The Delhi High Court has once again questioned the practice of restaurants and hotels charging a mandatory "service fee" on top of their menu prices. The court's central argument is: if establishments

Delhi High Court questioned restaurants for levying service charges despite already charging above MRP for food and drinks. The bench said ambience and service are included in the inflated prices, calling the extra charge unfair.

New Delhi: On Aug 22, the Delhi High Court on Friday questioned why restaurants are still charging customers an extra service charge when they are already collecting higher prices on food and drinks in the name of providing an “experience.”

A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela made these remarks while hearing petitions filed by the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI).

These associations had challenged a single-judge order that had earlier banned restaurants from forcing customers to pay service charges.

Back in March, the single-judge bench had ruled that restaurants cannot mandatorily add service charges to food bills in a “camouflaged and coercive” way, as this was against public interest and amounted to an unfair trade practice.

On Friday, the division bench said that when customers visit restaurants, they are already being charged under three heads — the food items themselves, the ambience or atmosphere of the restaurant, and the service of being served at the table.

The bench told the restaurant associations,

“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 court added that service charges should ideally already cover the cost of such services, including ambience.

To illustrate its point, the bench gave the example of overpriced bottled water. The judges asked, if restaurants are charging Rs 100 for a water bottle that costs only Rs 20 outside, then why should a customer also be asked to pay a separate service charge?

The court observed,

“And why are you quoting Rs 100 in your menu for Rs 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 March 28 single-judge order had also said that the addition of a service charge was nothing less than a “double whammy” for consumers, as they were being forced to pay Goods and Services Tax (GST) on top of the already unfair service charge.

The court had further noted, while looking at customer complaints and copies of restaurant bills, that the service charge was being imposed in an arbitrary and coercive manner. In such a situation, the court had said, it could not “be a mute spectator.”