New Delhi: The Central Consumer Protection Authority (CCPA) has imposed a ₹50,000 fine on China Gate Restaurant Private Limited, which operates the Bora Bora restaurant chain in Mumbai, for levying mandatory service charges in violation of consumer protection norms and Delhi High Court directions.

In an order dated 29 December, the CCPA said the restaurant added a 10% service charge by default to customers' bills and charged GST on the service charge, despite clear guidelines that such charges must be voluntary and cannot be included automatically.

The action followed a complaint filed through the National Consumer Helpline (NCH) by a Mumbai consumer, who alleged that the restaurant refused to remove the service charge and misbehaved when the consumer objected to it.

The CCPA noted that the Delhi High Court, in its 28 March 2025 ruling on National Restaurant Association of India vs Union of India, had upheld the authority's guidelines and categorically held that mandatory service charges were illegal. Despite this, the restaurant continued to levy a service charge by default through its billing software.

Several violations

A detailed investigation by the CCPA's director general (investigation) found that service charges were automatically added to all bills between 28 March and 30 April 2025, indicating that the charge was not discretionary. The investigation also found that the restaurant failed to resolve the consumer's grievance despite multiple notices, charged GST on the service charge in violation of guidelines, and had a non-functional email address, thereby limiting consumer access to grievance redressal mechanisms, according to the order reviewed by Mint.

While the restaurant argued that the service charge was discretionary and claimed it had stopped the practice after becoming aware of the court ruling, the CCPA said it failed to provide evidence of compliance during the relevant period. The authority also noted that the refund to the complainant was processed only after regulatory intervention.

Given that the restaurant has several outlets in Mumbai, the CCPA said, the practice had the potential to impact a large number of consumers. It directed the company to modify its billing software to remove the default service charge, ensure that consumer grievance channels remained functional at all times, and submit a compliance report within 15 days.

The order reiterated that consumers may tip staff if they choose to, but restaurants cannot add a service charge automatically, collect it under alternative names, or link service provision to the payment of such charges. The authority said violations of these norms would attract penalties under the Consumer Protection Act, 2019.

In a statement, the consumer affairs department said action was taken against Makhna Deli, Xero Courtyard, Castle Barbeque, Chaayos and Fiesta by Barbeque Nation for failing to refund mandatory service charges despite the Delhi High Court's order. "Notices have been issued under the Consumer Protection Act, 2019, directing the restaurants to refund the service charge amounts," it said.

The Delhi High Court upheld the CCPA guidelines banning automatic service charges and imposed ₹1 lakh fine on restaurant associations challenging those rules, underscoring stricter enforcement of consumer rights.

Under the Consumer Protection Act, 2019, failure to comply with CCPA directions can attract a fine up to ₹10 lakh for the first offence and up to ₹50 lakh for subsequent violations, along with other penalties such as product or service restrictions, though these provisions are general and not limited to service-charge cases.

Ashim Sanyal, chief operating officer, Consumer Voice, said, "Such orders send a strong signal that consumer rights cannot be diluted through billing practices or software defaults. Mandatory service charges undermine transparency and choice, and strict enforcement is necessary to ensure restaurants comply with both the law and court rulings."

Queries emailed to China Gate restaurant on Tuesday were not immediately answered.