“When you are already charging more on MRP in the name of the experience, why are you then levying a service charge?” the bench asked pointedly, putting the associations’ counsel on the defensive.
The Delhi High Court on Friday questioned restaurants and hotels over the practice of levying a mandatory service charge, questioning how eateries justify charging consumers over and above the printed Maximum Retail Price (MRP). Declining to stay its earlier order prohibiting compulsory service charges, a division bench of Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela grilled representatives of the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI).
“When you are already charging more on MRP in the name of the experience, why are you then levying a service charge?” the bench asked pointedly, putting the associations’ counsel on the defensive.
The court demanded clarity on why restaurants separate the service charge from the inflated prices already listed on their menus. “Providing an ambience for a certain kind of experience will not include the services you’re providing? This we don’t understand. And why are you quoting Rs 100 in your menu for a Rs 20 water bottle, without specifying that this 80 rupees extra is for the ambience you’re providing? This can’t be like this. This is an issue… Providing the ambience will form part of the services being provided by you… Can you charge any amount over and above the MRP? And for the service you’re charging, what’s that 80 rupees for?” the bench asked in a stern rebuke.
The grilling only intensified when counsel insisted the additional levy was justified for “hospitality and ambience.” The judges said, “If a customer goes to your restaurant and sits there, orders a bottle of water. Only for this, you will charge a service charge? Then for what are you charging MRP? For example, you are providing a chair to them, you are giving them space, permitting them to spend time, for enjoying music played for you, for that you are charging a service charge?”
Restaurants can’t force customers to pay service charge in food bills: Delhi HC
Back in March, a single judge had barred restaurants from enforcing a service charge in a “camouflaged and coercive” manner, ruling that the practice violated public interest and amounted to unfair trade. The court had even described the levy as a “double whammy” for consumers already paying GST over and above inflated menu prices.
Defending the March verdict, the Centre’s counsel argued that restaurants were still arbitrarily imposing service charges by “using their so-called sovereign power.” The bench, however, directed the government to strengthen its enforcement mechanisms instead, remarking that “you need to strengthen your legal metrology department.”
Meanwhile, counsel for the restaurant bodies pushed back, asserting that the choice ultimately lay with customers. “My menu is an invitation to offer. The customer walks into my restaurant. There is no compulsion,” the counsel said.
The court has now scheduled further arguments for September 22, stressing that it intends to resolve the matter conclusively rather than issue any interim relief.