Source : INDIA TODAY NEWS
The Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 1 lakh on Mister Chai, a restaurant at Delhi’s famous five-star Shangri-La Eros Hotel, for automatically adding a 10 per cent service charge to two customers’ bills without their consent.
In an order dated October 22, the consumer watchdog said the restaurant had violated consumer protection guidelines by making customers seek a waiver of the charge, instead of allowing them to decide whether they wanted to pay it. The CCPA directed the restaurant to discontinue the practice and submit a compliance report within 15 days of receiving the order.
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The authority took up the matter after receiving two consumer complaints, dated May 30 and June 10, 2025. The complainants alleged that a 10 per cent service charge had been added to their bills at the restaurant. The CCPA’s investigation found that the restaurant had levied a service charge of Rs 435 on a bill subtotal of Rs 4,350 and Rs 125 on another bill of Rs 1,250.
WHAT THE RESTAURANT SAID?
The restaurant argued that the charge was discretionary and that its menu clearly informed customers they could ask for it to be waived. It also said staff verbally informed customers about the charge and that the amounts had been refunded to the complainants. The hotel maintained that customers had consented to the payment.
However, the CCPA rejected this defence, saying the responsibility could not be placed on customers to actively ask for a waiver of a charge that was automatically included in their bills. It observed that such an arrangement created an “opt-out” mechanism rather than requiring customers to voluntarily agree to pay.
The consumer watchdog noted that changing the description of the levy to “Voluntary Service Staff Contribution (Optional)” on invoices did not make the practice lawful, since the amount continued to be added by default.
WHAT CCPA GUIDELINES SAY?
Under the CCPA’s 2022 guidelines, hotels and restaurants cannot add service charges automatically or by default to bills, collect them under another name, or force customers to pay them. The guidelines state that service charges must be voluntary, optional and left to the customer’s discretion.
The Delhi High Court, in a March 28, 2025 judgment in a case filed by the National Restaurant Association of India, upheld the CCPA guidelines and ruled that service charges or tips cannot be made compulsory. It also said any voluntary tip must not be added to the bill by default.
The CCPA noted that despite the guidelines and the High Court’s ruling, the restaurant continued levying the charge until October 1. It said the practice had persisted for at least 15 months after the High Court upheld the guidelines.
The restaurant informed the authority that it had stopped collecting the service charge across the hotel with effect from October 1. It also said the disputed amounts, along with the applicable GST, had been refunded to the complainants.
Taking into account the findings of its investigation and the restaurant’s submissions, the CCPA imposed a penalty of Rs 1 lakh and directed it to strictly comply with the service charge guidelines.
– Ends
SOURCE :- TIMES OF INDIA
