Mumbai: Consumer rights organisations and activists in Mumbai have welcomed the order of the Delhi High Court (HC) on 'service charge' matter proceedings. The HC while hearing the issue on July 24 imposed ₹1 lakh cost on two restaurant and hotel bodies for their non-compliance of its directions. The cost will have to be paid to the Consumer Affairs Department of Government of India. Consumer activists said HC gave a "good order" by not entertaining the "malafide intention" of the associations to "drag" the proceedings. They have been raising issues of 'service charge' added to the bill that are often mandatory or play on the "embarrassment" of consumers by not paying.
2 hotel associations failed to comply with HC
The order was passed after the two restaurant and hotel bodies - National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI) did not comply with the directives of the High Court. The two bodies had approached court on Central Consumer Protection Authority (CCPA) guidelines, which had stated that 'service charge' is voluntary and not mandatory. The associations had approached court and managed to get a stay.
Hearing the matter on 'service charge', the High Court had asked both the associations to file a complete list of all their members who are supporting the present writ petitions by April 30, 2023. They were also asked to state in special affidavit, percentage of members who impose service charge as a mandatory condition in their bills and whether the associations shall have objection in the term service charge being replaced with alternative terminology so as to prevent confusion in the minds of the consumer that the same is not a Government levy such as ‘Staff welfare fund’, ‘Staff welfare contribution’, ‘Staff charges’, ‘Staff welfare charges’, etc.
The court also asked that the percentage of members who are willing to make service charge as voluntary and not mandatory, with option being given to the consumers to make their contribution to the extent that they are voluntarily willing subject to a maximum percentage that may be charged was also asked to be stated. The two associations did not file the affidavit. On July 24, the court said that they can file it in four days only after paying the cost and scheduled the next hearing on September 5, 2023. More than 4,000 complaints were registered on the national consumer helpline against 'service charge', the central government stated in a press statement.
HC fines the 2 hotel associations for violating service charge terms
"It is a good order by HC that looks to eliminate the mischief two associations were doing. They were given a timeline to reply, which they did not with malafide intention to drag on the proceedings and hence HC has fined them. It is a good message that malafide intentions will not be entertained. It is something associations do when the government does something good. Associations approach the court to delay the matter, let it drag so that it goes into a cold storage. HC also needs to be complimented for taking the issue that these charges are camouflaged. People were paying service charge thinking it to be government tax and also paying tip. The money was neither going to the government nor to employees. The industry needed to be held accountable when they avoided filing an affidavit," said Adv. Shirish Deshpande, chairman of Mumbai Grahak Panchayat (MGP).
Jehangir Gai, another consumer activist said, "I do not have the court case details but if the two associations did not ask for time, the court should have given adverse remarks and moved ahead instead of giving time and imposing cost." Prakul Kumar, secretary general of NRAI did not comment when approached. FHRAI officials said they will get back but did not. FPJ tried contacting the consumer affairs ministry but there was no reply.
