A customer cannot be compelled to pay a service charge merely because it is written on a menu card: Delhi High Court affirms consumer’s right to choice

In a resounding judgment delivered on 28th March 2025, the Delhi High Court in National Restaurant Association of India & Ors. v. Union of India & Anr. upheld the validity of the guidelines issued by the Central Consumer Protection Authority (CCPA) prohibiting the mandatory imposition of service charges by restaurants and hotels. Dismissing the challenge raised by the industry’s two largest associations, the Court held that compelling customers to pay a fixed service charge—without giving them any real option to refuse— is not only misleading but also amounts to an unfair trade practice under the Consumer Protection Act, 2019. 
 
Describing such practices as contrary to consumer autonomy and statutory safeguards, Justice Prathiba M. Singh observed that “mere disclosure of service charge on a menu cannot amount to a binding contract” and held that the CCPA was well within its powers under Section 18 of the Act to issue binding directions to safeguard consumer rights. 
 
“A Menu Card is Not a Contract”: Background of the Dispute 
The Ministry of Consumer Affairs had first issued advisories in 2016 and 2017 noting the growing consumer complaints about forced service charges in restaurants, often presented as a fait accompli on the bill. Despite advisories asking restaurants to display that service charge was voluntary, the practice of imposing a fixed percentage charge continued. 
 
Responding to fresh consumer grievances, the CCPA issued guidelines dated 4th July 2022, declaring that no restaurant or hotel shall add service charge automatically or by default, and that paying such a charge must be voluntary and at the discretion of the consumer. 
 
This led to a legal challenge from two powerful industry groups—the National 
Restaurant Association of India (NRAI) and the Federation of Hotel and Restaurant Associations of India (FHRAI)—who claimed the guidelines were arbitrary and that the CCPA had no authority to interfere in pricing decisions. 
 
The petitioners asserted that service charge is a long-standing commercial practice, often used to support employee welfare, and that a customer who orders after reading the menu consents to the pricing structure, including service charge. 
 
 “Contract Cannot Be Imposed Unilaterally” 
 
The High Court categorically rejected the petitioners’ argument that customers voluntarily agree to service charges merely by entering a restaurant or ordering food. The Court declared that service charge cannot be made compulsory, even if written in the menu or displayed on walls. As the Court noted: “The mere act of the consumer entering a restaurant and placing an order after seeing a menu does not amount to free and informed consent for a mandatory service charge.” 
 
 The Court further emphasized that a contract cannot be created by default or unilateral declaration. It held: “Consent must be voluntary and specific. A consumer cannot be forced to pay a charge which he had no meaningful opportunity to refuse.” 
 
 The Court held that mandatory levy of service charge, without giving customers a real choice, constitutes an unfair trade practice under Section 2(47) of the Consumer Protection Act, 2019. It explained: “The lack of clarity in pricing and the inability of the consumer to exercise choice renders the practice misleading and unfair.” 
 
The Court also made it clear that displaying a notice in the menu or restaurant premises does not convert an unfair trade practice into a valid contractual term. 
 
“CCPA Was Acting Within the Law”: Guidelines Upheld 
 The Court affirmed that the CCPA has full authority under Section 18 of the Consumer Protection Act, 2019 to issue guidelines aimed at protecting consumers from deceptive or coercive business practices. On this point, Justice Singh remarked: 
 
“The issuance of the Guidelines is squarely within the powers vested with the CCPA under the CPA, 2019. The submission that the Guidelines are ultra vires the Act is rejected.” 
 
 The Court refuted the argument that the guidelines required parliamentary approval or should have been issued through delegated legislation, holding that the guidelines were regulatory directions issued under the express statutory mandate of the CCPA. 
 
“Staff Welfare Cannot Override Consumer Choice”: On Industry Justifications 
 
The petitioners had heavily relied on the argument that service charge is essential for the welfare of staff, as it forms a part of their income. The Court sympathised with the industry’s concerns but stated that such considerations cannot justify depriving consumers of their right to choose. The judgment observed:  “Staff welfare is an important concern, but it cannot override the fundamental principle of consumer choice. A fair and transparent system cannot be built on the premise of compulsion.” 

With this ruling, the Delhi High Court has put to rest the long-standing debate on whether restaurants can impose service charges as a matter of right. The Court has clarified that service charges are not per se illegal, but they cannot be mandatory or collected without express consent of the consumer. Importantly, the judgment strengthens the role of the CCPA and reiterates that consumer choice is central to the law. 
 
Justice Singh’s observation encapsulates the judgment's spirit:  “The consumer is not a captive party. He cannot be made to bear charges not agreed upon, merely because he has consumed the food.” 
 
 The industry may still voluntarily request service contributions, but the age of default, non-negotiable service charges is now firmly over—unless the customer willingly agrees to pay. 
 
Date of Decision:  28th March, 2025