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Central Consumer Protection Authority barred hotel,restaurant from levying service charge by default

Panasam Akshara | Delhi HC | July 18, 2022

National Restaurant Association of India approached Delhi High Court against recent order issued by Central Consumer Protection Authority barring hotels, restaurants from levying service charge by default.NRAI by a petition submitted that CCPA guidelines are arbitrary and untenable as they were issued without considering facts as well as circumstances.Petitioner claimed that levy of service charge,if displayed on menu and intimated to the customer becomes an agreement between parties and is not a violation of law.It says there is no such law which disallows restaurants to levy service charge,there isn't a new law or amendment to the existing law which says levying service charge is illegal.Petitioner argued that service charge is a contract and decision which comes up when the customer places an order after being made aware of terms and conditions there comes a binding contract.There is no authority to interfere in binding nature valid contracts until and unless it's proven unfair trade practice.Petitioner marks service charge is levied to distribute it equally among employees and not to give it to a particular employee serving the customer.The matter was heard by Justice Yashwant Varma,he directed Ministry of Corporate Affairs and CCPA to issue and list the matter on July 21,formal notice is pending to be issued.The Judge orally remarked that impugned guidelines pertain to service charge being levied without consent was not against service charge levied by restaurants after obtaining prior consent.Petitioner claims the charge to be unfair trade practice and referred a case of Rambagh Palace Hotel,Jaipur v. The Rajasthan Hotel Workers Union,Jaipur in the case it was held that the true nature of tips cannot be treated as payment made by management out of pockets but it's a transfer from what is collected by hotels as it is intended by payer to be distributed.

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