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IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
National Restaurant Association of India and Others – Appellants
Versus
Union of India and Another - Respondents
W.P. (C) 10867 of 2022 and CM APPL. 31645 of 2022, 38599 of 2022, W.P. (C) 10683 of 2022, CM APPL. 31033 of 2022, W.P. (C) 10867 of 2022 and CM APPL. 31645 of 2022, 38599 of 2022
Decided on : 18-04-2023
Service Charge - Challenge to Guidelines under Consumer Protection Act, 2019 - Section 18(2)(l) - Summary of Acts and Sections: Consumer Protection Act, 2019 - Section 18(2)(l)
Fact of the Case:
The petitioners, associations of hotel and restaurant owners, challenged the guidelines issued by the Central Consumer Protection Authority (CCPA) regarding the levying of service charge by restaurants and hotels. An interim order staying paragraph 7 of the guidelines was passed, subject to certain conditions.
Finding of the Court:
The court directed the associations to file a complete list of their members and consider aspects related to the imposition of service charge, alternative terminology, and voluntary imposition. The court also addressed the misuse of the interim order by establishments and prohibited the display of the interim order in a misleading manner.
Issues: Challenge to guidelines under the Consumer Protection Act, 2019, misuse of interim order, and considerations related to the imposition of service charge.
Ratio Decidendi: The court emphasized the need for clarity on the imposition of service charge and the prevention of misleading consumers, while also addressing the misuse of the interim order.
Final Decision: The matter was listed for further hearing, and specific affidavits were required to be filed by the associations. The interim order continued, and the cases were considered as part-heard matters.
JUDGMENT :
Prathiba M. Singh, J.
This hearing has been done through hybrid mode.
2. Both these matters have been taken up for hearing. The Petitioners in the present petitions are Associations of hotel and restaurant owners. It is claimed that more than 5 lakh establishments are represented by the Petitioners.
3. The challenge in these writ petitions is to the guidelines dated 4th July, 2022 issued by the Central Consumer Protection Authority (hereinafter ‘CCPA’) and the consequential communication issued on 6th July, 2022 to all the District Collectors for enforcing the guidelines of 4th July, 2022.
4. By the impugned guidelines, which are purportedly issued under Section 18(2)(l) of the Consumer Protection Act, 2019 (hereinafter ‘the Act’) the authority has taken a position that the levying of service charge by restaurants and hotels has been complained against by several consumers. Thus, the authority records that while restaurants and hotels can collect a tip which is voluntarily paid by the consumers, the same ought not to be incorporated into the bill in a manner so as to make the payment compulsory by the consumer. The guidelines, therefore, directed restaurants and hotels as under:
(i) No hotel or restaurant shall add service charge automatically or by default in the bill.
(ii) Service charge shall not be collected from consumers by any other name,
(iii) No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer's discretion.
(iv) No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
(v) Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount”
5. The above guidelines are challenged by the present two Petitioners who are associations/federations of restaurants and hotels owners, namely, National Restaurant Association of India and Federation of Hotel and Restaurant Associations of India. Vide order dated 20th July, 2022, an ad-interim order was passed staying paragraph 7 of the above extracted guidelines, subject to the following conditions:
(1) The members of the petitioner Association shall ensure that the proposed levy of a service charge in addition to the price and taxes payable and the obligation of customers to pay the same is duly and prominently displayed on the menu or other places where it may deemed to be expedient.
(2) The members of the petitioner Association further undertake not to levy or include service charge on any “take away” items.”
6. The above order was challenged by way of Letter Patent Appeals by the Respondents, in which the Respondents were permitted by the ld. Division Bench to file an application for the vacation of stay. The order of the Division Bench in LPA 473/2022 titled ‘Central Consumer Protection Authority v. Federation of Hotels and Restaurant Associations of India’ and LPA 479/2022 titled ‘Central Consumer Protection Authority v. National Restaurant Association of India’ dated 18th August 2022 reads as under:
Exemption allowed, subject to all just exceptions.
The application stands disposed of.
LPA 473/2022 & CAV 232/2022. CM APPL. 35375/2022. CM APPL. 35377/2022 and LPA 479/2022 & CM APPL. 35746/2022. CM APPL. 35748/2022
The present LPAs are arising out of the common order dated 20.07.2022 passed in W.P. (C) No. 10683/2022 titled National Restaurant Association of India v. Union of India and W.P. (C) No. 10867/202
Clarity on the imposition of service charge and prevention of misleading consumers.
(1) Deficiency in service - Section 39(1) of the Consumer Protection Act, 2019/Section 14(1) of Consumer Protection Act, 1986. empowers the Consumer Commissions to remove the deficiency in service if....
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