The Delhi High Court on Friday questioned why restaurants levy service charges on top of already inflated prices, observing that customers are being made to pay multiple times for the same services.
A division bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela posed sharp queries to the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI), who had challenged a single judge’s March order prohibiting mandatory service charges.
The bench remarked that restaurants were charging under three heads — for the food items, the ambience, and the service — but in reality, customers were already paying more than the Maximum Retail Price (MRP) for the experience.
“You are charging more than MRPs for the experience being enjoyed by the person visiting your restaurant. And you’re also charging service charges for the service rendered. Providing an ambience for a certain kind of experience will not include the services you’re providing? This we don’t understand,” the bench said, adding that the extra pricing should cover services too.
To illustrate, the court asked why restaurants charge Rs 100 for a water bottle with an MRP of Rs 20 without disclosing that the additional Rs 80 is for the ambience. “Can you charge any amount over and above the MRP? And for service you’re charging, what’s that 80 rupees for?” the bench questioned.
On March 28, a single judge of the Delhi High Court ruled that restaurants cannot levy service charges in a “camouflaged and coercive” manner, terming it an unfair trade practice against public interest. The court noted that consumers were facing a “double whammy” as they were compelled to pay Goods and Services Tax (GST) on top of the service charge.
The order had stressed that service charges were being arbitrarily and coercively enforced, leaving consumers with no choice, and that the court could not remain a “mute spectator” in such situations.
