Mahim restaurant penalised for charging service fee, asked to issue refund

Mumbai: A restaurant in Mahim has been penalised by the Central Mumbai District Consumer Commission for levying a service charge on a customer, violating guidelines set by the National Consumer Protection Authority in 2017.
Ridhina Nagvekar, a Prabhadevi resident, filed a complaint with the commission in June 2022. According to her counsel, Prashant Nayak, Nagvekar visited Thangabali restaurant with her family on January 30, 2021 and was billed ₹1,393.
Upon noticing a “service charge” of ₹75.30 on the bill, Nagvekar informed the manager that such charges were prohibited under Central Consumer Protection Authority guidelines. She explained that any such payment, akin to a tip, should be voluntary and requested its removal from the bill. Her request was denied.
Nagvekar subsequently emailed the restaurant and sent a legal notice, receiving no response. She then approached the District Commission seeking a refund of the service charge and compensation for deficiency in service.
Before the Commission, Nayak presented the guidelines prohibiting hotels and restaurants from levying service charges, arguing that the practice constituted an unfair trade practice.
The restaurant contested the complaint, claiming Nagvekar paid the bill voluntarily without protest. They asserted that they do not insist customers pay service charges and therefore were not guilty of unfair trade practices.
The establishment also cited Delhi High Court guidelines suggesting restaurants use terms like “staff contribution” instead of service charge, capped at 10% of the food bill. They argued this justified their actions, noting the guidelines were under challenge in the high court.
The Consumer Commission was unswayed by these arguments. It found the restaurant guilty of deficiency in service, noting that the guidelines were in force and binding at the time of the incident.
The Commission has ordered the restaurant to refund the excess amount with 6% annual interest. Additionally, the establishment must pay ₹5,000 to Nagvekar as compensation and litigation costs within 45 days.
This case highlights ongoing tensions between consumer rights and restaurant practices in India, particularly regarding service charges. As legal challenges to these guidelines continue, consumers and establishments alike await clearer regulations on the contentious issue.