Delhi High Court questions restaurant service charge; says customers already pay above MRP for ‘experience’

The Delhi High Court on Friday (August 22, 2025) questioned the restaurant associations over the practice of levying service charges, as to why customers should pay the extra fee when they are already being billed higher than the Maximum Retail Price (MRP) in the name of providing an “experience.”

A Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela posed the query to the counsel representing the associations for hotels and restaurant, who moved court against a single judge’s order.

The single judge of the High Court in March held restaurants cannot mandatorily levy service charge on food bills in a “camouflaged and coercive” manner as it is against public interest and amounts to unfair trade practice. The court on Friday (August 22, 2025) said restaurants were charging the visitor under three components — food items sold, providing ambience and serving.

“You [restaurants] are charging more than MRPs, for the experience being enjoyed by the person visiting your restaurant. And you’re also charging the service charges for the service rendered… providing an ambience for certain kind of experience will not include the services you’re providing? This we don’t understand,” the Bench said. “This service charge should include that also,” the Bench added.

The Bench asked the counsel for the National Restaurant Association of India (NRAI) and Federation of Hotels and Restaurant Associations of India (FHRAI) through an example that when the restaurants were charging ₹100 for a ₹20 water bottle, why the customer will have to pay an addition charge for the services it provides? “And why are you quoting ₹100 in your menu for ₹20 Rupee water bottle, without specifying that this 80 Rupees extra is for the ambience you’re providing? This can’t be like this. This is an issue… Providing the ambience will form part of the services being provided by you… Can you charge any amount over and above the MRP? And for service you’re charging, what’s that 80 rupees for?” the Bench asked.

On March 28 the court said, “The mandatory collection of service charge is contrary to law and violates the guidelines.” It added that if consumers wish to pay any voluntary tip for services which they had enjoyed, the same would obviously not be barred.