In a significant move to protect consumer rights, India's Central Consumer Protection Authority (CCPA) has taken strong legal action against 27 restaurants nationwide for the mandatory levy of service charges on customers. The authority has declared this practice a clear violation of consumer law.
Penalties and Directives Issued
The CCPA has imposed fines of up to Rs 50,000 on the non-compliant establishments. Beyond the financial penalty, the authority has issued two critical directives. First, the restaurants must refund the service charges collected from consumers. Second, they are mandated to modify their billing systems to ensure such charges are not added by default.
This suo motu action was initiated based on Section 2(47) of the Consumer Protection Act, 2019, which deals with unfair trade practices. The trigger for the investigation was a series of complaints received on the National Consumer Helpline (NCH), supported by customer invoices that showed an automatic 10% service charge addition.
Specific Cases and Actions
Investigations pinpointed several specific restaurants. For instance, Café Blue Bottle in Patna was directed to refund the entire service charge to the complainant, discontinue the practice immediately, and pay a penalty of Rs 30,000.
In another case involving China Gate Restaurant Pvt Ltd (Bora Bora) in Mumbai, the establishment refunded the charge during the hearing itself. It was further ordered to modify its software-generated billing system and pay a higher penalty of Rs 50,000.
Legal Backing and Future Vigilance
This enforcement drive gains solid legal backing from a March 2025 ruling by the Delhi High Court. The court upheld the CCPA's guidelines on service charges, affirming that their mandatory collection is illegal and that the CCPA is fully empowered to enforce these rules.
The guidelines in question were issued on July 4, 2022. They explicitly prohibit restaurants from:
- Adding a service charge automatically or by default.
- Collecting it under any other name.
- Forcing consumers to pay it.
- Denying entry or service to customers who refuse to pay the charge.
The CCPA has stated it is closely monitoring complaints on the NCH and will continue to take strict action against restaurants that fail to comply. This ongoing vigilance aims to safeguard consumer rights and decisively prevent unfair trade practices in the hospitality sector.
