On Tuesday, the Delhi High Court questioned the justification for restaurants collecting service fees from patrons as a “extra” and “different levy.”
Restaurants can raise their food prices to meet this fee rather than recovering it in the form of an additional charge above and beyond the overall bill, according to a bench led by Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad.
The Centre had filed an appeal with the high court challenging a single judge’s decision to stay its rules banning automatic service charges on meal bills in hotels and restaurants. The subject was scheduled for hearing on August 18.
The attorney for one of the restaurant organisations claimed that the service charge was not a tax levied by the government, was for the benefit of the restaurant staff, and was not intended to replace “tips.”
Your salary is raised. We will listen to you, the court declared, noting that the imposition of the service charge affected “very much consumers” as well as the restaurant’s staff.
“That’s how the average person sees it (the service charge as a government tax). Increase the cost of your food. No issue. The court informed the restaurant organisations that they were allowed to set a charge for their food but not levy it separately.
While the service charge is in the form of a tip, additional solicitor general Chetan Sharma, speaking on behalf of the appellant, said that consumers mistakenly believe it to be a government tax or levy.
“When they refuse to pay or are asked to pay, consumers feel embarrassed. This is the cause of the numerous complaints that were received “said he.
According to attorneys representing restaurants, the government does not forbid service fees, and when a restaurant makes it known that a fee will be assessed, it becomes a contractual issue.
“Can they compel someone to pay a service fee of any kind? Although you are the master of your price, you are unable to impose an additional price or fee “The judge stated.
You want to suggest that a person who doesn’t know the law or is illiterate enters into a contract when they go to a restaurant? When a non-lawyer orders a cup of tea, he enters into a contract and is responsible for the service fee, the statement said.
ASG Mr. Sharma further criticised the sole judge’s decision, claiming that it went against natural justice principles.
The guidelines, which were admittedly established in the public interest, were stopped without giving the appellant a reasonable and appropriate opportunity to present their case, according to the appellants in the appeal by the Center and the Central Consumer Protection Authority.
Those that don’t practise kad “The impugned order has been passed hastily without appreciating that the guidelines have been issued to safeguard the rights and interests of the consumers and seek to protect the consumers from unfair trade practises and violation of consumer rights due to mandatory collection of service charge and adding such charge automatically or by default in the food bill without allowing the consumer the choice or discretion to decide whether they want to pay the such charge,” the complaint reads.
The respondents’ attorney urged the court to list the current case, which concerned the Federation of Hotels and Restaurant Associations petition, as another appeal against the single judge order was still pending.
The National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India petitioned the sole judge on July 20 to postpone the July 4 regulations preventing hotels and restaurants from automatically adding service charges to food bills.
In its common order, the court stated that the stay is conditional on the petitioners’ members making sure that the service charge is duly and conspicuously displayed on the menu or in other places, explaining that it is levied in addition to the price and taxes and that customers are obligated to pay it. The members further agreed to refrain from adding any service fees to any takeout orders, it had been noted.
The July 4 order’s prohibition, according to the NRAI, was “arbitrary, untenable, and ought to be annulled” since it was made without taking into account the facts and circumstances, the organisation said before the solitary court.
The petition had stated, “Levy of service charge has been a standing practise in the hospitality business for over 80 years, which is obvious from the fact that the Supreme Court took notice of this principle way back in 1964.
The July 4 order’s prohibition, according to the NRAI, was “arbitrary, untenable, and ought to be annulled” since it was made without taking into account the facts and circumstances, the organisation said before the solitary court.
The petition had stated, “Levy of service charge has been a standing practise in the hospitality business for over 80 years, which is obvious from the fact that the Supreme Court took notice of this principle way back in 1964.
“There is also a socioeconomic component to the collection of service fees. The method of collecting service fees ensures that they are distributed logically and in a methodical manner among all of the staff, not simply the one who is serving the customer in the restaurant. By doing this, it is ensured that the benefit is distributed evenly to all staff members, including utility and back office personnel “Added was made.
