Hotel, restaurant bodies challenge Delhi HC ruling against mandatory service charge
The case is expected to come up for hearing before a division bench of the Delhi High Court on Tuesday. When reached for comment, NRAI officials declined to elaborate.
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India’s top hotel and restaurant associations have challenged a Delhi High Court order that barred eateries from forcing customers to pay service charges or tips, setting the stage for another high-stakes legal battle over consumer rights and industry practices. Over the weekend, the National Restaurant Association of India (NRAI), which represents more than five lakh restaurants across the country, filed a petition arguing that there is nothing illegal about levying a service charge and that it is a transparent, globally accepted system that does not amount to an unfair trade practice, people directly familiar with the matter told ET. Hotel associations have also backed the move, highlighting that service charges help ensure equitable distribution of tips among all staff including cleaning and kitchen workers.
The case is expected to come up for hearing before a division bench of the Delhi High Court on Tuesday. When reached for comment, NRAI officials declined to elaborate.
The March ruling from the High Court had stated that service charges must be voluntary and that forcing customers to pay them amounts to a violation of consumer rights, effectively mandating that restaurants and hotels cannot include service charges by default on bills.
The outcome of this appeal could have an immediate impact on dining bills across the country. Three senior executives told ET that the industry is still debating whether to hike menu prices to offset the potential revenue loss, especially since service charge collections often serve as a critical monthly supplement to staff incomes.
Last week, NRAI president Sagar Daryani said that given the steep financial hit that the order could cause, many restaurants are considering menu price increases of between 5 to 8 percent to protect their employees from losing out on earnings that come from service charges, especially those in roles like cleaning, serving and kitchen operations.
