A Single Bench of the Delhi High Court directed the Restaurant Association to replace ‘Service Charge’ with ‘Staff Contribution’ and also to make sure that the Staff Contribution amount should not exceed 10% of the bill.
The Petitioners in the present petitions are Associations of hotel and restaurant owners. The challenge in these writ petitions is to the guidelines dated 4th July, 2022 issued by the Central Consumer Protection Authority (‘CCPA’) and the consequential communication issued on 6th July, 2022 to all the District Collectors for enforcing the guidelines of 4th July, 2022.
Notice was issued in the present two petitions and on n the said date, the Court stayed the effect of the impugned guidelines.
The said stay order was subject to the condition that the members of the Petitioner associations prominently display on the menu and other places that ‘Service Charge’ is being charged by the establishment. It was also directed that the no ‘Service Charge’ be included on ‘take-away’ items. Thereafter, an appeal was preferred against the order dated 20th July, 2023 by the Respondents challenging the interim stay of the guidelines dated 6th July, 2022.
The petitioners stated that there is no uniformity or consistency being followed in respect of ‘Service Charge’ – some members charge ‘Service Charge’ and some do not. However, it is specifically stated that the members who are charging Service Charge, charge the same compulsorily from their customers and do not give an option of paying the same or not.
The Court of Justice Prathiba M Singh directed the members of the Federation of Hotel and Restaurant Associations of India (FHRAI), who are collecting the charges, shall with immediate effect cease the usage of the term ‘Service Charge’ and only use the terminology ‘Staff Contribution’ for the amount being charged as ‘Service Charge’ currently and the said amount being charged as ‘Staff Contribution’ by members of FHRAI shall not be more than 10% of the total bill amount excluding the GST component.”
“In case of establishments mentioned in the members of FHRAI, who are collecting the charges, the menu cards shall specify in bold that after the payment of ‘Staff Contribution’, no further tip is necessary to be paid to the establishment/servers/restaurant staff” the Court directed.
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