Delhi HC asks FHRAI to use the term 'staff contribution' in place of 'service charge'

New Delhi, Sep 5 (IANS) The Delhi High Court on Tuesday asked the members of a restaurant association to use the term 'staff contribution' for the amount they were claiming from their customers as 'service charge'.

The Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI) had challenged the Central Consumer Protection Authority's (CCPA) rules released on July 4 last year, which the high court stayed later that month.

The guidelines of CCPA prohibited the hotels and restaurants from levying service charge "automatically or by default" on bills.

Justice Pratibha M. Singh directed the FHRAI to clearly specify the imposition in their menu cards and not charge more than 10 per cent of the bill.

“They will make it clear that it is not a levy by the government,” the judge said. 

The FHRAI informed the court that they have over 3,300 establishments as its members and while there was no uniformity with respect to the levy of service charge among its members, they did not have any objection to the use of an alternative term for the amount.

The court had earlier stated that the associations' response must state whether the members would object if the term "service charge" were to be replaced with another term, such as "staff welfare fund, staff welfare contribution, or staff charges", in order to prevent consumers from assuming that the fee is being levied by the government.

On Tuesday, the senior counsel for FHRAI said some of its members were imposing service charge as a mandatory condition.

The NRAI, which has around 1,100 members, however, said service charge was the accepted terminology which cannot be replaced and there was no confusion with respect to its use.

“The matter would require a hearing," the judge said. 

Meanwhile, she directed that the members of the FHRAI shall use the term 'staff contribution' for the amount of service charge that they are charging.

The court further clarified that the same shall not be more than 10 per cent excluding GST. 

"Menu cards shall specify in bold that no further tip is to be paid to the establishment," it said. 

It said that it was only an interim order that is subject to the final outcome in the petitions, and posted the matter for hearing next on October 3.

On April 12, the high court had said that its interim order staying CCPA guidelines shall not be shown on the menu cards or display boards in a manner to mislead the consumers that the service charge has been approved by the court.