Friday, December 8, 2023

Service charge: Delhi High Court directs restaurant associations to file rejoinder within 2 weeks

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The Delhi High Court has directed the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI) to file their reply over the rejoinder to the affidavit submitted by the Central Consumer Protection Authority (CCPA) over levying of service charge on food bills within two weeks.

The Single-Judge Bench of Justice Yashwant Varma listed the matter for November. The High Court was hearing petitions filed by the NRAI and FHRAI, challenging the July 4 guidelines of CCPA, directing hotels and restaurants not to levy service charge on food bills.

As per the plea by NRAI, the CCPA guidelines against levying of service charge on food bills was ‘arbitrary, untenable and ought to be quashed,’ as it was imposed without an appreciation of facts and circumstances.

It contended that the levying of service charge had been a standing practice in the hospitality industry for more than 80 years. Even the Supreme Court had taken notice of this concept in 1964.

The plea pointed out the socio-economic angle in levying of service charge. It said the system of levying service charge ensured that there was a systematic and logical distribution of service charge collection amongst the employees and not just the employee serving the customer in the restaurant.

This also ensured equal distribution of benefit among all staff workers, including the utility workers and back staff, added the petition.

Earlier, both the Union government and the CCPA had apprised the High Court that hotels and restaurants were openly flouting the guidelines and collecting service charge on food bills from consumers involuntarily, even when they were dissatisfied with the services.

The authorities had submitted an application, seeking vacation of stay granted by the High Court on CCPA’s July 4 guidelines prohibiting hotels and restaurants from levying service charge on food bills.

On July 20, the High Court had passed an interim order staying the guidelines. The order was challenged by the Central government and CCPA before the Division Bench, which told the authorities to approach the single judge for appropriate relief.

Both the Union of India and the CCPA had contended in their application that adequate time and opportunity was not provided to them to present their case and the interim order was passed post haste.

The interim order caused grave hardship to the consumers at large, who were made to pay the service charge mandatorily without there being any element of discretion on their part, said the application.

It added that after the July 4 guidelines, 1105 more complaints were registered by consumers on the National Consumer Helpline with regard to unfair levying of service charge by hotels and restaurants.

The charge was being added automatically or by default to the food bill without allowing consumers the choice or discretion to decide on whether they wanted to pay or not, contended the plea.

The authorities said the guidelines did not interfere with the right of restaurants or hotels to set the prices at which they wanted to offer their food and services to consumers.

In its counter affidavit, the CCPA said the petitioners had failed to appreciate the rights of the consumers, whose hard-earned money was unjustly collected automatically or by default in the name of service charge.

As per CCPA, the objective of collecting mandatory service charge from consumers over and above the price of food items and applicable taxes was ‘unlawful,’ as no proportionate service was separately provided to them.

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