CCPA Action Against Zorro Night Club for Automatic Service Charge: Key Findings and Directions

1. Background of the Complaint

A grievance email dated 24.08.2025 from Mr. Sajal Garg triggered regulatory action by the Central Consumer Protection Authority (CCPA) against Zorro – The Luxury Night Club, Gurugram (a unit of Rudra Hospitality Private Limited).

According to the complaint, the restaurant had:

• Added a 10% service charge amounting to ₹805.40
• Included this charge automatically in the bill
• Levied it without any explicit consent from the consumer

A copy of the software-generated bill was enclosed with the complaint, demonstrating that the service charge formed a default component of the invoice.

At this point, the Hon’ble High Court of Delhi had already, by judgment dated 28 March 2025 in National Restaurant Association of India & Ors. v. Union of India & Anr., upheld the Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with regard to levy of service charge in Hotels and Restaurants, 2022 issued by the CCPA. The Court had clearly declared that:

Any mandatory service charge is contrary to law and violative of the CCPA Guidelines, and all restaurants are required to comply with these Guidelines.

Given this legal backdrop, the complaint indicated a possible systemic unfair trade practice affecting multiple consumers visiting the outlet.

2. Preliminary Inquiry by CCPA

Acting under Section 18(2) and Section 19 of the Consumer Protection Act, 2019, CCPA initiated a preliminary inquiry.

Key observations from this initial examination were:

• The restaurant had levied service charge despite the Delhi High Court having upheld the CCPA Guidelines in 2025.
• The bill was software-generated, implying the service charge was embedded as a default setting in the billing software.
• Such a practice, if uniform across all bills, would impact a class of consumers, attracting the concept of class action under Section 10 of the Consumer Protection Act, 2019.

Based on this prima facie material, CCPA issued a Notice dated 02 September 2025 to the restaurant, calling for its response on:

• Violation of the Consumer Protection Act, 2019
• Violation of the Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants issued on 04.07.2022

3. Restaurant’s Initial Defence

In its response dated 04 November 2025, the restaurant advanced several arguments:

1. Display Notice

   • The restaurant claimed it had prominently displayed a board stating:

     “service charge is not compulsory”

2. No Coercion

   • It contended that consumers were never pressured or forced to pay service charges.

3. Past Refund Practice

   • The restaurant admitted that:
     • Where consumers objected, the service charge had historically been refunded.
     • This, according to the restaurant, showed bona fides and compliance with the Guidelines, 2022.

4. Voluntary Nature and Staff Welfare

   • It asserted that:
     • Service charge was collected only after services were rendered.
     • Stewards would check consumer satisfaction prior to collection.
     • The amount collected went towards staff welfare.
     • If a consumer wanted a refund, they could submit a written application, which would be considered.

5. Denial of Unfair Trade Practice

   • The restaurant denied breaching Section 2(47) of the Consumer Protection Act, 2019, arguing it was fully aligned with the Guidelines, 2022 and that service charge remained voluntary and at consumers’ discretion.

4. Decision to Order Detailed Investigation

CCPA carefully reviewed this response and noted one critical admission:

The restaurant had, in practice, refunded service charge to some consumers.

This raised an important presumption:

• If refunds were occasionally granted, the default practice was to levy service charge on all bills, and only remove it when contested.

CCPA felt it necessary to determine:

• Whether the restaurant had truly stopped levying service charges after the Delhi High Court judgment dated 28 March 2025; and
• Whether its conduct amounted to a continuing unfair trade practice.

Accordingly, by letter dated 21 November 2025, CCPA directed the Director General (Investigation) to conduct a comprehensive investigation into the matter.

5. Investigation Findings of the Director General

The Investigation Report dated 06 February 2026 (received via email on 12 February 2026) recorded the following major points: