LI Network
Published on: 06 September 2023 at 13:00 IST
In a recent ruling, the Delhi High Court has directed the Federation of Hotel and Restaurant Association of India (FHRAI) to replace the term ‘service charge‘ with ‘staff contribution’ and mandated that the amount charged under this category should not exceed 10% of the bill.
Justice Prathiba M Singh stated that around 3,300 hotels and restaurants affiliated with FHRAI must also prominently mention on their menu cards that tips are not required once the staff contribution has been paid.
It’s important to note that this interim order is not applicable to restaurants associated with the National Restaurants Association of India (NRAI).
The Court issued this interim order while addressing a plea filed by FHRAI and NRAI, challenging the guidelines set forth by the Central Consumer Protection Authority (CCPA) on July 4, 2022.
These guidelines specified that hotels and restaurants should not automatically or by default add a service charge to food bills. The High Court had temporarily stayed these guidelines on July 20, 2022.
Subsequently, the Court sought the stance of both associations regarding the renaming of the term ‘service charge.’
During the recent proceedings, it was revealed that FHRAI had agreed to the name change and would display the new term on menus. They also clarified that no service charge is imposed on food deliveries.
The primary challenge before the Court revolves around CCPA’s jurisdiction to issue guidelines that effectively ban the levy of service charges. However, Justice Singh emphasized that the Court is addressing the issue under its writ jurisdiction and cannot ignore CCPA’s claims that some restaurants charge service fees as high as 20%.
“CCPA jurisdiction is one thing. But this court is dealing with it in writ jurisdiction. How can I turn a blind eye to this? This affects the entire country,” remarked Justice Singh.
Consequently, the Court scheduled further consideration of the matter for October 3.
