Delhi High Court clarifies that Service Charge is legal

In a huge relief to millions of anxious restaurant workers, the Delhi High Court today ordered a stay on Para 7 of the guidelines issued by Central Consumer Protection Authority (CCPA) on July 4, 2022, which essentially banned the levy of Service Charge in any manner whatsoever. This was a huge blow to restaurant employees because the Service Charge constitutes a significant part of their earnings.

It may be noted that in the same guidelines, the CCPA had also termed levying of Service Charge as an “Unfair Trade Practice”. Subsequently, NRAI had filed a writ in the Delhi High Court, seeking clarification on the legality of these guidelines. The Court heard the matter on two occasions this week before passing the order.

While granting the stay, the Court has also directed that the information regarding levy of Service Charge should be displayed on menu cards and also otherwise displayed so that customer is aware of this charge.  Importantly, the Court also clarified that the Service Charge cannot be levied on any take away orders. NRAI is very relieved with the passing of this order because it otherwise had a direct adverse impact on the human capital employed in the trade.

NRAI has always been steadfast in its assertion that there is nothing illegal in levying of Service Charge and it is a very transparent system. The association said it was glad that the Hon’ble Delhi High Court has upheld & confirmed this view.

As a responsible restaurant body, NRAI will soon send out advisories to all its Members about the conditions spelled out by the Hon’ble Delhi High Court and will urge all Members to comply with them in totality.