Delhi High Court Bans Mandatory Service Charges in Restaurants

The Delhi High Court has ruled against the mandatory imposition of service charges on restaurant bills, stating it violates consumer rights and constitutes an unfair trade practice. This decision supports consumer interests and mandates compliance with guidelines under the Consumer Protection Act, effectively prohibiting such charges in hotels and restaurants.

The Delhi High Court ruled that restaurants cannot impose mandatory service charges on bills, calling the practice 'camouflaged and coercive,' and against public interest. The court's decision comes as a boon for consumers, affirming that enforced charges amount to unfair trade practices in violation of consumer rights.

Justice Prathiba M Singh, in a comprehensive 131-page verdict, emphasized that service charges, often referred to as tips, should remain voluntary for customers. The court dismissed petitions from restaurant bodies challenging the guidelines issued by the Central Consumer Protection Authority (CCPA), thus reinforcing consumer welfare over rigid restaurant policies.

The court highlighted that such mandatory charges not only imposed financial burdens but also distorted fair trade principles. Judge Singh clarified that while establishments have freedom under Article 19(1)(g) to set prices, adding compulsory service charges as a fixed rate is unjustified. Establishments are now required to adhere to the CCPA guidelines, promoting transparency and protecting consumers' rights to understand true costs.

(With inputs from agencies.)