Delhi HC upholds guidelines prohibiting automatic levying of service charge

The Central Consumer Protection Authority's (CCPA) rules that forbid hotels and restaurants from automatically charging for services were upheld by the Delhi High Court on Friday. The court ruled that the forced enforcement of these rules infringed consumer rights and amounted to unfair trade practices. In July 2022, the CCPA released the recommendations in an effort to stop unfair trade practices and consumer rights abuses.

According to Justice Prathibha M. Singh, tips and service fees are optional and cannot be made mandatory by establishments like hotels or restaurants. "It is against consumer rights to impose a service charge in a forced manner. It is unfair trade practice to collect service charges under different identities. According to Justice Singh, the amount shouldn't be increased and should instead be up to the consumer's discretion.

It was illegal for the CCPA to enforce a required service charge over the cost of the food and any applicable taxes. It claimed that customers were not given any proportionate services separately.