Delhi HC Stays CCPA Guidelines Which Prohibited Levy Of Service Charge

The Delhi High Court, on July 20, stayed the operation of the guidelines notified by Central Consumer Protection Authority (CCPA). The guidelines, which were made operational on July 4, essentially prohibited the levy of service charge to the bill by restaurants and hotels. The rationale as provided in the guidelines, was stated as, "placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the Act."

The National Restaurant Association of India, the lead petitioner in the matter, being represented by Advocates Lalit Bhasin, Nina Gupta, Ananya Marwah, Ruchika Joshi and Ajay Pratap Singh, challenged the above stated notification of the CCPA.

ISSUES

It was submitted before the Court that the issue of a levy of a service charge by the hotel industry was noticed way back by the Dewan Chaman Lal Committee which had submitted its report in June 1958. Deprecating the practice of permitting serving staff to take individual tips, that Committee had recommended the implementation of the continental system of service charge both with regards to its collection as well as disbursement.

It was further contended that the Wage Board which came to be constituted by the Chief Commissioner of Delhi in 1964 had also provided for the levy of a service charge on costumers bills varying from 5% to 10%. The collections so made were then to be distributed with 10% going to a welfare fund, 15% being retained by the management towards breakages and 45% to be distributed to the workmen and employees of the establishment and the remaining 30% to be allocated to the wage bill.

OBSERVATIONS

Pertinently, Justice Yashwant Varma observed that, "there would be a serious doubt whether the issue of pricing and the levy of a service charge would fall within the ambit of Section 2(47) of the Consumer Protection Act, 2019 itself." 

Section 2 (47) of the Consumer Protection Act broadly encapsulates the various types of "unfair trade practices" that the Act prohibits. It states that, "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices..."

The matter will next be heard on November 25, 2022.