Delhi High Court Fines Restaurant Associations Rs 2 Lakh over Service Charge Rule

The Delhi High Court imposed a fine of Rs 2 lakh on two restaurant associations for not revealing a comprehensive list of their members who impose mandatory service charges and those who apply it voluntarily.

The FHRAI, one of the associations, paid the Rs 1 lakh penalty to the department of consumer affairs on Thursday.
 

In her Monday's ruling, Justice Prathiba M Singh instructed that the fines must be paid to the department of consumer affairs.

The High Court was considering a petition filed by two associations, namely the Federation of Hotel and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI).

The petition challenged the guidelines issued by the Central Consumer Protection Authority (CCPA), which barred hotels and restaurants from imposing service charges automatically on food bills.
 

Back in April, the High Court directed the two associations to reveal a comprehensive list of their members who supported the petitions.

Additionally, they were asked to specify the percentage of members who enforced service charges as a compulsory requirement and those who chose to treat it as a voluntary contribution.

The court also inquired if the associations had any objections to replacing the term 'service charge' with an alternative name, like 'staff welfare fund,' to avoid confusion among consumers that it was not a government-imposed fee.
 

In the ruling issued on July 24, Justice Singh noted that the petitioners had failed to adhere fully to the given instructions and had submitted their affidavits without properly serving them to the Centre, seemingly attempting to hinder the progress of the hearing.

The court highlighted that the petitioners were required to fulfill certain compliances, which they had not done.

Consequently, the court granted a final opportunity to the associations to submit the affidavits appropriately.

As per the consumer affairs department, after the CCPA released guidelines regarding service charges in July 2022, the National Consumer Helpline has recorded over 4,000 grievances from consumers.

These complaints are related to instances where customers were compelled to pay service charges even when dissatisfied with the service provided.

Additionally, there were complaints about restaurants disguising the service charge under different names, such as 'S/C', 'SC', 'SCR', or 'S CHARGE'.