State Cannot Issue Notification Regulating Rates Chargeable By Private Hospitals To Non-Covid Patients; Bombay HC Quashes Notifications

Division bench of Justice PV Ganediwala and Justice RK Deshpande at Nagpur were hearing a writ petition filed by Hospitals' Association, Nagpur and Dr.Pradeep Arora challenging the said notifications dated April 30, 2020 and May 21, 2020 issued by the State Government which contained the following clause-

"For Covid Patients treated at any of the Hospitals/ Nursing homes/Clinics covered under this notification across Maharashtra, rates shall not be more than rates prescribed in Annexure-C. For non-Covid patients rates will be as per Annexure-A read with Annexure-B (if applicable)."

The said notification fixed maximum chargeable rates for both Covid and Non-Covid patients. Petitioners had challenged the relevant clauses fixing rates for Non-Covid patients.

Previously, in an order dated September 25, the same bench had stayed the operation of said notifications and asked the State to clarify its stand regarding State's power to issue such notifications regulating rates chargeable for Non-Covid patients.

On April 30, the Public Health Department of the State Government issued a notification containing reference to - (i) The Epidemic Diseases Act, 1897, (ii) The Disaster Management Act, 2005, (iii) The Maharashtra Essential Services Maintenance (Amendment) Act, 2011, (iv) The Maharashtra Nursing Home (Amendment) Act, 2006, and (v) The Bombay Public Trusts Act, 1950 and on May 21, this notification was modified/amended by issuing another notification.

The first notification dated April 30 was to remain in force till further orders and the second notification dated May 21 states that it would remain in operation till August 31. Court was informed that this date is further extended up to November 30.

The bench specifically asked Advocate General of Maharashtra AA Kumbhakoni as to whether there is any possibility of extending operation of these notifications beyond November 30, he responded in a lighter vein and said that he will have to ask 'Corona' for that.

"We understand this to mean that it is not possible for him to make any positive statement in this regard. We would not have taken up this matter if the statement had been that the operation of the notifications may not be extended beyond 30-11-2020. However, uncertainty in the situation has compelled us to proceed further in the matter to deal with on merits" Court noted.

On the competency of the State Government to issue such notifications, it was argued by Dr. Pradeep Arora, petitioner-in-person, supported by Amicus Curiae Senior Advocate Subodh Dharmadhikari, that though the notifications in question refer to the provisions of the Epidemic Diseases Act, the Disaster Management Act, the Maharashtra Essential Service Maintenance (Amendment) Act, 2011, the Maharashtra Nursing Home Registration (Amendment) Act, 2006 and the Bombay Public Trusts Act, 1950, there is no specific reference to any particular provision under these Acts, indicating the source of power to regulate the rates in respect of Non-Covid patients.

Pointing to relevant provisions under the aforesaid acts it was urged that none of these provisions empower the State Government to regulate the rates recoverable by the private hospitals for providing medical services to Non-Covid patients. The notifications in question are, therefore, beyond the competence of the State Government, the petitioners argued.

Moreover, it was urged by them that the fundamental right to practice any profession or to carry on any occupation, trade or business under Article 19(1)(g) of the Constitution includes right to charge rates, reasonable, proportionate to or commensurate with the nature and quality of the medical treatment and allied services rendered to Non-Covid patients, which may differ from hospital to hospital. The rates prescribed in the notifications in question are unreasonably low and to insist upon providing the said treatment and services to Non-Covid patients at such rates cannot be justified under Article 19(6) of the Constitution of India.

If at all reasonable restrictions are required to be imposed under Article 19(6), it can only be done by a law to be made by the State Legislature and the notifications in question cannot be described as a 'law' under Article 13(3)(a) and (b) of the Constitution of India, petitioners submitted.

On the other hand, Advocate General AA Kumbhkoni, submitted that Entry 6 in List II (State List) of Schedule VII as well as the provisions of Section 2 of the ED Act and Section 65 of the DM Act empower the State Government to regulate the rates chargeable by the private hospitals to Non-Covid patients also. According to him, there is a medical emergency situation prevailing in the country due to the outbreak of Covid-19 and the death rate is on rise. He submitted that during this pandemic situation, the issue of providing medical treatment and allied services to Covid is inherently and intimately connected with Non-Covid patients and no distinction can be made between them.

If the State Government has power to regulate the rates charged by the private hospitals to Covid-19 patients, the power to prescribe the rates for Non-Covid patients is also inherent, AG Kumbhakoni argued.

He further contended that the rates specified in Annexures A and B to the notifications in question are the same rates which are part of the Insurance Regulatory and Development Authority (IRDI) approved health care product treated in GIPSA-PPN or network of hospitals empanelled by various TPAs at specific package rates agreed by them and borne by the insurer. Hence, it cannot be said that the same are unreasonably low. According to him, the rates are model, reasonable and competitive. Once the rates are found to be reasonable and competitive, then there is no violation of fundamental right under Article 19(1)(g) of the Constitution of India, he said.

After examining the facts of the case, Court observed-

"Thus, we find that wherever the Constitution intended to confer a power on the Parliament or the State Legislature to fix the taxes, tolls, rates, charges, fees or duties, a specific power is conferred, making an entry under the State or Union or Concurrent List, as the case may be. Similarly, wherever the Constitution intended to confer power to regulate any trade, business or profession or such activities or any part of it, such power is specifically conferred under such List upon the Parliament or the State Legislature.

Therefore, in our view, Entry 6 regarding public health and sanitation; hospitals and dispensaries in the State List is neither an entry to regulate or control, the charges, fees or rates, nor it can be read to include the power to prescribe or regulate the charges, fees or rates in 27 wp1936.20.odt respect thereof. We, therefore, hold that the State Legislature is, therefore, not competent either to frame any law in that respect or to issue any notification regulating the rates chargeable by the private hospitals to Non-COVID patients."

Further, court held that neither the ED Act nor the Covid Regulations empower the State Government to issue the impugned directions in relation to the Non-Covid patients in 20% isolation and non-isolation beds in private hospitals/health care providers and nursing homes."

Similarly, the bench held that the State Government is not competent to issue impugned directions in respect of Non-Covid patients under Section 65 of the Disaster Management Act.

Importantly, Court also held-

"The private hospitals/health care providers and nursing homes are denuded of their control and regulation over 80% isolation and non isolation beds and to that extent they are to be compensated under Section 66 of the DM Act"

The bench also concluded that the said notifications are an encroachment over the fundamental rights of the petitioner under Article 19(1)(g) of the Constitution of India to practise any profession or to carry on any occupation, trade or business.

Finally, the bench quashed and set aside the notifications dated April 30 and May 21, issuing the directions contained in clauses (4), (8), (9), (11), (12), (13), (14) and (15) to the extent applicable to Non-Covid patients in the private hospitals/health care providers and nursing homes, etc.

Court also rejected the request of AGP AM Deshpande's request for a stay on the judgment for four weeks

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