All India Lawyers Union v. Government of NCT of Delhi and Others

WP(C) No.5410/199
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In 1986, the Delhi Capital Government (“GNCTD”) decided to convert the vacant Players’ Building into a multi-specialty hospital on a ‘no profit, no loss’ basis and invited offers from private institutions. GNTCD issued a notice stating that the vacant building along with the land was to be made available free of cost provided that the hospital on the whole ran on ‘no profit, no loss’ basis and provided free medical and other facilities to at least a third of its indoor patients (i.e patients staying at the hospital) and 40% of its outdoor patients (i.e patients not staying at the hospital) without any discrimination.

On 11 March 1988, GNCTD entered into a joint venture agreement (“Joint Venture Agreement”) with the winning bidder, Apollo Hospital Enterprises Ltd. (“Apollo”) and they registered the public limited company under the name IMCL. The terms of the Joint Venture Agreement  were in conformity with the notice inviting the tender with respect to Apollo’s undertaking to run the hospital on a ‘no profit, no loss’ basis and to provide certain services free of cost.

Subsequently, the Player’s Building was requisitioned by the Sports Authority of India, resulting in the transfer of the planned hospital a new location. A fresh lease deed (“Lease Deed”) was entered into on 16 March 1994 between the GNCTD and the IMCL with respect to the new hospital location. The Lease Deed contained provisions for providing free food, medical diagnostics and other facilities just like the previous lease deed.

Problems arose when GNCTD requested that IMCL formulate a suitable scheme for providing free treatment to indoor and outdoor patients as set out in the Joint Venture Agreement and the Lease Deed. The management of the IMCL claimed that the relevant clauses of the Joint Venture Agreement and the Lease Deed did not place any obligations upon IMCL to provide free medical or free consumables. Moreover, the IMCL board also wanted certain guidelines to apply to the definition of “poor patient”, along with requiring certain authorization for patient referral and the monitoring of admission. In a subsequent IMCL board meeting, GNCTD reiterated that the definition of free beds would include certain other free medical goods and services and stressed that victims of roads accidents brought to the hospitals be given free medical treatment. However, the IMCL board could not agree to any decision regarding the above issues.

On 10 December 1997, All Indian Lawyers Union (Delhi) filed a writ petition impleading the GNCTD and IMCL and seeking directions to ensure the provision of free medical treatment as per the terms of the Lease Deed.

A committee appointed by the Court found that the hospital had failed to provide it with certain information regarding treatment of poor patients and that there were glaring deficiencies and discriminatory treatment given to patients referred for free treatment.

The respondent argued  that  under the terms of the Lease Deed, (a)  it was not required to provide free treatment until the hospital had been fully commissioned which event, had yet to occur, (b) the expression “medical and diagnostic facilities” did not include the cost of medicines and medical consumables, (c) as a public limited company, IMCL was answerable to its investors and therefore required to ensure profitable working of the hospitals run by it, and (d) although GNCTD was a major shareholder of IMCL it was not entitled to special rights above the other shareholders of the company.

First, the Court determined that, by agreeing to partner with the State in the matter of health care, IMCL had effectively become an instrumentality of the State, and was not a purely commercial venture.

The Court then went on to recount the international treaties, Indian constitutional provisions and domestic case law which bound India to protect its citizens’ right to health. The Court concluded that, as health care was essential to an individual’s quality of life, its supply could not be left to the market, but rather the State was required to ensure that every citizen, regardless of capacity to pay, was assured of access to basic health care.

Despite the arguably private nature of IMCL, the Court also held that the Writ of Mandamus was maintainable because Article 226 of the Constitution of India gave every High Court the jurisdiction to issue appropriate writs to “any person or authority” for the enforcement of any fundamental right or any other purpose, regardless of whether such “person or authority” was a statutory authority or an instrumentality of the State and regardless of whether the duty to be enforced was not imposed by statute. Therefore, it was appropriate for a Writ of Mandamus to be issued against a private entity discharging a public function.

Turning then to the interpretation of the clauses in the Joint Venture Agreement and the Lease Deed which discussed IMCL’s obligations to provide free treatment, the Court determined that, as such clauses were “of wide import and cannot be read in a narrow and pedantic manner” they should be read to cover all facilities, including medicines and consumables. Considering that GNCTD had invested in the hospital in order to discharge its constitutional obligations to provide free health care to the indigent, the intention must not have been that the poor were required to pay for their own medicines and consumables. Therefore, the agreements must be interpreted rationally to ensure that the underlying intentions were respected.

Ultimately, the Court held that the IMCL had been flouting the conditions mentioned in the Joint Venture Agreement and Deed Lease and ordered IMCL to, inter alia, provide free medical treatment (including medicine and consumables) for poor patients—as defined by the Court.

Para 30: “By agreeing to be a partner with the State in the matter of health care, with stipulations about free health care to the specified extent, IMCL had taken onto itself the mantle of State instrumentality. The discourse on ‘right to health’ would show that it hardly lies in the mouth of the private player to turn around and abdicate its responsibility, after having offered its services for establishing a multi-disciplinary super-specialty hospital on the terms inclusive of benevolent arrangements for the poor and indigent and in the bargain having secured State largesse in the form of prime parcel of public land and monetary contribution.”

Para 43: “Health care is an essential concomitant to quality of life. Its demand and supply cannot therefore be left to be regulated solely by the invisible hands of the market. The State must strive to move towards a system where every citizen has assured access to basic health care, irrespective of capacity to pay.”

Para 57: “In our opinion, the words in the agreement are of wide import and cannot be read in a narrow and pedantic manner. The words ‘free of cost full medical diagnostic and other necessary facilities’ would cover all the facilities including medicines and consumables. The words used in the agreement apart, the purpose underlying the setting of the hospital was that the prescribed percentage of patients from the poor and vulnerable sections of the society would receive free treatment in the hospital. The hospital was set up by the GNCTD with the intention to cater to the poor and vulnerable classes of the citizens of Delhi to the extent of 1/3rd of the indoor patients and 40% of OPD. It has been made clear in the Notice Inviting Tender that the hospital was to run on ‘no profit no loss’ basis. The GNCTD has provided a total of Rs.38.66 crores of capital investment along with 15 acres of prime land on Delhi-Mathura road on a notional rent of Re.1/- per month. These investments were made by the GNCTD to discharge its constitutional obligations to provide free medical treatment facilities to needy and deserving citizens. The intention of the State could never be that those who fall in that category would be required to fetch their own medicines or pay for the consumables. The terms of the agreement must, therefore, be interpreted rationally in order to ensure that the object underling the same is advanced. The hospital by taking the stand that such free patients are required to pay for consumables and medicines has made complete mockery of the scheme for providing free treatment to the poor and needy citizens. Viewed thus, the expression ‘free medical diagnostic and other facilities’ must be interpreted to mean treatment not only in the nature of providing admission and accommodation to the hospital, diagnosis and investigation but free medicines and consumables also.”

Para 60. “In our opinion, clauses of the agreement are absolutely clear in their meaning and the free treatment would also include consumables and medicines. However, the hospital has managed to avoid its responsibility to serve to the interest of the citizens for more than fifteen years by raising one or other frivolous objection. The land was given to the hospital at a token rent of Re.1 per month. In addition to the land, the GNCTD contributed substantially to the equity capital as well as to the construction of the hospital. Total investment of the GNCTD is more than Rs.38 crores. It is not permissible for the hospital to turn around and avoid the responsibility undertaken by it under the agreement.”

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