New Delhi: The High Court of Delhi considered changing the name from “service charge” to “staff welfare fund.” Ask the restaurant to change its name to avoid confusion about government-imposed charges.

The bench of Justice Pratibha Singh also urged the NRAI, hotels, and other associations to hold a meeting and file an affidavit with the court stating “The percentage of its members willing to inform the consumers that service charge is not mandatory and that they can make voluntary contributions.”

While the high court suspended the Central Consumer Protection Authority (CCPA) rulings that outlawed service charges, the court today underlined that the interim decisions to stay the CCPA guidelines “should not be interpreted as the high court approving service charges.”

On behalf of the Central Consumer Protection Authority (CCPA), Additional Solicitor General (ASG) Chetan Sharma stated that hotels and restaurants have been misinterpreting the Court’s interim judgement and, in fact, utilising the order to legitimise the service fee.

The guideline states that “Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount”.

The Court ask restaurants and hotels for percentage data which they will impose. The matter will be heard on July 24.

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The guidelines infringe on the restaurants’ constitutionally protected right to trade. He stated that as long as the client is aware that payment of the service charge is mandatory, it is a contract between the business and the consumer. He further said that the service charge is part of the pay negotiations of the establishment’s employees and hence should not be messed with.

It was also contended that the rules were issued under Section 18 of the Consumer Protection Act without giving the petitioners’ members a hearing. Dr Lalit Bhasin, representing the Federation of Hotels, said that the component of service charge had been in place for 80 years and that the idea behind it was to promote equitable distribution of tip amounts.

The ASG, on the other hand, said that the guidelines were developed following extensive stakeholder engagements. The service charge, once included, becomes a component on which GST is levied, according to the ASG. In fact, the buyer pays a significantly greater amount, he noted.

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