CCPA fines Chaayos operator Rs 50,000 over default service charge

The Enforcement Action

The Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 50,000 on Sunshine Teahouse Pvt. Ltd., the company that operates the Chaayos tea-cafe chain, for levying a service charge on customer bills by default. The order, numbered CCPA-2/16/2025-CCPA and dated 14 July 2026, was passed by a bench of Chief Commissioner Nidhi Khare and Commissioner Anupam Mishra. Alongside the penalty, the CCPA directed the company to reimburse the service charge paid by the complainant and to modify its billing software so that the charge is no longer added automatically.

The Authority found that the charge was "mandatorily levied on all consumers" through a command in the billing system, and held that this amounted to an unfair trade practice under the Consumer Protection Act, 2019. The proceeding began as suo-motu cognisance of a grievance registered on the National Consumer Helpline (1915) under docket number 6958017 dated 30 March 2025.

Chaayos contested the case. In its submissions the company maintained that the service charge at its outlets "is not mandatory", that it was "entirely voluntary and is applied solely at the discretion of the consumer", and that it had discontinued the levy across all outlets with effect from 1 May 2025. The CCPA recorded these submissions but concluded that the default addition of the charge to software-generated bills negated the claim that it was voluntary. The company must submit a compliance report within 15 days of receiving the order.

How the Scheme Worked

According to the order, the matter traces back to a single restaurant bill. A consumer complained to the National Consumer Helpline on 30 March 2025 that an outlet had added a service charge to his bill and, when he sought a refund, was told the charge was mandated by company management and was non-refundable. The grievance was registered two days after the Delhi High Court, on 28 March 2025, had upheld the CCPA's 2022 guidelines and held that mandatory service charge is "contrary to law".

The CCPA states it conducted a preliminary inquiry under Sections 18(2) and 19 of the Consumer Protection Act, 2019, and, because the bill was software-generated, treated the practice as one capable of affecting consumers "as a class". It issued a notice on 25 April 2025 seeking the company's response. Chaayos replied on 1 May 2025, arguing that the charge was optional, that signage at its points of sale informed customers of this, and that it honoured refund requests.

Unpersuaded, the Authority directed its Director General (Investigation) to examine the matter. The investigation report, submitted in May 2026, records that the company levied a service charge on the bill dated 30 March 2025, after the High Court judgment, and that the charge "was added by default" rather than left to the customer's discretion. It also notes that the National Consumer Helpline sent the company reminders dated 4, 11 and 15 April 2025, and that the grievance went unresolved.

The report was shared with Chaayos on 27 May 2026, and a hearing was held on 10 June 2026, at which the company was represented by counsel and produced later invoices showing no service charge. In its final findings the CCPA held that the charge stemmed from "the command embedded in the billing software", which it said produced a "default addition of service charge to every bill" until the practice was discontinued. On that basis it recorded that the charge had been levied mandatorily, in contravention of the guidelines and the High Court's judgment.

The Law Invoked

The CCPA order rests on the Consumer Protection Act, 2019, and the service-charge guidelines issued under it. The Authority relied on Sections 18(2) and 19, which empower it to inquire into violations of consumer rights and unfair trade practices, and on Sections 20 and 21, under which it may issue directions and impose penalties. Section 21 allows a penalty of up to ten lakh rupees for a first contravention, rising to fifty lakh rupees for subsequent ones; Section 21(7) lists the factors, including the population affected and the duration of the conduct, that guide the amount.

The order also cites the definitional provisions of the Act. Section 2(47) defines "unfair trade practice"; Section 2(9)(ii) and 2(9)(v) set out the consumer's right to be informed about price and to seek redressal against unfair trade practices; and Section 2(28) addresses the misleading representation of price. The CCPA read these against its "Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants" of 4 July 2022, which state that "no hotel or restaurant shall add service charge automatically or by default in the bill".

Underpinning the whole action is the Delhi High Court's judgment of 28 March 2025 in National Restaurant Association of India & Ors. v. Union of India & Anr., which upheld those guidelines and confirmed that the CCPA "is free to enforce its guidelines in accordance with law".

What Happens Next

A CCPA order of this kind is a regulator's finding, not a criminal conviction, and it is open to challenge. Under the Consumer Protection Act, 2019, a person aggrieved by an order passed by the Central Authority under Section 20 or 21 may appeal to the National Consumer Disputes Redressal Commission within thirty days of receiving it. Until any such appeal is decided, the directions in the order stand.

In the immediate term, the order requires three things: reimbursement of the service charge paid by the complainant, modification of the billing software to remove the default charge, and payment of the Rs 50,000 penalty. Chaayos must file a compliance report with the CCPA within 15 days. The company has told the Authority that it discontinued the levy across all outlets and ordering channels from 1 May 2025, a submission the order records.

Because the penalty is calibrated to the conduct and to the number of consumers potentially affected, the CCPA noted the company's reach of "more than 180+ outlets in India" when fixing the amount. A repeat contravention could, under the statute, attract a materially higher penalty.

What It Means

For diners, the order is a reminder that a service charge in India is voluntary. The CCPA's finding does not turn on whether a menu or a signboard calls the charge "optional"; it turns on whether the charge is added to the bill by default. A charge that a billing system applies automatically, and that a customer must actively ask to remove, is treated as mandatory in substance, whatever its label. That is the practice the 2022 guidelines prohibit and that the Delhi High Court has held to be contrary to law.

The practical takeaway is straightforward. A consumer who finds a service charge on a restaurant bill is within their rights to ask for it to be removed, and the establishment cannot deny service or entry for that reason. Anyone who believes a charge has been levied against these guidelines can register a grievance with the National Consumer Helpline on 1915 or through the e-Daakhil portal, exactly as the complaint in this matter began. The order shows that a single, documented helpline grievance can lead to a regulator-led investigation and a penalty.

More broadly, the action signals that the CCPA is enforcing the service-charge guidelines against large chains, not merely restating them, and that software-driven default billing is squarely within its sights.

FAQ

What exactly did the CCPA order?

The CCPA imposed a Rs 50,000 penalty on Sunshine Teahouse Pvt. Ltd., which operates Chaayos, and directed it to reimburse the service charge paid by the complainant and to change its billing software so the charge is no longer added by default. The order is dated 14 July 2026 and numbered CCPA-2/16/2025-CCPA. A compliance report is due within 15 days.

Is the CCPA's finding a criminal conviction?

No. This is a regulatory finding of unfair trade practice under the Consumer Protection Act, 2019, not a criminal conviction. The CCPA held that the charge was added by default, which it treated as a violation. The company contested the case, said the charge was voluntary, and stated it discontinued the levy from 1 May 2025. The order is appealable to the National Commission.

Is a service charge mandatory in restaurants?

No. Under the CCPA's 2022 guidelines, upheld by the Delhi High Court in March 2025, no hotel or restaurant may add a service charge automatically or by default, and it cannot be collected under another name. A service charge is voluntary, and a consumer may decline it or ask for it to be removed without being refused service.

What should I do if I am charged a service charge?

You can ask the establishment to remove the charge from the bill, and it is required to do so. If it refuses, you can register a grievance with the National Consumer Helpline on 1915, file a complaint through the e-Daakhil portal, or approach a consumer commission. The complaint in this matter began as a single helpline docket.

Where can I read the official order?

The order is published on the CCPA's website under the Department of Consumer Affairs. It sets out the case number, the bench, the findings, the statutory provisions relied on, and the directions issued. The link appears in the source note below.

This report is based on the official CCPA order dated 14 July 2026 in Case No. CCPA-2/16/2025-CCPA. It was surfaced via coverage in LiveLaw.