Delhi High Court provides relief to hotels & restaurants on CCPA guidelines

Delhi High Court provides relief to hotels & restaurants on CCPA guidelines

Bhasin and Company Advocates represented NRAI. 

The Delhi High Court has stayed the July 4 guidelines issued by the Central Consumer Protection Authority (CCPA) barring hotels and restaurants from including service charges by default in the bill. The hearing has been scheduled for November 25.

In relief for the hospitality industry, the court stated that the matter required introspection. The stay is subject to restaurants prominently displaying on their premises and menus that service charges would be levied in addition to food prices and taxes. In addition, no service charge would be levied by restaurants on takeaway orders.

The National Restaurant Association of India, one of the petitioners, stated that the stay was a huge relief to millions of anxious restaurant workers as service charges constituted a significant part of their earnings.

The industry body said it has always been steadfast in its assertion that there was nothing illegal in levying the service charge and it was a very transparent system. It added, "The NRAI will soon send out advisories to all its members about the conditions spelled out by the Delhi High Court, urging them to comply in totality."

The CCPA had released the guidelines to prevent unfair trade practices and to protect consumer interests. The guidelines stated that service charge cannot be levied automatically and that it cannot be collected by adding it to the food bill and levying the Goods and Services Tax (GST) on the total amount.

In its writ petition, the Federation of Hotel & Restaurant Associations of India (FHRAI) argued that it was entirely the prerogative of a hotel or a restaurant to decide on the structure of the menu and its pricing, to suit its business model. It said that the hotels were bound by wages contract with employees, which specify benefits of service charges.

Gurbaxish Singh Kohli, the Vice President, FHRAI, added, "The guidelines are against the very grain of practicing business in a fair environment and erroneously proceeded on the basis that service charge is akin to a tip/gratuity and, therefore, optional. FHRAI and its members shall endeavor to ensure that consumers and patrons are well informed about the levy of service charges. We are glad that our employees shall continue to avail of agreed benefits under the service charge."

NRAI was represented by Dr. Lalit Bhasin, Ms. Nina Gupta and others from Bhasin and Company Advocates.