Supreme Court Upholds Free Treatment Mandate for Hospitals on Concessional Land: Union of India vs. Mool Chand Khairati Ram Trust (2018)

Date of the Judgment: 9 July 2018

Citation: (2018) INSC 608

Judges: Arun Mishra, J., Uday Umesh Lalit, J.

Can hospitals that received land at discounted rates be compelled to offer free medical care to the poor? The Supreme Court of India addressed this critical question in a recent judgment, clarifying the obligations of such institutions. This case examines the balance between private interests and public welfare, particularly concerning access to healthcare for the underprivileged. The judgment was delivered by a two-judge bench comprising Justice Arun Mishra and Justice Uday Umesh Lalit.

Case Background

In 1949, the Government of India decided to allot land to hospitals and schools at highly concessional rates to encourage their participation in providing health and education to the public. Land was allotted at rates between Rs. 2,000 to Rs. 5,000 per acre. The Mool Chand Khairati Ram Trust was established in 1927 by Lala Kharaiti Ram, with the aim of promoting Sanskrit education and improving Ayurvedic medicine. The trust operated a hospital in Lahore, but after the partition in 1947, the trustees migrated to India and were allotted land in Delhi in 1951.

The Moolchand Khairati Ram Trust was allotted nine acres of land in Lajpat Nagar, Delhi, on 17 April 1951. The allotment letter and subsequent lease deed did not stipulate any condition for providing free treatment to economically weaker sections. Similarly, St. Stephen’s Hospital, established in 1885, received land in 1970, 1972 and 1976, with no such condition in their allotment letters or lease deeds. Sitaram Bhartiya Institute of Science & Research applied for land in 1984 and was allotted 1.52 acres at Rs. 6 lakhs per acre, followed by a lease deed in 1985. The Foundation for Applied Research in Cancer was allotted land in 1991 at Rs. 28,50,000 per acre, later revised to Rs. 39,00,000 per acre.

In 2012, the Government of NCT of Delhi issued a circular directing hospitals to implement the Delhi High Court’s judgment in the Social Jurists case, which mandated free treatment for a certain percentage of poor patients. The Land & Development Office also issued an order stating that all hospitals that received land from them must provide free treatment. These orders were challenged by the hospitals through writ petitions.

Timeline:

Legal Framework

The Supreme Court considered the following key legal provisions:

• Charitable Endowments Act, 1890: Section 2 defines “charitable purpose” to include relief of the poor, education, and medical relief.
• Article 19(1)(g) of the Constitution of India: Guarantees the right to practice any profession, or to carry on any occupation, trade, or business.
• Article 19(6) of the Constitution of India: Allows the state to impose reasonable restrictions on the rights under Article 19(1)(g) through a law.
• Article 21 of the Constitution of India: Guarantees the right to life and personal liberty, which includes the right to health.
• Delhi Development Authority (Disposal of Developed Nazul Land) Rules, 1981: Rules 3, 4, 5, 6 and 20, which govern the allotment of land at concessional rates to charitable institutions.
• Medical Council of India Regulations: Mandate that the prime object of the medical profession is to render service to humanity, and that financial gain is a subordinate consideration.

Arguments

Appellants (Union of India and GNCTD):

• The condition of providing 10% IPD and 25% OPD free medical treatment is not a restriction under Article 19(6) but a public interest policy.
• The hospitals received land at concessional rates as charitable institutions, and should be obligated to provide free medical aid.
• The recommendations of the Justice A.S. Qureshi Committee, which suggested uniform standards for free treatment, were valid.
• The government is competent to issue orders to implement the recommendations of the committee.
• Clause 7 of the allotment letter of Sitaram Bhartia Institute and Foundation for Applied Research in Cancer allows the government to alter terms and conditions.
• The definition of ‘charitable’ in the Income Tax Act does not govern the present case; the word should be seen in a legal sense.

Respondents (Hospitals):

• Legal obligations can only be created by agreement or statutory law, not by executive order or court sympathy.
• The 1949 policy did not mandate free treatment, and neither did the allotment letters or lease deeds.
• The condition that institutions should be run for the public good without profit was not applicable to hospitals.
• The DDA Rules of 1981 do not apply, and Clause 14 of the lease deed does not authorize the government to impose such conditions.
• The decision in the Social Jurists case is not applicable as the hospitals were not parties to that case.
• The right to carry on business is fundamental under Article 19(1)(g), and restrictions can only be imposed by law under Article 19(6).
• The land was not given at concessional rates but at market rates prevailing in 1951.
• The hospitals are already providing free services at their own level.
• Unilateral amendment of the lease deed is not permissible.
• Charity does not mean free services, and medical relief itself is a charitable purpose.
• Clause 7 of the allotment letter does not authorize the lessee to change or alter any terms of the lease.
• The condition of free treatment has serious financial implications and is not legally tenable.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the hospitals, having obtained land at concessional rates for charitable purposes, can be mandated to provide 10% IPD and 25% OPD services free of cost to economically weaker sections?
2. Whether, in view of condition No. 7 of the allotment letter, the imposition of free treatment was permissible in the case of Sitaram Bhartiya Institute and Foundation for Applied Research in Cancer?
3. Whether the imposition of free treatment conditions amounts to a restriction under Article 19(6) on the right to carry on profession, trade or business under Article 19(1)(g)?
4. What is the effect of the previous decision rendered in the case of Social Jurists v. GNCTD?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court relied on the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court relied on various precedents and legal texts to establish the definition of ‘charitable purpose’ and the obligations of charitable institutions. It cited Halsbury’s Laws of England to define charity and the concept of public benefit. It also referred to the Law Lexicon by P. Ramanatha Aiyar to understand the legal meaning of ‘charitable’ and ‘charity’. The Court emphasized that charitable purposes must benefit the poor and needy, and that medical relief is a form of charity. It also used the cy-pres doctrine to justify the imposition of free treatment even if it was not explicitly stated in the original agreements.

The Court also relied on several of its own previous judgments to clarify the scope of Articles 19(1)(g) and 19(6), holding that the free treatment condition was not a restriction on the right to carry on business, but an obligation inherent in the nature of a charitable activity. The Court also cited cases to support the view that executive orders can be issued in the absence of legislation if the state could legislate on the subject.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following factors:

• The hospitals were allotted land at concessional rates, implying an obligation to serve the public good.
• The medical profession has an ethical duty to serve humanity, with financial gain being a subordinate consideration.
• The state has a constitutional duty to provide healthcare to its citizens, especially the poor and needy.
• The hospitals, by claiming to be charitable, had an inherent obligation to provide free or subsidized services.
• The poor and needy cannot be denied treatment due to financial constraints.
• The need to balance private interests with public welfare, with public interest being paramount.

Fact:Law:

Logical Reasoning

Key Takeaways

• Hospitals that receive land at concessional rates from the government have an obligation to provide free medical treatment to economically weaker sections of society.
• This obligation is inherent in the nature of charity and the medical profession, and is not a restriction on the right to carry on business.
• The government can enforce this obligation through executive orders and policy decisions, without the need for specific legislation.
• The decision in the Social Jurists case is applicable to all similarly situated hospitals, regardless of whether they were parties to that case.
• The Supreme Court has emphasized that the right to health and access to medical care are paramount, and cannot be denied due to financial constraints.
• Hospitals must act in the public interest and not for commercial gains, especially when they have received public resources.

Directions

The Supreme Court directed the Government of NCT of Delhi to file a periodical report within one year regarding compliance of the free treatment conditions by the hospitals. The Court also warned that any violation of the conditions would be viewed sternly and could lead to cancellation of the lease.

Development of Law

Ratio Decidendi: The Supreme Court held that hospitals that have received land at concessional rates are obligated to provide free medical treatment to the economically weaker sections of society. This is not a restriction on their right to do business, but an inherent obligation of the medical profession and the nature of charity. The court also upheld the applicability of the Social Jurists case to all similarly situated institutions.

Change in Previous Positions of Law: This judgment clarifies that the obligation to provide free treatment does not require a specific law but can be enforced through executive orders and policy decisions, especially when the land was granted for charitable purposes. It also reinforces the principle that public interest should override private interests in matters of healthcare.

Conclusion

The Supreme Court’s judgment in Union of India vs. Mool Chand Khairati Ram Trust upholds the mandate for hospitals that received land at concessional rates to provide free medical treatment to economically weaker sections. This decision reinforces the principle that such institutions have an inherent obligation to serve the public good and that access to healthcare should not be limited by financial constraints. The court emphasized that this obligation is not a restriction on the right to carry on business, but a fundamental aspect of the medical profession and the nature of charity. This ruling sets a strong precedent for balancing private interests with public welfare in the context of healthcare.

Category

• Constitutional Law
  • Article 19(1)(g)
  • Article 19(6)
  • Article 21
• Public Interest Litigation
  • Right to Health
  • Access to Healthcare
• Charity Law
  • Charitable Purpose
  • Charitable Institutions
• Land Law
  • Government Land Allotment
  • Concessional Rates

FAQ

Q: What does this judgment mean for hospitals that received land at concessional rates?

A: It means they are legally obligated to providefree medical treatment to a certain percentage of economically weaker patients, typically 10% in-patient and 25% out-patient services.

Q: Does this apply to all hospitals that received concessional land, or only those in Delhi?

A: While the specific case was about hospitals in Delhi, the principles established by the Supreme Court are likely to be applicable to all hospitals that received land at concessional rates across India.

Q: Can hospitals refuse to provide free treatment if they were not originally informed of this condition?

A: No, the Supreme Court has held that this obligation is inherent in the nature of charity and the medical profession, and it applies even if it was not explicitly stated in the original allotment letters or lease deeds.

Q: Is this free treatment a restriction on the right to carry on business?

A: No, the court clarified that it is not a restriction but an inherent obligation of the medical profession and the nature of charity.

Q: What will happen if hospitals fail to comply with this mandate?

A: The Supreme Court has warned that any violation of these conditions would be viewed sternly and could lead to cancellation of the lease.

Q: What is the Social Jurists case that is referred to in this judgment?

A: The Social Jurists case is a previous judgment of the Delhi High Court that mandated free treatment for a certain percentage of poor patients in hospitals that received concessional land. The Supreme Court upheld the applicability of this judgment to all similarly situated hospitals.

Q: What is the meaning of “concessional rates” in this context?

A: Concessional rates refer to the discounted prices at which the government allotted land to charitable institutions, which were significantly lower than the market rates.

Q: Can hospitals claim that they are already providing free services and therefore do not need to comply with this mandate?

A: No, the Supreme Court has stated that this cannot be a shield to avoid organized free treatment as mandated by the court.

Q: What is the significance of Clause 7 of the allotment letter for Sitaram Bhartiya Institute and Foundation for Applied Research in Cancer?

A: Clause 7 allowed the government to alter the terms of the allotment, which the court held includes the imposition of the condition to provide free treatment.

Q: How does this judgment impact the right to health in India?

A: This judgment reinforces the right to health by ensuring that hospitals that received public resources serve the public good and provide access to healthcare to economically weaker sections of society.

Disclaimer

This analysis is for informational purposes only and does not constitute legal advice. The information provided is based on the Supreme Court’s judgment in Union of India vs. Mool Chand Khairati Ram Trust (2018) and should not be used as a substitute for consulting with a legal professional.