Service charge issue: Eatery owners challenge guidelines in Delhi HC

New Delhi:  The Delhi High Court will hear in detail on Thursday a plea moved by the eatery owners challenging the newly issued Central Consumer Protection Authority (CCPA) guidelines which restrained restaurants from adding a service charge by default to food bills. The plea of the National Restaurant Association of India (NRAI) will be heard in detail on July 21 which was deferred following a short hearing earlier.

The restaurant body reiterated its stand in the plea before the court, stating the new government guidelines have no legal stand. "In the absence of due authentication and promulgation of the guidelines, the contents thereof cannot be treated as an order of the government," read its plea. (Also Read: RBI's new order, you will not be able to withdraw more than 15,000 from this bank; Read why)

"The levying of service charge is a matter of contract and decision of the management. The levying of service charge is displayed at various places in the restaurant. The same is also displayed on the menu cards of the restaurants. Once the customer places the order after being made aware of the terms and conditions there comes into existence a binding contract. No authority can interfere with the binding nature of a valid contract until and unless it is shown and proved to be unconscionable or is an unfair trade practice," it stated.

"The levying of service charge is a universally accepted trade practice. Service charge is being levied in various countries like the UK, Singapore, Japan, and the US with varying percentages between 8 percent and 12.5 percent. In the UK, accounting and distribution of service charges are also done through an independent agency through a system called Tronc," it said further. (Also Read: Delhi Court extends 4 days remand of ex NSE CEO Chitra Ramakrishna in a money laundering case)

The Central Consumer Protection Authority (CCPA), which comes under the Ministry of Consumer Affairs, has issued guidelines for preventing unfair trade practices and violation of consumer rights about the hotels and restaurants levying service charges, stating that the consumer may lodge a complaint with the National Consumer Helpline (NCH) against such practice. The CCPA said that the consumer may request the concerned hotel or restaurant to remove the service charge from the bill amount. The consumer may also file a complaint against unfair trade practices with the Consumer Commission.