Delhi HC rules service charges or tips on food bills voluntary, not mandatory

It upheld the 2022 guidelines issued by the Central Consumer Protection Authority (CCPA) that prohibited hotels and restaurants from automatically levying a 'service charge' on food bills, reinforcing that these payments must remain voluntary.

Dismissing the petitions filed by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI), which challenged the CCPA’s power to issue such guidelines, Justice Prathiba M Singh said that the Authority is not merely a recommendatory body but is fully empowered and has the jurisdiction to pass the guidelines under the CPA, 2019. “In fact, issuing guidelines in consumer interest is an essential function of CCPA and the guidelines would have to be mandatorily complied with as the scheme of the Act clearly provides for enforcement of guidelines, which would not curtail fundamental rights it held.

“All restaurant establishments would have to adhere to the guidelines passed by the CCPA. If there is any violation of the same, action would be liable to be taken in accordance with law. CCPA is free to enforce its guidelines in accordance with law,” it held.

Hotels and restaurants generally levied a service charge of 10% on the food bill.

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“The collection of service charge and use of different terminologies for the said charge is misleading and deceptive in nature. The same constitutes an unfair trade practice under Section 2(47) of the CPA, 2019,” it said, adding that consumers should not be misled