Eateries can't impose service charge, rules HC

Mandatory levy of service charge... is against public interest and undermines the... social fabric of consumers as a class.

- Shruti Kakkar

The Delhi high court on Friday prohibited hotels and restaurants from automatically adding a "service charge" to food bills, affirming the Central Consumer Protection Authority (CCPA)'s 2022 guidelines and holding that such a levy infringes upon consumer rights.

The ruling, delivered by justice Prathiba M Singh, entitles customers to pay only for the price of the food, without paying charges for services offered by restaurants, and prohibits establishments from adding such charges to bills by default.

In her 131-page ruling, the judge opined that service charge or "tip" is a voluntary payment by customers and cannot be compulsory or mandatory. Such a charge, she said, created an unfair pricing structure lacking transparency.

"A mandatory levy of service charge by restaurant establishments is against public interest and undermines the economic as well as social fabric of consumers as a class. It imposes an additional financial burden on customers and distorts the principle of fair trade as the customer is mandatorily asked to pay the same, regardless of the consumer's satisfaction," justice Singh said.