Delhi HC Rules Mandatory Service Charges in Restaurants ‘Unfair Trade Practice’

​The Delhi High Court has ruled that the mandatory imposition of service charges by hotels and restaurants constitutes an unfair trade practice and violates consumer rights. Justice Prathiba M. Singh upheld the Central Consumer Protection Authority's (CCPA) guidelines prohibiting the automatic addition of service charges to food bills, emphasizing that such charges and tips should be voluntary contributions left to the discretion of consumers. ​

The court dismissed petitions filed by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI), which challenged the CCPA's 2022 guidelines. Both associations have been directed to deposit ₹1 lakh each with the CCPA for consumer welfare.

Justice Singh highlighted that the mandatory collection of service charges could mislead consumers into believing these are government-imposed taxes like GST, thereby constituting an unfair trade practice. The court asserted that the CCPA possesses the authority to issue such guidelines to prevent unfair practices and protect consumer interests.

This ruling reinforces the principle that consumers should have the freedom to decide whether to pay a service charge, ensuring transparency and fairness in the hospitality industry.