Observing that restaurants do not need to levy service charges to pay their employees, the Delhi High Court Thursday granted the Centre and Central Consumer Protection Authority (CCPA) liberty to approach the single bench for vacation of stay on the guidelines prohibiting hotels and restaurants from adding service charge automatically or by default in the bill.
While advancing the date of hearing before the single bench from November 25 to August 31, the division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said, “You (restaurants) don’t have to levy service charges to pay your employees. You are liable and bound to pay your employees under various enactments, that is your obligation under law.”
Besides granting the Centre and CCPA the liberty to move for vacation of the stay order passed by a single bench on July 20, the court also permitted them to file a response to the petitions of the Federation of Hotel and Restaurant Associations of India and National Restaurant Association of India (NRAI) against the guidelines. The court requested the single bench to pass an appropriate order on the application for vacation of stay once the same is filed.
The Centre and CCPA, represented by Additional Solicitor General Chetan Sharma and advocate Sandeep Mahapatra, earlier submitted that the guidelines declare the service charge as anti-consumer and restaurants are free to increase their prices instead.
“The ordinary man perceives it to be some government levy which he has to pay and if you don’t pay, there is an embarrassment to the consumer. This has engaged the attention of the government since 2017. There are some associations which are against this,” submitted Sharma.
Sharma also argued that it would have been prudent had the authorities been given time to file a reply by the single bench to the petitions challenging the CCPA guidelines. He also said interim relief or stay is in the nature of final relief.
Observing that a common man perceives a service charge by a restaurant as a government levy, the court Tuesday observed that an eatery can increase the food price instead of seeking it separately. “That is what a common man perceives. Increase your food price, no problem, because you are entitled to fix a rate for your food but don’t levy it separately…,” the court had said.
While hearing the petitions filed by NRAI and Federation of Hotel and Restaurant Associations of India, Justice Yashwant Varma last month stayed the CCPA guidelines subject to the members of the unions ensuring that the levying of service charges in addition to the price and taxes and the obligation of the customer to pay it “is duly and prominently displayed on the menu or other places”.
The Centre and CCPA in the appeal before the division bench had said the guidelines were issued to prevent violation of the rights of consumers who were being made to pay service charges by default without allowing them the discretion whether to pay. “Apart from the consumer organisations various other hotels and restaurant associations welcomed the framing of the guidelines, which factum could not be placed on record as no counter affidavit was called (by the single bench),” they said, adding that CCPA was not afforded “adequate and reasonable opportunity” to put forth its case.