Consider using term 'staff welfare fund' instead of service charge: Delhi High Court to hotel and restaurant associations

The Delhi High Court on Wednesday asked restaurant and hotel associations to consider changing the term ‘service charge’ to ‘staff welfare fund’ or ‘staff welfare contribution’ to avoid the confusion that it is a government-imposed levy..Justice Prathiba M Singh asked the associations to hold a meeting and inform the Court about the percentage of its members willing to inform the consumers that service charge is not mandatory and that they can make voluntary contributions.The Court also ordered the associations to inform it about the percentage of hotels and restaurants that impose service charge.It further said that the Court's interim orders staying the Central Consumer Protection Authority (CCPA) guidelines stipulating that hotels or restaurants should not add service charge automatically, should not be shown as the High Court approving of service charge. Justice Singh has asked the associations to file an affidavit on the same by the next date of hearing on July 24..The Court passed the order while hearing petitions filed by the National Restaurant Association of India and the Federation of Hotel and Restaurant Associations of India. These associations have challenged the CCPA guidelines issued on July 4, 2022. Through an interim order, the High Court had earlier stayed the guidelines..Appearing for the CCPA today, Additional Solicitor General (ASG) Chetan Sharma argued that various restaurants have now started misinterpreting the interim order of the Court and in fact using the order to give legitimacy to the service charge.Advocate Dr Lalit Bhasin, appearing for one of the hotel associations, stated that the aspect of service charge being imposed has continued for over 80 years and is recognised by the Supreme Court and High Courts in various decisions.He added that the rationale behind service charge is to ensure equitable distribution of tip amounts, and as long as the restaurant’s menu makes it clear that service charge is applicable, they should be left to the hotel or restaurant.