be quashed”. “The service charge is the management’s decision and is displayed on the menu card. Once the customer places the order after being made aware of the terms and conditions, there comes into existence a binding contract. No authority can interfere with it unless it is proved to be unconscionable or is an unfair trade practice,” the plea said.

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