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Federation of Hotel and Restaurant Associations of India v. Union of India & Ors.

Civil Appeal · 2017 INSC 1217Decided 12 Dec 2017
Civil Appeal No. 21790 of 2017
Justice Rohinton Fali Nariman · Justice Navin Sinha

Background

The hotel industry's trade body sought a declaration that laws on standardised weights and measures and printed "Maximum Retail Price" (MRP) rules do not apply to goods like bottled water sold to customers inside hotels and restaurants, because such sales are really part of a single composite service (ambience, seating, service) rather than a standalone sale of goods. A Single Judge of the Delhi High Court agreed, but a later Division Bench disposed of the matter on a lawyer's concession without deciding the legal point, leaving the question open for future enforcement action, which is what the hotel association appealed against.

Decision Breakdown

The Supreme Court held that a concession on a pure question of law/jurisdiction, especially one bearing on potential criminal prosecution, does not bind a litigant, so the Division Bench should not have treated the matter as settled by concession. On the merits, it held that under both the old 1976 Act and the successor Legal Metrology Act, 2009, "sale" still means a straightforward transfer of goods for consideration: Parliament never amended this definition to pick up the broader constitutional definition of "sale" introduced by the 46th Constitutional Amendment for composite service contracts. Relying on the Court's own precedents in the Associated Hotels and Northern India Caterers line of cases, it held that when food/drinks are supplied as an indivisible part of hotel or restaurant service, that transaction is not a "sale" caught by the weights-and-measures/MRP regime, and hotels count as "institutional consumers" exempted under the applicable Rules. The appeals were allowed and the High Court's 2015 judgment and review order were set aside.

Lesson Learnt

Hotels and restaurants are not legally required to charge no more than the printed MRP for bottled water or similar packaged items served as part of dining/room service, because that supply is treated as part of an indivisible service contract, not a separate "sale" of goods, under the specific wording Parliament chose in the weights-and-measures laws.

Official source (sci.gov.in)View Judgment (PDF)

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