The Central Consumer Protection Authority (CCPA) recently took cognizance of grievances dated 30-05-2025 and 10-06-2025 against Shangri-La Eros New Delhi wherein the consumers alleged that a 10% service charge was forcibly levied on food bills at the restaurant’s outlet “Mister Chai”.
By a preliminary inquiry in exercise of the power conferred under Section 18(2) and Section 19 of the Consumer Protection Act, 2019 (Act), the CCPA prima facie found that the restaurant had levied the charge even though the Delhi High Court upheld the Guidelines of 2022 in National Restaurant Association of India & Ors. v. Union of India & Anr. (2025:DHC:2084). Considering that the bill was software generated, CCPA noted that the practice may have affected a wider base of consumers, making it a fit case for class action under Section 10 of the Act.
Hence, CCPA issued a notice dated 28-07-2025, to which the restaurant replied on 06-08-2025 that the imposition of service charge on the food bill is completely discretionary and that the same is explicitly stated on every page in the menu of the restaurant. CCPA observed that the restaurant had contended that it is the consumer’s responsibility to actively request a waiver at the counter. It was stated that placing the onus on the consumers to opt out of an automatically levied service charge contradicts the CCPA’s Guidelines of 2022, which mandates that no hotel or restaurant shall add service charge automatically or by default in the bill.
On 29-08-2025, CCPA directed the Director General (Investigation) to conduct a detailed investigation, and the DG submitted a report, which was shared with the restaurant on 28-07-2026. On 27-08-2026, CCPA directed the restaurant to furnish specific information, and the restaurant responded stating that the amount had been successfully refunded to the complainant. It was also submitted that the restaurant was taking voluntary staff contribution but was in the process of complete stoppage of the same w.e.f. 01-10-2026.
Perusing Section 2 (28) of the Act, CCPA clarified that when a restaurant displays a menu with specific prices, a component of service is inherent in the price of food and beverages offered by the restaurant, about which the consumer is duly informed. It stated that pricing of the product thus covers both the goods and services component. However, it was said that if a mandatory service charge is added later, it conveys an express or implied representation that the restaurant, a service provider had deliberately concealed the actual price of the food and service thereof, constituting an unfair trade practice.
CCPA stated that because restaurants have absolute freedom to set their menu prices, placing an order constitutes consent only to pay the displayed price plus applicable taxes, which is why, the practice of levying service charge violates the fundamental principles of fairness and contravenes Section 2(28) of the Act. It was held that the restaurant’s revised billing description renaming service charge to “charges for voluntary service staff contribution” was legally untenable under the Guidelines.
It was noted that the charge remained embedded within the billing software by default and that by mandating that the charge “can be waived off upon guests’ request” unlawfully shifted the burden onto the consumer and exerted social pressure to comply, imposing a financial burden on the consumer. CCPA stated that collection of service charge and use of different terminologies for the said charge is misleading and constitutes an unfair trade practice under Section 2(47) of the Act. It was found that the charge was mandatorily levied on all consumers until 01-10-2026, in contravention if the 2022 Guidelines.
Hence, CCPA held that the restaurant was in violation of Section 2(9) (ii), Section 2(9) (v), Section 2(28) (i) and (iii), section 2(47), Section 2(46) (vi), and the 2022 Guidelines. It was concluded that the mechanism of “opt-out” rather than “opt-in” fundamentally vitiated consumers’ free consent and that such deliberate, continuous imposition caused widespread prejudice to consumers as a class, attracting penal provisions under Section 21(7) of the Act.
CCPA directed the restaurant to discontinue and refrain from levying or collecting any service charge automatically, by default or under any other name, and to strictly comply with the 2022 Guidelines. It imposed a penalty of Rs. 1,00,000 and directed the restaurant to submit a compliance report within 15 days.
