Hotel, restaurant bodies challenge Delhi HC order on service charge

India’s restaurants and hotels associations have this weekend challenged a March order by the Delhi High Court that ruled that they can’t force customers to pay service charge or tips, sources confirmed.The National Restaurants Association of India (NRAI), which represents over five lakh restaurants, said in its petition in the Delhi High Court that “there is nothing illegal in levying service charge and this transparent system is followed worldwide and does not amount to unfair consumer practice”, people directly aware of the development said. The hotel associations also said that the service charge was to ensure equitable distribution of the tip amount, ET has learnt.

The matter is likely to come up for hearing before the division bench of the Delhi High Court on Tuesday.

When contacted, NRAI executives declined to comment.

Last month, the Delhi High Court had held that restaurants and hotels cannot force customers to pay service charges or tips, as it violates consumer rights. According to the ruling, paying service charges needs to be voluntary and cannot be enforced on consumers.

The contentious matter will directly impact consumers’ bills, either way.Three industry executives ET spoke to said they are undecided whether to hike prices or not and cited “concerns on negative financial impact on staff, specially employees in cleaning, serving and kitchen jobs, who often receive combined service charge earnings monthly.”NRAI president Sagar Daryani had told ET last week: “Given the steep impact of the service charge order, many restaurants are considering hiking menu prices anywhere between 5-8% at the earliest to ensure that staff are not left with a negative financial impact.”