Delhi High Court stays curbs on service charge levy by restaurants

Akshay Anand, co-founder, Cosy Box, said that it is a pleasant relief from the Delhi High Court as it affects the livelihood of many staff who depend on the service charge as 30-40% of their expenses come from it.

However, Justice Yashwant Varma, said restaurants and hotels which levy such a charge should mention it prominently on their menu cards. The court also recorded an undertaking by restaurants that there will be no service charge on takeaway food orders.
However, Justice Yashwant Varma, said restaurants and hotels which levy such a charge should mention it prominently on their menu cards. The court also recorded an undertaking by restaurants that there will be no service charge on takeaway food orders.

The Delhi High Court on Wednesday stayed the recent guidelines issued by the government prohibiting restaurants and hotels from charging service charge on food bills from customers. Stating that the issue requires consideration, the court sought responses from the government and posted the case for next hearing on November 25.

However, Justice Yashwant Varma, said restaurants and hotels which levy such a charge should mention it prominently on their menu cards. The court also recorded an undertaking by restaurants that there will be no service charge on takeaway food orders.

“The matter requires consideration, until the next date of listing, the directions as contained in para 7 for the impugned communication/ guidelines of July shall remain stayed. The members of the petitioner association shall ensure that levy of service charge in addition and the obligation of customers to pay the same is duly and prominently displayed on the menu or other place where it may be deemed to be expedient,” the order said.

“The members of the petitioner associations further undertake not to levy or include service charge on any takeaway orders,” it added.

“If you don’t want to pay don’t enter the restaurant. It is essentially a matter of choice,” the court orally remarked as the hearing drew to a close.

The order was passed on a plea by the National Restaurant Association of India (NRAI) challenging the guidelines issued by the Central Consumer Protection Authority (CCPA).

Hotels and restaurants generally levy a service charge of 10% on the food bill.

NRAI, which claims to represent over 500,000 restaurants, said it has always been steadfast in its assertion that there is nothing illegal in levying service charge and it is a very transparent system. “As a responsible restaurant body, NRAI will soon send out advisories to all its members about the conditions spelled out by the Delhi High Court and will urge all members to comply with them in totality,” it said.

Massive Restaurants’ founder and managing director Zorawar Kalra termed the order a huge relief for the lakhs of employees that work in the sector as the restaurant industry is the second-largest employer of human resources in the country and service charge was for their betterment.

Impresario Handmade Restaurants’ chief regional officer – north Satyajit Dhingra said the stay order by the Delhi High Court is a step in a positive direction for the hospitality industry. The service charge component benefits not only those you see serving at the front-end, but also those working tirelessly in the background to provide patrons with an exceptional dining experience, he said.

“The restaurant staff is the major backbone of any brand and in the challenging times of inflation, service charge was not just an extra income source but also a token of appreciation that induced them to give their best,” said Vikrant Batra, co-founder and director, Batra Bros Food and Beverages, which runs Cafe Delhi Heights.

Akshay Anand, co-founder, Cosy Box, said that it is a pleasant relief from the Delhi High Court as it affects the livelihood of many staff who depend on the service charge as 30-40% of their expenses come from it.

Foodlink F&B Holdings India’s CEO Sanjay Vazirani said that the order demonstrates that the court wants to weigh all sides and make a fair and unbiased decision in this matter.

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