Supreme Court clarifies Consumer Protection Act applicability to hospitals providing free services: Union of India vs. N K Srivastava (2020)

Date of the Judgment: 23 July 2020

Citation: 2020 INSC 563

Judges: Dr Dhananjaya Y Chandrachud, J, Indu Malhotra, J, K M Joseph, J

Can a hospital that provides free treatment to some patients be considered a service provider under the Consumer Protection Act, 1986? The Supreme Court addressed this question in a case involving alleged medical negligence at Safdarjung Hospital. The court clarified the extent to which hospitals are covered under the Act, particularly when they offer free services to some patients while charging others. The judgment was authored by Dr. Dhananjaya Y Chandrachud, J, with a bench comprising of three judges.

Case Background

In March 2004, the spouse of the complainant was admitted to Sarvodaya Hospital in a medical emergency. She delivered a premature baby. The complainant was referred to Safdarjung Hospital for the baby’s care. The complainant alleged that despite having a Nursery ICU, Safdarjung Hospital did not provide the required care, leading to the baby’s death in April 2004. The complainant filed a case against both hospitals, seeking damages for medical negligence.

Timeline:

Course of Proceedings

The District Forum initially dismissed the complaint, stating that Sarvodaya Hospital did not misrepresent its facilities and that Safdarjung Hospital provided free treatment, thus falling outside the purview of the Consumer Protection Act, 1986. The State Consumer Disputes Redressal Commission (SCDRC) reversed the decision regarding Sarvodaya Hospital, finding them negligent, but upheld the dismissal against Safdarjung Hospital. The National Consumer Disputes Redressal Commission (NCDRC) overturned the SCDRC’s decision on Sarvodaya Hospital, finding no negligence, but held Safdarjung Hospital liable, stating that the hospital was not exempt under the Consumer Protection Act, 1986, despite providing free treatment to some patients. Safdarjung Hospital then appealed to the Supreme Court.

Legal Framework

The Supreme Court considered Section 2(1)(o) of the Consumer Protection Act, 1986, which defines “service.” The relevant part of the provision states:

“”service” means service of any description which is made available to the potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, [housing construction], entertainment, amusement or the purveying of news or other information, but does not include rendering of any service free of charge or under a contract of personal service;”

The court interpreted this section in light of its previous judgment in Indian Medical Association v. V.P. Shantha [(1995) 6 SCC 651], which clarified that only hospitals providing services entirely free of charge to all patients are excluded from the Act’s purview. Hospitals that charge some patients while offering free services to others are still considered service providers under the Act.

Arguments

Appellant (Safdarjung Hospital):

• Safdarjung Hospital argued that it does not levy charges across the board and hence, it should not be held liable under the Consumer Protection Act, 1986.

Respondent (Complainant):

• The complainant argued that Safdarjung Hospital, despite having a Nursery ICU, did not provide the necessary care, leading to the baby’s death.
• The complainant further contended that Safdarjung Hospital should be held liable under the Consumer Protection Act, 1986 as it does not provide free service to all patients.

Issues Framed by the Supreme Court

The Supreme Court did not frame specific issues but considered the following:

• Whether Safdarjung Hospital is covered under the Consumer Protection Act, 1986, considering it provides free treatment to some patients.
• Whether the NCDRC could reverse the finding on maintainability in favor of Safdarjung Hospital in a revision petition by Sarvodaya Hospital.

Treatment of the Issue by the Court

Authorities

Cases:

• Indian Medical Association v. V.P. Shantha [(1995) 6 SCC 651] – Supreme Court of India: This case clarified that hospitals providing free services to some patients while charging others fall under the purview of the Consumer Protection Act, 1986.

Legal Provisions:

• Section 2(1)(o) of the Consumer Protection Act, 1986: Defines “service” under the Act, excluding services rendered free of charge.

Judgment

How each authority was viewed by the Court?

• The Court relied on Indian Medical Association v. V.P. Shantha [(1995) 6 SCC 651]* to reiterate that hospitals providing free services to some patients while charging others are covered under the Consumer Protection Act, 1986.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the factual findings of the NCDRC, which were not adequately challenged by Safdarjung Hospital. The court emphasized that the hospital did not contest the finding that it had not provided the necessary care despite having the facilities. The court also considered the small quantum of the claim (Rs 2 lakhs) and the fact that the issue of jurisdiction was not properly raised by the hospital in its pleadings and evidence. The Court was also influenced by the need to ensure that its decision in this case should not be treated as a precedent for future cases involving Safdarjung Hospital.

Logical Reasoning

Judgment

The Supreme Court dismissed the appeal by Safdarjung Hospital, upholding the NCDRC’s decision to award compensation of Rs 2 lakhs to the complainant. However, the court clarified that this decision is specific to the facts of the case and should not be treated as a precedent for future cases involving Safdarjung Hospital. The court left open the question of whether Safdarjung Hospital is covered under the Consumer Protection Act, 1986, for future determination. The court also left open the question of whether the NCDRC could reverse the finding on maintainability in favor of Safdarjung Hospital in a revision petition by Sarvodaya Hospital.

The court stated, “We therefore confine the judgment of the NCDRC to the peculiar factual background, as we have noted in the present case.”

The court further clarified, “We clarify that we have left open the issue as to whether Safdarjung Hospital would be governed by the provisions of the Act, more particularly, having regard to the provisions of Section 2(1)(o), to be decided in an appropriate case.”

The court also noted, “In an appropriate case, it will have to be decided whether the NCDRC can at all exercise in revisional proceedings the powers which have been conferred on an appellate court under Order XLI Rule 33 of the Code of Civil Procedure 1908.”

Key Takeaways

• Hospitals that provide free services to some patients while charging others are generally covered under the Consumer Protection Act, 1986.
• The specific facts of each case are crucial in determining whether a hospital is liable under the Act.
• The Supreme Court has left open the question of whether Safdarjung Hospital is covered under the Consumer Protection Act, 1986, for future determination.
• The NCDRC’s power to reverse findings in a revision petition is also an open question.

Directions

The Supreme Court directed Safdarjung Hospital to pay Rs 2 lakhs to the original complainant within two months from the date of receipt of a certified copy of the order.

Development of Law

The Supreme Court did not change the position of law. The ratio decidendi of the case is that the applicability of the Consumer Protection Act, 1986 to hospitals providing some free services depends on the specific facts of the case, and the court left the question open for future determination, particularly for Safdarjung Hospital.

Conclusion

In Union of India & Anr vs. N K Srivasta & Ors, the Supreme Court upheld the NCDRC’s decision holding Safdarjung Hospital liable for medical negligence, while clarifying that the decision was specific to the facts of the case. The court did not make a conclusive determination on the applicability of the Consumer Protection Act, 1986 to hospitals providing free services to some patients, leaving it open for future cases. This judgment underscores the importance of factual context in consumer disputes and the need for hospitals to ensure the provision of proper care, irrespective of whether services are provided free of charge or not.