Delhi High Court orders restaurant association to limit service charge to 10% of bill, use term 'staff contribution' for it

The Delhi High Court on Tuesday ordered the Federation of Hotel and Restaurant Association of India (FHRAI) to use the term ‘staff contribution’ in place of ‘service charge’ and said that the amount charged as staff contribution should not exceed 10% of the bill..Justice Prathiba M Singh said that nearly 3,300 hotels and restaurants associated with FHRAI shall also specify on their menu cards in bold letters, that tips need not be given after staff contribution is paid.The interim order passed today will not be applicable to the restaurants associated with National Restaurants Association of India (NRAI).The Court passed the interim order while dealing with a plea filed by the FHRAI and the NRAI challenging the guidelines issued by the Central Consumer Protection Authority (CCPA) on July 4, 2022 stipulating that hotels or restaurant should not add service charge automatically or by default to food bills. These guidelines were stayed by the High Court on July 20, 2022..Subsequently, the Court had sought two associations’ stand on renaming the term service charge. Today, the Court was informed that while FHRAI agreed to change the terminology, NRAI has not. Senior Advocate Sandeep Sethi appeared for FHRAI and submitted that the association has no issues with renaming the charge and that the same will be displayed on the menu. He further stated that no service charge is levied on home delivery of food..During the hearing, it was pointed out that the challenge before the Court is to the CCPA’s jurisdiction to issue guidelines effectively banning levy of service charge.However, Justice Singh remarked that the Court is dealing with the issue under writ jurisdiction and therefore, it cannot turn a blind eye to the submissions by the CCPA that some of the restaurants are charging service charges up to 20%.“CCPA jurisdiction is one thing. But this court is dealing with it in writ jurisdiction. How can I turn a blind eye to this? This affects the entire country.”.The Court then proceeded to list the matter for further consideration on October 3.