Restaurant owners rejoice, as HC stays CCPA orders against service charge

The Delhi High Court has ruled that paying service charge is a matter of choice.

Restaurants in India can now heave a sigh of relief as the Delhi High Court has stayed the guidelines issued by Central Consumer Protection Authority (CCPA), which had earlier stated that hotels and restaurants cannot levy service charges by default on food bills.

After hearing the plea of National Restaurant Association of India’s (NRAI) and other petitioners, the Delhi High Court has ruled that paying the charge is a matter of choice.

Service charge
The service charge model motivates staff to perform at their best. The higher the sales, the more service charges they get. This also motivates staff to work in harmony and improve teamwork.

Security, stability for staff

“I have been going around the country meeting our teams everywhere. They’ve been very worried since the new guidelines. Now they’re very relieved and hoping for security and stability going forward,” says AD Singh, Founder & MD, Olive Group of Restaurants.

The judgement passed by the Delhi High Court is a big win for the restaurant industry.

“For the longest time, we’ve been trying to get this right for our well-deserving staff who work extremely hard to provide quality service to the guests. Now we just hope that this judgement is followed suit and increases the awareness among people regarding the importance of service charge and the whole application of it,” says Pawan Shahri, CEO & Founder, Chrome Hospitality.

Restauranteurs emphasised that the HC stay order is in the right direction and well deserved for the industry.

“The restaurant industry is the second-largest employer of human resources in the country and service charge is only for their betterment,” says Zorawar Kalra, Founder and Managing Director, Massive Restaurants.

Offering a separate service charge on a bill acts in favour of transparency, whereas it likely would have otherwise been absorbed into the menu pricing, with guests eventually paying the same, if not more.

“Legislation banning it would have been disproportionately unfair to restaurant staff. Either way, I think what is key here is to create a more open dialogue between the industry and its patrons, so that guests know what they’re paying for and restaurateurs are aware, and can work towards rectifying, diners’ concern,” says Aditi Dugar, CEO and owner of Masque Restaurant and Sage Saffron in Mumbai.

The judgment is a huge relief for the millions of hospitality employees who are direct beneficiaries of the service charge.

“We have always maintained that service charge was never illegal. Now, we are delighted that the court has passed a stay order against the CCPA guidelines,” says Rachel Goenka, CEO & Founder of The Chocolate Spoon Company.

Pankaj Gupta, Founder at Taftoon Bar & Kitchen & Oye Kake, says that he is relieved that restaurants won’t be barred from levying service charge.

“Even more pleased than me is the deserving team operating my restaurants. We appreciate this remarkable order from the Delhi High Court which shows support for our hard-working industry and will go a long way to help maintain transparency and high standards of service for our guests,” he says.

Vivek Chawla, Director, TORI, says that all over the world, hotels and restaurants are allowed to levy service charge. “It was quite shocking how the above order was even passed,” he says.

“A good judgement passed, sanity prevails, and, most importantly, the Indian judiciary system has taken the right step forward in helping the restaurant and hotel association. This judgement will save jobs of many in this sector, which is still recovering from the pandemic,” says Atul Chopra, Co-founder, Yazu, Juliette & Maai.

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