Restaurant Association moved Delhi HC challenging the recent guidelines issued by the Central on levying service charges

Case: NRAI & Ors. vs. UOI & Ors.

The National Restaurant Association of India (NRAI) has moved to Delhi High Court challenging the recent guidelines issued by the Central Consumer Protection Authority (CCPA), specifying that hotels or restaurants should not add service charges automatically or by default to food bills. 

Argument

According to the plea, no law prohibits restaurants from levying service charges, and there has been no amendment to the existing laws that would make the levying of service charges illegal.

The petitioner submitted that service charge had been an 80-year-old standing practice in the hospitality industry, which was evident from the Supreme Court's note in the 1964 case of Management of Wenger & Co. vs. Their Workmen.

Levy of service charge is a matter of contract between the restaurant and the customer. No authority can interfere unless it can be shown that the same is an unfair trade practice.

In addition, the plea also cited socio-economic aspects since the dispersal of service charges amongst the employees ensures that the amount is equally divided among all the staff workers, including utility workers, back-end staff, etc.

Lastly, the plea submitted that the legality, or reasonableness of the levying service charge had been considered by the SC, HCs, NCDRC, and erstwhile Monopolies and Restrictive Trade Practices Commission. It was also pointed out that the substitution of tips for service charges has been upheld in various judicial pronouncements.