Violates Fundamental Right To Trade: Calcutta High Court On State Commission's Order Fixing Treatment Rates For Private Hospitals

The Calcutta High Court has held that a number of Advisories and an Order issued by the West Bengal Clinical Establishment Regulatory Commission (“Commission”) for fixation of rates and charges by Clinical Establishments (“CEs”) from patients in the State, were without any statutory backing and thereby violated the Fundamental Right to Trade of the CEs under Article 19(1)g of the Constitution.

While allowing a writ petition by Apollo Multispeciality Hospitals and directing the respondent Commission to rescind their advisories, a bench of Justice Moushumi Bhattacharya observed that on a reading of the provisions of the West Bengal Clinical Establishments (Registration, Regulation and Transparency Act, 2017 (“the 2017 Act”), it became clear that the power to issue Advisories of such a nature was not available to the respondent Commission.

Brief facts of the case:

The petitioner approached the High Court being aggrieved with the issuance of a total of 26 Advisories and an Order by the Commission over a fourteen-month period in 2020-2021, which fixed the rates charged by the petitioner for a variety of services provided by them. These covered numerous essential services such as admission of pregnant women in such establishments, discharge of patient’s post-treatment, and allocation of vacant beds, amongst others.

It was contended by the Petitioners that the Commission could not issue such advisories under its residuary powers, since fixing rates and charges and the scope of the Commission's power therein, had already been exhaustively defined under Section 38(1)(iv) of the 2017 Act. Further it was contended that even if these advisories were classified as administrative directions, they would still not be within the residuary powers of the Commission under the 2017 Act.

Respondents argued that the 2017 Act is a social welfare legislation and that the directions issued by the Commission were to ensure the welfare of the patients and transparency in the rates being charged by private clinical establishments under the Act.

The crux of their argument was that since the Advisories were in the form of stop-gap measures, as recommendations of a “high-powered committee” it would be well within the powers of the Commission to issue, until definitive rules and regulations were framed by the State Government. This was justified under the 2017 Act, read with Entries 6 and 66 of List II of the Seventh Schedule under Article 246 of the Constitution which deal with the separation of the Union, State and Concurrent powers of Government, it was contended.

Observations of the Court:

Having heard both Counsels at length, the Court opined that upon a reading of the 2017 Act, it is seen that for the exercise of the Commission’s powers under Section 38(1)(iv) or related provisions for the fixing of rates, there must first be well-defined Regulations framed in consultation with the State Government on the subject, without which it would be without statutory backing. Justice Bhattacharya held:

“The argument that the statutory source of the Advisories is not only under section 38(1)(iv) but also under the other sub-sections of section 38, would have been acceptable had section 38(1)(iv) also been flexible in its contours without fixing the power to framing of Regulations. The Commission’s argument would also have withstood scrutiny had the Act been silent on the mechanism for fixing of rates and charges. The Commission in that case would certainly have had the authority to fill in the gap by administrative instructions or executive orders in the form of Advisories. This however, is not the case as the gap has completely been filled up by section 38(1)(iv) (Refer: Assistant Collector of Central Excise, Calcutta Division v. National Tobacco Company of India Ltd., (1972) 2 SCC 560). In fact, there is no gap at all.”

It was further held that the Commission was only a delegated authority of the State, and as such could only regulate prices once it, in consultation with the State government had come up with Regulations that were consistent with the Act. Since Section 38(1)(iv) read with Section 52 of the Act left no ambiguity concerning the fixing of rates by the Commission, the Court was of the considered view that seeking recourse under any residuary section for these actions would be impermissible in law.

Finally, in dealing with the question on whether a State can make regulations to cap rates of private clinical establishments, the Court placed reliance on a Division Bench judgement of the Bombay High Court in the case of Hospitals’ Association, through the President, Dr. Ashok Arbat v. Government of Maharashtra; wherein the Bombay High Court had held that the issuance of regulations by the State, capping the rate charged by private clinics to non-Covid patients were violative of Article 19(1)(g) of the Constitution, and hence bad in law.

In allowing the Writ petition, and disallowing fixation of rates for patients with or without COVID, Justice Bhattacharya observed that, while the purpose of the 2017 Act, to ensure the welfare of patients must be maintained, “the Commission [in issuing such Advisories] has taken a closed by-lane which is not even a short-cut for travel to its chosen destination”.

Case Title: Apollo Multispeciality Hospitals Limited & Anr. vs. West Bengal Clinical Establishment Regulatory Commission WPA 3858 of 2022

Citation: 2023 LiveLaw (Cal) 160

Appearance: Mr. Debanjan Mandal, Managing Partner, Mr.Biswajit Kumar, Partner, Mr. Debayan Sen, Senior Associate and Ms. Mahima Cholera, Senior Associate for petitioners

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