Delhi High Court: In a case wherein the petitioners filed the writ petition to challenge the guidelines dated 4-7-2022 issued by Central Consumer Protection Authority (‘CCPA’), and consequential communication issued on 6-7-2022 to all the District Collectors for enforcing the guidelines, Pratibha M. Singh, J.*, issued the interim direction, directing the members of the hotel associations to cease the usage of term ‘service charge’ and only use ‘staff contribution’ for the amount being charged as ‘service charge’ and opined that the issues raised would affect the customers across the country.
In the present case, two petitions had been taken up together and National Restaurant Association of India (‘NRAI’) and others were the petitioners in W.P.(C) 10683 of 2022, and Federation of Hotel and Restaurant Associations of India (‘FHRAI’) were the petitioners in W.P.(C) 10867 of 2022c.
On 20-7-2022, the Court stayed the impugned guidelines with subject to the condition that the members of both the petitioner associations should prominently display on the menu and other places that ‘service charge’ was being charged by the establishment. The Court further directed that no service charge should be included on ‘take away’ items.
Thereafter, vide order dated 12-4-2023, the Court while taking up both the petitions, issued certain directions, in terms of which the petitioners had filed the affidavit.
The Court stated that upon the perusal of the affidavit, it can be stated that the membership of both the petitioner associations were not in lakhs, as was claimed in the writ petition. The two petitioner associations, being the apex bodies represent the interests of hotels and restaurants across all India, which were lakhs in number.
The Court stated that there were four major issues which were needed to be considered-
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Whether the CCPA could issue the impugned directions to hotels and restaurants;
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Whether hotels and restaurants could `levy’ service charge from the customers;
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Whether the service charge could be made compulsorily payable by the customers;
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Whether the amount collected could be called `Service Charge’
The Court stated that, considering that the issues raised would affect the customers across the country, the matters would be taken up expeditiously. Further, the Court issued the following interim directions:
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Members of FHRAI who were collecting the charges, should cease the usage of the term ‘Service Charge’ with immediate effect and only use ‘Staff Contribution’ for the amount being charged as ‘Service Charge’;
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The amount that was charged as ‘Staff Contribution’ should not be more than 10% of the total bill amount excluding the GST component;
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In the establishments mentioned in FHRAI, the menu cards should specify in bold that after the payment of ‘Staff Contribution’, no further tip was necessary to be paid to the establishment, servers or any restaurant staff.
The Court stated that the aforesaid interim order and directions were subject to further orders in the writ petition. Further, the aforesaid order should not be construed as an approval of the charges being collected, and the legality of the collection of such charges was to be adjudicated by the present Court.
The matter was further listed to be heard on 3-10-2023.
[National Restaurant Association of India v. Union of India, 2023 SCC OnLine Del 5540, decided on 5-9-2023]
Advocates who appeared in this case:
For the Petitioners: Lalit Bhasin, Nina Gupta, Ananya Marwah and Ajay Pratap Singh, Advocates; Sandeep Sethi, Senior Advocate with Sameer Parekh, Sumit Goel, Sonal Gupta, Swati Bhardwaj and Abhishek Thakral, Advocates;
For the Respondent: Sandeep Mahapatra and Kirtiman Singh, CGSCs with Abhinav Bansal, Vidhi Jain, Kritika Sharma, Sugam Kr. Jha, Osheen Verma and Abhinav Bansal, Advocates.
*Judgment authored by- Justice Pratibha M. Singh
