Delhi High Court Rules Service Charge Cannot Be Mandatory on Food Bills

​The Delhi High Court has ruled that levying a mandatory service charge in restaurants and hotels constitutes an unfair trade practice. The court emphasized that such charges cannot be imposed without the consumer’s consent, asserting that service charges or tips are voluntary and cannot be made obligatory. ​

Previously, the Central Consumer Protection Authority (CCPA) issued guidelines prohibiting hotels and restaurants from automatically adding service charges to food bills. These guidelines aimed to prevent unfair trade practices and protect consumer rights. However, the Delhi High Court stayed these guidelines, allowing restaurants to continue the practice provided they prominently inform customers about the service charge on menus and other display areas. The court clarified that service charges cannot be levied on takeaway orders. ​

The National Restaurant Association of India (NRAI) welcomed the court’s decision, maintaining that levying a service charge is a transparent and globally accepted practice. They argue that it ensures equitable distribution of tips among staff members. ​

In summary, while the Delhi High Court recognizes the voluntary nature of service charges, it permits restaurants to include them in bills as long as customers are clearly informed and have the choice to pay or not.​

Sources