NEW DELHI: The Delhi HC on Friday scheduled the hearing of appeals filed by leading restaurant and hotel associations for May 23. The appeals challenge a single judge’s ruling that declared service charges and tips to be voluntary payments, not mandatory levies to be imposed on consumers’ food bills.
The appeals have been jointly filed by the National Restaurant Association of India and the Federation of Hotels and Restaurant Associations of India (FHRAI). The petitioners are seeking interim relief, urging the Court to stay the implementation of the contentious judgment delivered in March.
A Division Bench of Chief Justice D.K. Upadhyaya and Justice Tushar Rao Gedela agreed to list the matter before the summer recess despite a congested docket.
The appeals were originally item numbers 4 and 5 in Friday’s advance cause list but could not be taken up as the Bench was preoccupied with a time-bound batch of petitions during the post-lunch session.
Appearing for the restaurant bodies, Senior Advocate Siddharth Luthra made an urgent plea to have the matter heard early, stressing the need for interim relief. “Our board is very heavy,” the Bench initially responded, indicating that the case might have to wait until after the vacation. However, following submissions, the Court relented and scheduled the hearing for May 23.
The appeals were first listed on April 29 but could not be heard due to technical difficulties with the Court’s virtual conferencing system. In the underlying judgment delivered in March, the single judge had rejected the writ petitions challenging the 2022 guidelines issued by the Central Consumer Protection Authority (CCPA), which prohibit hotels and restaurants from levying service charges “automatically or by default” on food bills.
Upholding the CCPA’s stance, the Court ruled that such charges must be voluntary and cannot be contractually enforced by default. It dismissed the petitions filed by the restaurant bodies and imposed a cost of `1 lakh on each petitioner, to be deposited with the CCPA for utilisation in consumer welfare initiatives.
The Court also underscored that the enforcement of mandatory service charges was often coercive in practice and noted that customers frequently misinterpret such charges as government-imposed taxes, such as service tax.
The single judge further emphasised that if a customer wishes to leave a tip, they may do so voluntarily, but the amount must not be pre-added to the bill. Any inclusion of a service charge by default would violate the customer’s freedom of choice, the judgment held.