Full Judgment Text
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 09.07.2015
+ W.P.(C) 1538/2013 & CM 3212/2013
DELHI VOLUNTARY HOSPITAL
FORUM & ORS ..... Petitioners
versus
MINISTRY OF HEALTH AND FAMILY
WELFARE & ORS ..... Respondents
Advocates who appeared in this case:
For the Petitioners : Ms Mamta Tiwari and Mr Petal Chandhiok.
For the Respondents : Mr Saqib and Ms Shipra Shukhla for R-1, 2 & 3.
AND
+ W.P.(C) 2688/2013 & CM 5073/2013
SUNDER LAL JAIN CHARITABLE HOSPITAL ..... Petitioner
versus
MINISTRY OF HEALTH AND FAMILY
WELFARE & ORS ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Ms Mamta Tiwari.
For the Respondents : Mr Rajesh Gogna with Mr Arnab Naskar
for R-1, 2 & 3.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The present petitions have been filed impugning the Office
Memorandum dated 07.02.2013 (hereinafter ‘impugned OM’) whereby the
W.P.(C) 1538/2013 & 2688/2013 Page 1 of 17
rates for treatment were reduced from ` 97,750/- to ` 50,000 in case of
Coronary Angioplasty and from ` 97,750/- to ` 55,000 in case of Coronary
Angioplasty with Balloon.
2. Briefly stated, the facts relevant to consider the controversy in the
present petitions are as under:-
2.1 On 05.09.2009, the Government of India floated a tender for
empanelment of private hospitals, eye care centres, dental clinics and
imaging centres under the Central Government Health Scheme (hereafter
CGHS) and issued an E-tender Document for inviting bids (hereafter the
‘Tender Document’). In pursuance to the Tender Document, various
hospitals including the petitioner hospitals submitted their technical and
commercial bids. In September 2010, the Government of India (Directorate
of Health Services) declared a treatment wise list of rates (CGHS approved
rates) which were arrived at on the basis of the lowest rates submitted by
various hospitals in their respective bids. The said rates list indicated
` 97,750/- as the rate for treatment of Coronary Angioplasty and Coronary
Angioplasty with Balloon.
2.2 On the rates being notified by the Government, various hospitals
including the petitioner hospitals accepted the notified rates and submitted
their Acceptance Letters to the Government. Thereafter, in October 2010,
the Government entered into Memorandum of Agreements (hereafter
MoAs) with various hospitals, including the petitioner hospitals, for being
empanelled with the CGHS for providing treatment facilities to the
beneficiaries of the CGHS as per the declared CGHS rates.
W.P.(C) 1538/2013 & 2688/2013 Page 2 of 17
2.3 The said MoAs were initially valid for a period of 2 years and were
extendable by another year subject to mutual agreement on the same terms
as provided under the Tender Document. Thus, after the expiry of the term
of two years in 2012, the MoAs were extended till 31.03.2013. After a
lapse of approximately 5 months of the extension period, the Government
issued the impugned OM revising the CGHS rates for treatment of
Coronary Angioplasty from 97,750/- to 50,000 and for treatment of
` `
Coronary Angioplasty with Balloon from ` 97,750/- to ` 55,000. It is
contended by the petitioners that the representations made by various
hospitals against the revision of CGHS rates elicited no response from the
Government.
2.4 During the pendency of the present petitions, the term of the
empanelment of various hospitals/diagnostic centres was extended from
time to time and as per notification dated 24.06.2014, the term of
empanelment was extended till 31.07.2014 or till finalization of next
empanelment process, whichever is earlier.
Submissions
3. The learned counsel for the petitioners contended that the revision of
CGHS rates was arbitrary and without any application of mind, as no study
was conducted by the Government before directing for revision of the
CGHS rates. It was contended that the CGHS rates for various treatments
were unreasonably reduced by the Government by the impugned OM. It
was contended that the Government by a notification dated 19.06.2014
again increased the rates for the treatment of Coronary Angioplasty with
W.P.(C) 1538/2013 & 2688/2013 Page 3 of 17
Balloon to ` 92,690/- for CGHS, Delhi & NCR. It was also asserted that
consequent to the said notification, 275 hospitals/Diagnostic Centres had
executed agreements with the Government.
4. The learned counsel for the respondents contended that the revision
of CGHS rates is a policy decision which was taken on the basis of
technical recommendation from Director General of Health Services in
consultation with expert Cardiologists, as the CGHS rates for angioplasty
were considered to be on the higher side. The revised CGHS rates were
notified only after obtaining concurrence of Integrated Finance Division of
Ministry of Health & Family Welfare. It was contended that the scope of
judicial review of a policy decision is very limited.
5. It was further submitted that revision of CGHS rates was a
considered decision and would not amount to modification of the terms and
conditions of the MoA. The learned counsel for the respondents contended
that there was no requirement for seeking approval or consent of hospitals
while undertaking the process of revision of applicable CGHS rates. And,
in terms of Clause 24 of the Tender document, it was open for the
empanelled Private Hospitals to withdraw from the scheme if the revised
CGHS rates were not acceptable to the said hospitals.
6. The learned counsel for the respondents pointed out that by
notification dated 15.10.2012, the validity of empanelment was extended
till 31.03.2013 and it was clarified that the empanelled hospitals had the
option to withdraw from the empanelment by submitting letters seeking
withdrawal of empanelment on or before 31.10.2012. It was contended that,
W.P.(C) 1538/2013 & 2688/2013 Page 4 of 17
therefore, the relevant period for consideration would be from 07.02.2013
till 31.03.2013. The counsel also referred to a notification dated 14.02.2013
which is related to the "Continuous Empanelment Scheme", which provides
that the revised CGHS rates shall be applicable for any fresh empanelment.
7. It was further urged that where a contract is non-statutory and purely
contractual, the rights of the parties are governed only by the terms of the
contract. The grievances raised by the petitioners are contractual in nature
and required interpretation of the contractual terms and, therefore, remedy
under Article 226 of the Constitution of India is not sustainable. Reliance
was placed on decisions in State of Orissa & Ors. v. Narain Prasad &
Ors. : (1996) 5 SCC 740 and NHAI v. Ganga Enterprises & Anr. : (2003) 7
SCC 410 . The respondents also referred to Clause 25 of the Tender
Document which provides for an alternative dispute resolution mechanism
of arbitration and contended that the petitioners had an alternative
efficacious remedy and therefore proceedings under Article 226 of the
Constitution of India were not maintainable. Reliance was placed on M/s
Bisra Stone lime Co. Ltd. v. Orissa State Electricity Board & Anr. : AIR
1976 SC 127 and Smt. Rukmanibai Gupta v. The Collector, Jabalpur :
AIR 1981 SC 479 .
8. The aforesaid contentions were disputed by the petitioners and it was
contended that the action of the Government, even in contractual matters,
must satisfy the test of reasonableness being an action of the ‘State’.
Reliance was placed on a decision of this court in South Delhi Distributors
v. Govt. of NCT of Delhi & Anr. : W.P. (C) No.11847/2009, decided on
15.12.2009 .
W.P.(C) 1538/2013 & 2688/2013 Page 5 of 17
9. The petitioners contended that the availability of alternative remedy
did not bar the invocation of Writ jurisdiction of this Court, as the
impugned OM was arbitrary and illegal. Reliance was placed on decisions
in Union of India & Ors. v. Tantia Construction Pvt. Ltd. : (2011) 5 SCC
697 and Harbanslal Sahnia & Anr. v. Indian Oil Corporation Ltd. &
Ors. : (2003) 2 SCC 107 .
Discussion and conclusion
10. In view of the aforesaid, the principal controversy to be addressed is
whether the reduction in the CGHS rates for treatment of Angioplasty as
specified in the impugned OM dated 07.02.2013 is arbitrary and
unreasonable? It is also necessary to consider whether the reduction in the
CGHS rates as notified constitutes the breach of MoAs entered into by the
Government with various hospitals including the petitioner hospitals and
whether the present petition is maintainable.
11. Insofar as the respondents’ contention, that the present proceedings
are not maintainable as the issue involved relates to contractual
arrangement between the petitioner hospitals and the Government, is
concerned, the same is not sustainable. It is trite law that Article 14 of the
Constitution of India strikes at arbitrariness in State’s action. Thus, all
decisions of the State are amenable on the touchstone of Article 14 of the
Constitution of India. Indisputably, in cases relating to contractual
arrangement the latitude and discretion available to the State is vide and the
judicial review of such discretion is extremely limited. However, in cases
where it is shown that the decision of an authority or State is not informed
W.P.(C) 1538/2013 & 2688/2013 Page 6 of 17
by reason or is based on no material at all, the same would be liable to be
struck down as falling foul of Article 14 of the Constitution of India. The
Supreme Court in the case of Mahabir Auto Stores & Ors. v. Indian Oil
Corporation & Ors : AIR 1990 SC 1031 had observed as under:-
“........Where there is arbitrariness in State action of this
type of entering or not entering into contracts, Article 14
springs up and judicial review strikes such an action
down. Every action of the State executive authority must
be subject to rule of law and must be informed by reason.
So, whatever be the activity of the public authority, in
such monopoly or semi-monopoly dealings, it should meet
the test of Article 14 of the Constitution. If a
Governmental action even in the matters of entering or not
entering into contracts, fails to satisfy the test of
reasonableness, the same would be unreasonable.”
12. It is also relevant to refer to the decision of the Supreme Court in Abl
International Ltd. & Anr v. Export Credit Guarantee : (2004) 3 SCC 553.
The supreme Court summarized the position as to maintainability of a writ
petition in contractual matters as under:
“From the above discussion of ours, the following legal
principles emerge as to the maintainability of a writ
petition :-
(a) In an appropriate case, a writ petition as against a State
or an instrumentality of a State arising out of a contractual
obligation is maintainable.
(b) Merely because some disputed questions of facts arise
for consideration, same cannot be a ground to refuse to
entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of
W.P.(C) 1538/2013 & 2688/2013 Page 7 of 17
monetary claim is also maintainable.”
13. The Supreme Court also referred to its earlier decision in Kumari
ShriLekha Vidyarthi & Ors. v. State of U.P.& Ors. : 1991 (1) SCC 212 and
observed as under:
“It is clear from the above observations of this Court, once the
State or an instrumentality of the State is a party to the contract, it
has an obligation in law to act fairly, justly and reasonably which
is the requirement of Article 14 of the Constitution of India.
Therefore, if by the impugned repudiation of the claim of the
appellants the first respondent as an instrumentality of the State
has acted in contravention of the above said requirement of
Article 14, then we have no hesitation in holding that a writ court
can issue suitable directions to set right the arbitrary actions of the
first respondent.”
14. Insofar as the claim that revision in CGHS rates constitutes breach of
MoA is concerned, the same needs to be considered in context of the nature
and the substratum of the MoA. It is necessary to bear in mind that the
Government invited tenders and entered into MoAs with various hospitals
for the purpose of accepting them as service providers to the beneficiaries
of CGHS. Under the CGHS, medical care facilities are provided to Central
Government employees and pensioners and certain other categories of
beneficiaries as notified by the Central Government from time to time. The
Government invited bids from private hospitals, eye centres, dental clinics
and imaging centres in order to ensure that medical services under the
CGHS are available to the beneficiaries of CGHS. The bid process was
divided into two parts – “technical bid” and “commercial bid”. The
technical bids were examined in the first instance. Thereafter, the
W.P.(C) 1538/2013 & 2688/2013 Page 8 of 17
commercial bids, of those bidders who were found to be eligible and
fulfilling the technical criteria, were opened. The bid document provided a
mechanism for approval of the maximum rates at which treatment would be
offered by the respective hospitals. Essentially, the lowest rates submitted
by the bidders were contemplated to be notified as approved rates/CGHS
rates. All hospitals seeking empanelment were required to accept the
approved rates by communicating their acceptance by a letter. The private
hospitals selected for empanelment were also required to enter into a MoA.
The essential object of empanelling the hospitals was to accept them as
service providers. The approved rates were to serve as the maximum rate
that could be charged by the hospitals for providing their services.
15. Paragraph 15 of Tender document provided that the CGHS rates
would be valid for a period of two years and extendable by another year
with mutual agreement. The said paragraph is relevant and is quoted
below:-
“15. VALIDITY OF CGHS RATES
The rates shall be valid for two years and is
extendable by another year with mutual agreement.
The empanelled institutions shall not charge more
than CGHS rates.”
16. The Government on its part agreed that the bills for the treatment
provided by empanelled hospitals would be paid within a period of 10
working days.
17. The MoA (format of which was enclosed with E-tender document)
expressly provides for the obligations of empanelled hospitals to charge
approved rates. Article 6 of the MoA is relevant and is quoted below:-
W.P.(C) 1538/2013 & 2688/2013 Page 9 of 17
“6. APPROVED RATES TO BE CHARGED
The Hospital shall charge from the CGHS
beneficiary as per the rates for a particular procedure /
package deal as prescribed by the CGHS and attached as
Annexure (rate list), which shall be an integral part of this
Agreement. The rates notified by CGHS shall also be
available on web site of Ministry of Health & F.W. at
www.mohfw.nic.in
The package rate will be calculated as per the duration
specified in the tender document under the ‘treatment
requirements’. No additional charge on account of
extended period of stay shall be allowed if that extension
is due to infection on the consequences of surgical
procedure or due to any improper procedure and is not
justified.
The rate being charged will not be more than what is
being charged for same procedure from other (non-CGHS)
patients or institutions. An authenticated list of rates
being charged from other non-CGHS institutions if
available will also be supplied to CGHS within 10 days of
this Agreement.
The procedure and package rates for any diagnostic
investigation, surgical procedure and other medical
treatment for CGHS beneficiary under this Agreement
shall not be increased during the validity period of this
Agreement. The Hospital agrees that during the In-patient
treatment of the CGHS beneficiary, the Hospital will not
ask the beneficiary or his attendant to purchase separately
the medicines / sundries / equipment or accessories from
outside and will provide the treatment within the package
deal rate, fixed by the CGHS which includes the cost of
all the items. Appropriate action, including removing
from CGHS empanelment and / or termination of this
Agreement, may be initiated on the basis of a complaint,
medical audit or inspections carried out by CGHS terms /
appointed TPA.”
W.P.(C) 1538/2013 & 2688/2013 Page 10 of 17
18. The MoA also includes provisions for submission of bills, medical
audit of the bills and processing of claims.
19. A plain reading of the Tender Document and the MoA clearly
indicates that, in substance, private hospitals were empanelled to accept
them as service providers from whom medical treatment could be availed
of by the beneficiaries of CGHS at approved rates. The approved rates
formed an integral part of the MoA and the empanelled hospitals were
obliged to provide treatment at the approved rates. However, notifying the
approved rates was only for the purposes of specifying the maximum rates
that could be charged by the empanelled hospitals. It is difficult to accept
that the same in any way fettered the Government from revising the
approved rates from time to time. The approved rates essentially
represented the payment that Government was willing to pay for the
medical services rendered by a hospital. Although the empanelled hospitals
were obliged not to charge above the approved rates, it was always open for
the empanelled hospitals to exit the panel, if they were not willing to accept
the approved rates. As indicated earlier, the substratum of arrangement
between the empanelled hospitals and the government was to set up a
framework within which private hospitals could provide medical services to
the CGHS beneficiaries. Given the substratum of the arrangement, it is
difficult to accept that the Government was obliged or committed in any
manner not to revise approved rates or that the empanelled hospitals were
obliged to render services at rates not acceptable to them. The empanelled
hospitals are obliged to provide treatment at the rates accepted by them.
However, if the rates were revised by the Government which were not
W.P.(C) 1538/2013 & 2688/2013 Page 11 of 17
acceptable to the empanelled hospitals, they were at liberty to discontinue
their services and seek dis-empanelment. This was expressly provided
under paragraph 24 of the Tender Document, which reads as under:-
“24. EXIT FROM THE PANEL
The Rates fixed by the CGHS shall continue to hold
good unless revised by CGHS. In case the notified rates
are not acceptable to the empanelled Private Hospital, or
for any other reason, the Private Hospital no longer wishes
to continue on the list of empanelled Private Hospital, it
can apply for exclusion from the panel by giving three
months notice and by depositing an exit fee of Rs Ten
thousand.”
20. It is well settled that an agreement must be read as a whole. The
plain reading of the MoA clearly indicates that even though a mechanism
for fixing the rates for treatment had been specified under the Tender
Document, Government would, nonetheless, have the discretion for fixing
rates which it considered reasonable; it was open for the hospitals to accept
those rates and provide the services or decline to do so.
21. In my view, the contention that Government was bound to accept the
rates as initially fixed is not sustainable, as it would not be in conformity
with the substratum of the arrangement/agreement which, as indicated
above, provided for empanelment of the hospitals to render medical
services; indisputably, neither party was obliged to continue rendering
service or continue availing of the services at rates which were not
acceptable to the them.
W.P.(C) 1538/2013 & 2688/2013 Page 12 of 17
22. In view of the aforesaid, the contention that in terms of the
agreement, Government was constrained not to revise approved rates, is not
sustainable. The learned counsel for the petitioners, also did not press the
contention that downward revision of the rates was in breach of the MoA
but focused her submissions to urge that downward revision of rates was
arbitrary and unreasonable; the principal contention urged by the petitioners
was that the revised rates for the treatment of Angioplasty were arbitrary
and unreasonable and without any application of mind.
23. It was contended on behalf of the respondents that the decision to
revise the ceiling rates for Coronary Angioplasty were based on the
technical recommendation from the Director General, Health Services in
consultation with expert cardiologists. It was further contended that the
same being a matter of policy did not warrant any interference by this Court
under Article 226 of the Constitution of India.
24. It is well settled that Courts will not interfere in decisions taken by
professionals within the scope of their authority unless it is found that the
same is ex facie , arbitrary, unreasonable or violates any of the
Constitutional guarantees. Therefore, the scope of inquiry in the present
proceedings is limited to determining whether the decision is illegal,
irrational or suffers from procedural impropriety. This Court is neither
competent to examine the merits of the decision as regard to the rates to be
charged for Angioplasty nor would it supplant its opinion over that of the
experts. Having stated the same, it would be necessary to examine whether
the decision of Government was based on any material at all.
W.P.(C) 1538/2013 & 2688/2013 Page 13 of 17
25. It is relevant to note that there is no allegation that the rates
submitted by the hospitals were unreasonably high on account of any
cartelisation. On the contrary, the lowest rates for treatment of Angioplasty
were approved by Government pursuant to the bids received in 2009 and
were fixed at ` 50,000 in case of Coronary Angioplasty and ` 55,000 in case
of Coronary Angioplasty with Balloon. The affidavit submitted by the
Government pursuant to the order issued by this court on 31.07.2014,
indicates that during the pendency of the present proceedings further bids
had been called and pursuant to the bids, the Government had notified
approved rates for various medical treatments. However, the Government
had received representations from various hospitals with regard to various
anomalies and therefore, the issue of rates had been referred to an expert
committee. It is stated that the expert committee had examined the rates and
made its recommendations. Insofar as Angioplasty is concerned, a rate of
` 92,000/- has been fixed. The Government also confirmed that several
hospitals have accepted the declared rates and have executed their
respective MoAs.
26. Given the wide difference between the rates as notified by the
Government pursuant to the bids received in 2009, as well as in 2014 and in
the rates as revised by the impugned OM on 07.02.2013, it is essential to
examine the material which prompted the Government to issue the
impugned OM. The minutes of the meeting annexed as Annexure R-3 to
the counter affidavit filed on behalf of the respondents (in W.P.(C)
No.1538/2013) indicates that a decision had been taken to revise the
charges for direct Angioplasty to ` 50,000/- and for Angioplasty with
W.P.(C) 1538/2013 & 2688/2013 Page 14 of 17
Balloon to ` 55,000/-. The relevant extract of the said minutes (singed on
11.12.2012) is quoted below:-
“9. It was also decided during the discussion that CGHS
has upgraded rate for procedure for direct
angioplasty at present is very very high. Therefore
the price for procedure for direct angioplasty should
be fixed to Rs.50,000/- and price for angioplasty of
balloon should be fixed upto Rs.55,000/-.”
27. It is apparent from the above that the participants of the meeting
which included Head of Department of Government Hospitals were of the
view that the charges for Angioplasty procedure were very high. However,
the minutes do not reflect any other material, which would substantiate the
aforesaid view. In the circumstances, the respondents were called upon to
produce the relevant file and the same was perused. The respondents were
also unable to indicate any material which would substantiate the aforesaid
decision. Surely, the decision to significantly revise the rates downward
would require to be substantiated on the basis of some material which
would indicate that the rates fixed earlier, on the basis of the lowest rates
bid by the bidders, were unreasonable. However, it appears that the
decision to revise the rates downward was based on unsubstantiated opinion
and not on any material. It is also relevant to note that in 2014 the
Government has recommended that the charges for the treatment in
question be fixed at ` 92,000/-. In my view, the impugned OM would not be
sustainable as it is not based on any material at all except a view expressed
by certain doctors at a meeting.
W.P.(C) 1538/2013 & 2688/2013 Page 15 of 17
28. In the aforesaid circumstances, the Government is directed to re-
examine the revised CGHS rates as fixed by the impugned OM dated
07.02.2013. Experts may be called upon to substantiate their opinion with
regard to the charges payable for Angioplasty and based on the said
material the Government may take an informed view as to the rates to be
charged for Angioplasty.
29. Having stated the above, it is necessary to clarify that the aforesaid
decision would not necessarily imply that the hospitals would be entitled to
raise invoices at enhanced rates, if any, in respect of treatment provided
after 31.03.2013. The petitioners have pointed out that several hospitals had
decided to withdraw from empanelment pursuant to the reduction in the
approved charges for Angioplasty. It appears that several other hospitals
accepted the revised rates and had provided the treatment at revised rates.
Clearly, such hospitals would not, now, be entitled to raise revised bills or
claim enhanced charges, if any. It is also relevant to note that MoAs were in
force only for a period of two years. Clause 2 of MoA is relevant and is
quoted below:-
“2. DURATION OF AGREEMENT
The Agreement shall remain in force for a period of 2
years or till it is modified or revoked, whichever is earlier. The
Agreement may be extended for another year subject to
fulfillment of all the terms and conditions of this Agreement
and with mutual consent of both parties.”
30. The term of the MOAs was extended till 31.03.2013 by the Office
Memorandum dated 15.10.2012. Thus, the MoAs entered into between
respondent and various hospitals had elapsed due to efflux of time. There
W.P.(C) 1538/2013 & 2688/2013 Page 16 of 17
was no compulsion on any of the hospitals to continue to provide services
after the MoAs had come to an end. However, it appears that MoAs were
extended for further periods after 31.03.2013 and the same were accepted
by certain hospitals. In the circumstances, it would not necessarily follow
that all hospitals would be entitled to charge for the treatment of
Angioplasty at enhanced rates if so approved by the respondent. Needless
to mention that it would be open for the hospitals including the petitioners
in W.P.(C) 1538/2013 & W.P.(C) 2688/2013 to make a claim, which
would be considered by the respondent. If aggrieved, the hospitals shall
also be entitled to invoke the agreed dispute resolution mechanism.
31. Accordingly, the petitions and pending applications are disposed of.
No order as to costs.
VIBHU BAKHRU, J
JULY 09, 2015
RK
W.P.(C) 1538/2013 & 2688/2013 Page 17 of 17