The Delhi High Court has postponed the hearing of two appeals challenging the validity of the Central Consumer Protection Authority’s (CCPA) guidelines that bar the automatic addition of service charges to restaurant bills.

The appeals were filed by the National Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI), who have questioned the CCPA's statutory authority and expressed concern over disruption to longstanding industry practices.

A Bench comprising Chief Justice Devendra Upadhyay and Justice Tushar Rao Gedela adjourned the matter without a detailed hearing due to technical difficulties during virtual proceedings.

The dispute stems from guidelines issued by the CCPA in July 2022, which clarified that service charges cannot be automatically levied without a customer’s explicit consent. The move followed numerous consumer complaints alleging that restaurants were adding a 5–20% service charge by default. The guidelines were subsequently upheld by a single-judge bench of the High Court, which found that mandatory service charges amounted to an unfair trade practice under Section 2(47) of the Consumer Protection Act, 2019.

In its ruling, the single-judge bench emphasized that compelling customers to pay a service charge without consent was misleading, and that the CCPA was within its statutory powers to prohibit such practices. The Court also imposed a penalty of ₹1 lakh each on NRAI and FHRAI for violating consumer rights.

Challenging this decision, the appellants argued that service charges are a long-standing industry norm, integral to employee compensation structures and governed by labour settlements. They maintained that as long as service charges are clearly disclosed on menus and in restaurants, customers can make an informed choice. The associations further contended that the matter falls under the purview of labour law rather than consumer protection.

The single judge, however, noted a lack of evidence showing that collected service charges were directly benefiting employees. The Court directed restaurants to avoid using the term “service charge,” suggesting terms like “voluntary contribution” or “staff welfare fund” instead, and stressed that any such payment must be entirely voluntary and transparently disclosed.

The Court also held that the CCPA guidelines, although termed as such, are binding in nature as they derive authority from the statutory framework of the Consumer Protection Act.

Due to technical constraints, the Division Bench did not engage in a detailed hearing and listed the matter for further proceedings on May 9. Until then, the single-judge ruling and the CCPA guidelines will continue to remain in effect, unless stayed by a subsequent order.