The Delhi High Court imposed a fine of INR 2 lakh on two restaurant associations for their failure to fully disclose the list of members who impose a mandatory service charge and those who do it voluntarily. One of the associations, FHRAI, has already paid the INR 1 lakh fine to the department of consumer affairs on Thursday.
Justice Prathiba M Singh, in her order on Monday, directed that the costs should be paid to the department of consumer affairs.
The High Court was addressing a plea submitted by the associations – Federation of Hotel and Restaurant Associations of India (FHRAI) and National Restaurant Association of India (NRAI). The plea challenged the guidelines issued by the Central Consumer Protection Authority (CCPA), which forbade hotels and restaurants from automatically imposing service charges on food bills.
Back in April, the High Court had issued an order to the two associations, instructing them to reveal a comprehensive list of their members to support the petitions. Additionally, they were asked to specify the percentage of their members who enforced a mandatory service charge and those who opted for a voluntary contribution approach. The court also inquired if the associations objected to replacing the term ‘service charge’ with an alternative expression like ‘staff welfare fund.’ The purpose of this change was to avoid confusion among consumers that the charge was not imposed by the government.
Justice Singh, in the order issued on July 24, noted that the petitioners had shown “complete non-compliance” with the given directions. The court pointed out that the affidavits were filed without properly serving the Centre, seemingly attempting to hinder the progress of the hearing. The court stated that the petitioners had various obligations to fulfill, and none of them had filed the affidavits as per the specified order. Despite this, the court granted one final opportunity to the associations to submit the affidavits correctly.
Union consumer affairs secretary Rohit Kumar Singh, said, “The cost imposed by the Delhi HC has been paid by the association today (Thursday) which has been deposited in the Consumer Welfare Fund (CWF). We expect all the restaurants to stop levying service charges with immediate effect.”
As per the consumer affairs department, the National Consumer Helpline has recorded over 4,000 complaints since the CCPA issued guidelines on service charge in July 2022. Consumers have lodged grievances regarding being compelled to pay service charges even when they are dissatisfied with the service provided. Additionally, there have been complaints about restaurants collecting service charges under misleading names, such as ‘S/C,’ ‘SC,’ ‘SCR,’ or ‘S CHARGE.’
