HONOURABLE SRI JUSTICE P. NAVEEN RAO. WRIT PETITION NO.16556 and 27662 OF 2013 Date: 17.04.2014 W.P.No.16556 of 2013 Between:
Praveen Cardiac Centre, # 33-25-35/C, No.5 Bus route, Bellapu Sobhanadri Street, Pushpa Hotel Road, Kasturibaipet, Vijayawada, Krishna District, A.P., Rep.by its Managing Director.
….. Petitioner And Government of Andhra Pradesh rep,by the Principal Secretary, Medical, Health and Family Welfare Department, Secretariat, Hyderabad and others.
…. Respondents W.P.No.27622 of 2013 Between:
M/s. Usha Cardiac Centre Ltd., D.No.39-2-11, Pitchaiah Street, Labbipet, Vijayawada, Krishna District, Andhra Pradesh, rep.by its Authorized Signatory/Chief Operating Officer, Mr. Nadendla Balaji s/o.late N.Purnachandra Rao and another ….. Petitioners And Government of Andhra Pradesh rep,by its Principal Secretary, Department of Medical and Health, Secretariat Buildings, Hyderabad and others.
…. Respondents This Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO. WRIT PETITION NO.16556 and 27662 OF 2013 COMMON ORDER:
With the consent of Sri K.R.K.V.Prasad, counsel for the petitioner in W.P.No.16556 of 2013 and Sri Sricharan Telaprolu, counsel for the petitioners in W.P.No.27662 of 2013 and Special Government Pleader for Advocate General for respondents, the writ petitions are taken up for final disposal.
2. Petitioners, private hospitals, assail the order dated 26.03.2013 whereby the petitioners were de-listed from the list of network hospitals under Rajiv Aarogyasri Health Insurance Scheme and the consequential order of the appellate authority dated 23.05.2013 and 10.06.2013 respectively, affirming the order of the original authority.
3. The State was concerned about the inadequate medical facilities and infrastructure available in the Government hospitals, which was causing lot of financial hardship and suffering to the millions of citizens of the State, more particularly people who were living below the poverty line denying them proper treatment. It was noticed that in Government hospitals there were several deficiencies in infrastructure and manpower resources and availability of competent medical officers to deal with serious ailments such as, cancer, kidney failure, heart disease etc., and forcing the people to go to private hospitals, where the treatment is expensive and not affordable to millions of people. Having realized, the responsibility of the State to provide proper medical care to the needy people, the Government of Andhra Pradesh launched health scheme popularly known as “Rajiv Aarogyasri Health Insurance Scheme”.
4. Special purpose vehicle was established to operate the scheme in the form of Trust created by the State called Arogyasree Health Care Trust (Trust) in February, 2007. The Trust has to act as a State level nodal agency for the implementation of the Scheme. The Trust is fully funded, controlled and administered by the State. The Scheme was launched initially in three districts w.e.f. 01.04.2007 and later extended to other districts.
5. The Trust has identified several diseases which required to be attended under the Scheme, formalized the procedure for enlistment of the hospitals, enrolment of the patients, treatment and the cost analysis for each of the treatments. The Trust has identified several hospitals, where the treatment can be undergone by the patients. As per the scheme, the patient is not required to pay any amount and the entire amount shall be borne by the State. The Government reimburses the amount to the hospital. It is called cashless transaction. The Trust has built a Network of Hospitals (NWH), where treatment can be administered under the scheme.
6. The Trust has brought out a manual dealing with all aspects of the scheme. Each of these network hospitals are required to enter into a contract with the trust. Clause 7 of the Manual deals with empanelment of network hospitals and clause 8 deals with disciplinary action. The Trust constituted Empanelled and Disciplinary Committee (EDC), which is vested with power to enroll a hospital and take disciplinary action against erring network hospital. The contract comprises general and special conditions of contract. Para 8.2 of the special conditions of contract provides prerequisites for settlement of disputes with NWH by EDC. In addition to the conditions incorporated in the special conditions of contract, the Trust has notified guidelines in Circular No.AST/1835/F-109/2012, dated 05.07.2012. The circular mandates procedure to be followed by the EDC before taking adverse action against NWH. Para 8 of General conditions of contract deal with settlement of disputes. The corresponding para in special conditions of contract (SCC) is para 8.2.
W.P.No.16556 of 2013
7. The petitioner was empanelled as network hospital in the year 2009. Initially the empanelment was for a period of one year, but such empanelment was extended from time to time. On 26.03.2013, order was passed delisting the petitioner from the list of network hospitals. Aggrieved by the order of delisting, petitioner filed Appeal on 03.04.2013. On 23.05.2013 the CEO passed orders in the appeal filed by the petitioner affirming the decision to delist. Hence, this writ petition.
W.P.No.27662 of 2013:
8. The first petitioner was enlisted as network hospital in the year 2007 and continued to be as enlisted hospital till the impugned order is passed. First Petitioner was issued notice dated 05.03.2013 calling for explanation from the first petitioner on a complaint regarding the treatment given to the patient, by name, Smt. Revu Susheela. First Petitioner submitted explanation on 09.03.2013. Prior to this, on 31.05.2012, notice was issued to the first petitioner calling for explanation on the complaint given by Rama Krishna, who was the son of the diseased patient by name Smt. Susheela. Petitioner filed his reply on 04.06.2012. After issuance of notice date 05.03.2013, order was passed on 26.3.2013 delisting the first petitioner from Aarogyasri Scheme enlisted hospitals. Aggrieved thereby first petitioner filed appeal. The CEO passed orders on 10.06.2013 affirming the order dated 26.3.2013. Hence, this writ petition.
9. Heard Sri K.R.K.V.Prasad, counsel for the petitioner in W.P.No.16556 of 2013 and Sri Sricharan Telaprolu, counsel for petitioners in W.P.No.27622 of 2013, Special Government Pleader for Advocate General for respondents.
10. Learned counsel Sri K.R.K.V.Prasad submitted that before passing orders on 26.03.2013, the procedure as mandated by the special terms of contract, manual and the circular dated 05.07.2012 were not followed. Petitioner was not put on notice. No opportunity of hearing was given. The relevant and important documents which were the basis for delisting the petitioner were not supplied and, therefore, the order is ex facie illegal.
Learned counsel further contended that the EDC has not made any recommendation for delisting the petitioner, but the third respondent passed suomoto orders delisting the petitioner.
11. The order passed by the third respondent is with the consent and approval of the Chief Executive Officer. In accordance with the clauses of special conditions of contract, when petitioner filed an appeal, appeal was considered by the very same person, who is the Chief Executive Officer, on whose approval and consent the original order was passed. On this ground alone the order dated 23.05.2013 is liable to be set aside. The person who acted at the initial stage cannot decide the very same matter in appeal. The prejudice and bias is writ large.
12. Para 8.2.1 of the special conditions of contract, mandate consideration of appeal by a panel consisting of three members. No such panel was constituted and decision on the appeal was taken by the Chief Executive Officer.
13. It is further contended that at the stage of appeal, the CEO considered various other aspects, which were not the subject matter of original order and reflected on past instances to come to the conclusion to reject the appeal. The learned counsel, therefore, submitted that such action amounts to denial of reasonable opportunity, is in excess of power vested in the CEO, amounts to arbitrary and discriminatory decision.
14. The action taken against the petitioner is excessive and disproportionate. As per the Circular dated 05.07.2012 and clause 8 of the manual, if any lapses are noticed by the EDC, the EDC should first impose costs and the delisting of a hospital would arise only if repeatedly EDC found illegalities committed by the hospital. He further contended that the action of the respondents is arbitrary and discriminatory. In more serious cases, less severe action was taken, whereas in the case of petitioner, severe action is taken without any justification.
15. The order of the original authority does not deal with the issues germane to delisting the petitioner hospital from the list of network hospitals.
Whereas the subsequent order of the CEO and the counter-affidavit refers to the issues, which appeared to be the reason for delisting the petitioner hospital.
16. Learned counsel for the petitioner placed reliance on the following decisions in support of his contentions:
[1]
1. T.R.Dhananjaya vs. J.vasudevan
2. Lanco Constructions Ltd., Hyderabad v. Govt. of A.P., Irrigation and Command Area Development Dept.,
[2]
Hyderabad and others
[3]
3. K.G.Derasari and another v. Union of India and others
4. Harbanslal Sahnia and another v. Indian Oil corpn.Ltd. and
[4]
others
[5]
5. Prithawi Nath ram v. State of Jharkhand and others
[6]
6. A.P.SRTC and others v. S.Jayaram
7. Bharat Petroleum Corporation Ltd. V. Great Eastern
[7]
Shipping Co.Ltd.
8. Rashmi Metaliks Limited and another v. Kolkata
[8]
Metropolitan Development Authority and others
9. Mohd Gazaiuddin Ahmed v. Bhanwarlal, IAS, District
[9]
Collector, Hyderabad
10. Mrs. Sanjana M.Wig. vs. Hindustan Petro Corporation
[10]
Ltd.,
11. Union of India and others vs. Tantia Construction Private
[11]
Limited
12. Harbanslal Sahnia and another vs. Indian Oil Corpn.Ltd. and
[12]
others
17. Learned counsel Sri Sricharan Telaprolu supplemented his submissions in addition to the submissions made by Sri K.R.K.V.Prasad, counsel appearing for petitioner in W.P.No.16556 of 2013. Learned counsel contended that the first notice was issued on 31.05.2012 regarding the improper treatment to a patient and thereafter next notice was issued on 05.03.2013. It appears from the reading of the said notice that a meeting of EDC was held on 31.01.2013 considering the issue of treatment to Revu Susheela and in the meeting it was decided to obtain information from the petitioner on the issue raised by the Cardiologist to whom the matter was referred to for his expert opinion. As directed by the Chief Medical Auditor in his notice dated 05.03.2013, petitioner filed his explanation dated 09.03.2013 replying to the objections pointed out by the Expert. Thereafter the order of delisting is passed. No further enquiry was held and no personal hearing was afforded to the petitioner as mandated by clause 8.2.2(6) of special conditions of contract read with Circular dated 05.07.2012. The relevant documents which were the basis were not supplied. The order of delisting of the petitioner is ex facie illegal and contrary to the terms of contract, which are equally binding on both parties; amounts to arbitrary exercise of power and authority.
18. Elaborate procedure prescribed in clause 8 of the special conditions of contract is violated. As per clause 8 of the manual delisting would arise only if repeated violations are noticed. In the instant case, the only violation pointed out against the petitioner was concerning treatment to patient by name Susheela. Therefore, the provision contained in clause 8.4(c) of the manual is not attracted.
19. Though the order of the CEO is lengthy, the principal contention urged by the petitioner was not considered and therefore the order is vitiated as a non-speaking order. What are mentioned in para-10 of the CEO order are extraneous to the issue and shows his biased attitude in deciding the issue. The CEO also failed to appreciate that it was specific contention of the petitioner that without notice and opportunity as mandated by the clauses of contract, the original authority has passed orders and, therefore, there was no occasion for the petitioner to place relevant papers before the original authority. If personal hearing was afforded to him, he could have placed all the relevant papers. Thus, CEO erred in rejecting the consideration of material placed before him. If the CEO was of the opinion that he would not consider the material which was not placed before the original authority, he ought to have remitted the matter back to the original authority, but refusing to consider additional material on the ground that said material was not placed before the original authority was erroneous.
20. Action taken against the petitioner is excessive and disproportionate. This was solitary instance alleged against the petitioner. Petitioner is a reputed hospital and is headed by well known Cardiologist and, therefore, the extreme action of delisting the petitioner could not have been taken for a solitary instance and furthermore, there is sufficient justification for the petitioner in the manner in which patient was treated.
21. Learned Special Government Pleader Sri Sridhar Reddy raised preliminary objection on maintainability of writ petitions. Learned Special Government Pleader contended that respondent No.2 is a Trust and, therefore, no writ is maintainable against the decision taken by the officers of the Trust. He further contended that the relationship of the petitioner and the respondent trust is based on the terms of contract entered into between them and terms of contract cannot be enforced in the writ petition filed under Article 226 of the Constitution of India. He therefore submitted that the writ petition is liable to be dismissed on the ground that it is not maintainable.
22. In support of his contention that the writ petition is not maintainable, learned Special Government Pleader relied on the following decisions :
[13]
1. The State of Punjab vs. Balbir Singh and others
2. Premji Bhai Parmar and others vs. Delhi Development
[14]
Authority and others
[15]
3. The Divisional Forest Officer vs. Bishwanath Tea Co.Ltd.,
4. Life Insurance Corporation of India vs. Escorts Ltd. And others[16]
5. State of Gujarat and others v. Meghji Pethraj Shah
[17]
Charitable Trust and others
6. State of Bihar and others v. Jain Plastics and Chemicals
[18]
Ltd.,
7. Hyderabad Urban Development Authority, reconstituted as Hyderabad Metropolitan Development Authority, Secunderabad and another v. M/s.IBC Knowledge Park Pvt.Ltd. rep.by its Managing Director, Yunus Zia and
[19]
others
23. Placing reliance on the averments contained in the counter- affidavit, learned Special Government Pleader contended that the violations pointed out against the petitioners are grave and, therefore, petitioners are not entitled to continue as network hospitals. Petitioners were afforded sufficient opportunity to explain their stand before the orders were passed on 26.03.2013 delisting the petitioners. Several show-cause notices were issued pointing out the various irregularities committed by the petitioners. Petitioners submitted explanations. The EDC considered the earlier show- cause notices and explanations submitted by the petitioners and the inspection report of the General Manager insofar as petitioner in W.P.No.16556 of 2013 and having found serious irregularities committed by the petitioner decision was taken on 14.03.2013 delisting the petitioner from the list of network hospitals and in consequent to the said decision, the Chief Medical Auditor passed orders on 26.3.2013. Similarly, the allegations against petitioner in W.P.No.27662 of 2013 are grave and after considering all relevant material decision to delist was taken.
24. It is further contended that petitioners were afforded ample opportunity by the CEO and after considering the explanations submitted by the petitioners and after affording opportunity and on verification of the records, the Chief Executive Officer had passed orders rejecting the appeals. It is further contended that as Chief Executive Officer, decisions taken by the subordinates are routinely circulated to him and in the said manner, the CEO processed the file concerning delisting of petitioners before orders were passed by Chief Medical Auditor on 26.3.2013. He therefore contended that there is no merit in the contention that CEO had predetermined and had prejudice while sitting in appeal. He therefore supports the decision taken by the respondent trust by way of original order and the appellate order.
25. In reply, counsel for the petitioners submitted that the writ petitions are maintainable since the respondent trust is established and controlled by the State Government. State Government has a deep and pervasive control over all facets of the trust. The Chief Executive Officer is an officer of the State Government. The funds of the trust are public funds. The nature of duties performed are in the realm of public service. The trust is appointed as special purpose vehicle to enforce the policy of the State Government i.e., to provide financial support to the people who are living below poverty line in obtaining better medical facilities for the ailments suffered by them. Thus, the respondent trust is amenable to the jurisdiction of this Court under Article 226 of the Constitution of India. The contentions urged in the writ petition are on the issues concerning the non-observance of procedural formalities and, therefore, the decision assailed vitiates on these grounds. It is also contended that the decision of the original authority on 26.3.2013 is vitiated on account of non-observance of procedural formalities as well as decision taken by the incompetent authority and the decisions of the CEO are vitiated as the person who was part of the original decision was sitting in appeal and considering the appeal singularly without placing the appeal before a panel.
26. Having regard to the submissions made by the learned counsels, the following points arise for determination :
1) Whether the writ petitions are maintainable ?
2) Whether the decision of the respondent trust in delisting the petitioner from the list of network hospitals is valid and legal ?
MAINTAINABILITY OF WRIT PETITIONS:
27. It is not in dispute that the second respondent trust is established by the Government of Andhra Pradesh. It is created as a special purpose vehicle to enforce policy of State Government to provide financial assistance to identified citizens to get treatment for various ailments. The entire funding is by State. The trust is discharging public duty. The trust entered into a contract with the petitioners for the purpose of enlisting the petitioners as network hospitals to implement Aarogyasri Health Insurance Scheme of State Government. The NWH provides treatment to needy citizens on behalf of the Trust. The Trust reimburses the expenditure incurred by the hospital for the treatment. The funds are public funds. Thus, there is public law element.
28. I have carefully considered the decisions cited by the Special Government Pleader on the maintainability of the writ petitions.
29. In the case of Life Insurance Corporation of India (supra) (relied on by the Special Government Pleader), Supreme Court held that if the action of the State is related to contractual obligation or obligations arising out of the contract, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field (para 102). Thus, wide discretion is vested in the writ court to entertain matters even with reference to the contractual obligations.
30. After exhaustive review of principles of law on maintainability of writ petitions by parties seeking to enforce terms of contract, the bench of two learned judges of this Court in the case of Hyderabad Urban Development Authority, reconstituted as Hyderabad Metropolitan Development Authority, Secunderabad vs. M/s. IBC Knowledge Part Private Limited,
[20]
rep.by its Managing Director, Yunus Zia and others , summarized the principles deducible from precedents. Para-48 reads as under:
“48. On an analysis of the above decisions of the Supreme Court, it is clear that contractual obligations may fall under judicial review if there is some public law element involved therein. Where the dispute lies within the contractual field pure and simple in the realm of private law a writ petition is not maintainable. In such cases, the relations between the parties are governed by the contract which determines the rights and obligations of the parties interse. However, where there is an element of arbitrariness or unreasonableness, illegality, irrationality or procedural impropriety in the action of state authorities offending Article 14 of the Constitution of India, even in respect of a dispute arising out of a private contract, the Court, in exercise of its power of judicial review under Article 226, can entertain the matter and grant relief as per law.
……In cases where there is an element of arbitrariness, illegality or irrationality in the action of the State or its instrumentality the Court can interfere and grant relief …..”
31. In these two cases, there is element of arbitrariness, unreasonableness, illegality and procedural impropriety on the part of the 2nd respondent trust in delisting the petitioners. Thus, the 2nd respondent trust is amenable to the jurisdiction of this Court under Article 226 of the Constitution of India and the writ petitions are maintainable.
VALIDITY OF ORDERS OF DELISTING:
32. Clause 8 of Aarogyasri Scheme Manual deals with disciplinary action against NWH. To appreciate the contentions on second issue, it is useful to extract relevant clauses.
Clause 8.1. Reasons for disciplinary Action.
The EDC shall initiate disciplinary proceedings against erring NWHs for the following reasons.
i. infrastructure deficiencies
ii. Equipment deficiencies
iii. Man power deficiencies
iv. Service deficiencies
v. Violation of service contract agreement.
Clause 8.3. Initiation of Case
EDC shall start disciplinary action by initiating a case against the network hospital. A show a cause notice with a direction to offer their remarks on the charges shall be sent electronically on IT portal seeking a counter within seven working days through postal.
The NWH or its authorized representative of hospital shall have the opportunity to attend the EDC proceedings of their case at the appointed time and place mentioned in the show a cause notice with relevant material. The EDC shall hear the case based on available material on record even if the NWH does not appear in the EDC proceedings of the case. The EDC may also call for records, documentation or further explanation from the NWH to ascertain the truth.
The EDC if necessary may at its discretion cause further enquiry to be conducted in the matter by appointing sub- committees for obtaining expert opinion, conducting inspection etc., in the matter.
The EDC after the conclusion of hearing the case complaint shall pass an order within (7) days of conclusion of hearing either by allowing the complaint by imposing the necessary penalty or by closing it. The order will be issued by the Chief Medical Auditor as Chairman of Empanelment, Disciplinary Committee (EDC).
Clause 8.4. Disciplinary Action
ii. Permanent Disciplinary Actions:
(b) De-empanelment of specialities: the NWH shall be de- empanelled for a particular speciality in case of service deficiencies.
(c) Delisting: The NWH shall be delisted for repeated violation of service contract agreement and other service deficiencies for a period of not less than two years. The delisted NWHs for default are bared from re-empanelment till the expiry of two years.
33. In addition to clause 8 of the manual, circular dated 05.07.2012 was issued prescribing further guidelines on procedure to take disciplinary action.
34. In addition to the above, special terms are incorporated in the contract entered with the hospitals. They read as under:
“8.2. Disputes shall be settled by EDC in accordance with the following provisions.
1. Each dispute submitted by a party to settlement shall be heard by a panel, in accordance with the following provisions:
(a) EDC : Where the dispute concerns a technical or non- technical matter, the EDC shall hear the matter.
(b) Appellate Panel: Where the party dispute the decision of the EDC, an appeal lies to a panel chaired by the CEO and consisting of two other members, viz., Chief Medical Auditor of the Trust and nominees from out of a panel of the specialist doctors concerned (registered medical association) furnished by the service provider excluding any doctor employed directly or indirectly by the Service Provider and selected by the CEO.
2. Rules of procedure Except as stated herein, proceedings shall be conducted in accordance with the rules of procedure or EDC as in force on the date of this contract. The following procedure is currently in vogue:
1. Receipt of information about the grievance/complaint from various sources against the Network Hospital.
2. Notice to be issued within two (2) working days of the receipt of complaint.
3. Network Hospital to respond within seven (7) working days.
4. In case, the case/issue can be decided based on the available evidence and reply without need for further investigation. The EDC has to pass a decision within seven (7) working days.
5. In case, the case/issue requires further investigation, the investigation shall be completed within 2 weeks by an appropriate person/committee appointed by the EDC and report to be submitted to EDC along with required proofs.
6. Upon the receipt of investigation report, the EDC shall issue show cause notice within seven (7) working days to NWH to submit explanation, in order to provide an opportunity of being heard. The notice to NWH shall indicate the date and time on which either the owner or his legal representative shall be present before the EDC in order to defend his case either orally or in writing.
7. After hearing the NWH, the EDC shall pass a decision within seven (7) days in the form of a speaking order.
8. In case any NWH is aggrieved by the decision of the EDC, it can file an appeal to the appellate panel.
9. The appellate authority shall dispose the case within two (2) weeks.
10. It is to be noted that any production of evidence against any NWH, relating to any case shall not be submitted after the expiry of 48 hours prior to the Scheduled EDC meeting by any agency (Trust/Insurance/others). Any evidence received later than 48 hours prior to the start of EDC meeting shall be considered as a fresh case.”
35. As per the above extracted clauses and circular dated 05.07.2012, the EDC should verify the complaints and after having satisfied, prima facie, genuineness of the complaint, it should issue show-cause notice calling for explanation of the hospital. The circular and clauses extracted above envisage giving of personal hearing to the hospital on a time and date specified by the EDC. Only after the conclusion of the hearing as mandated, EDC should pass orders.
36. As per clause 8.2.2(6) of special conditions of contract, after receipt of investigation report, EDC should issue show cause notices to the network hospital to submit his explanation. In order to provide an opportunity of being heard, it also mandates issue of notice indicating the date and time of personal hearing. On the date fixed, on behalf of hospital oral submissions can be made or it can make submissions in writing.
37. Various kinds of penalties are prescribed. As per clause 8.4.(ii)(c) of the Manual, penalty of delisting can be resorted to only if there were repeated violations of agreement and service deficiencies for a period of not less than two years. The decision of the EDC should be communicated by the Chief Medical Auditor, who is the Chairman of the EDC.
3 8 Against any such decision taken by the EDC, an appeal lies to appellate panel chaired by the Chief Executive Officer and consisting of two other members i.e., Chief Medical Auditor of the Trust and a nominee from out of a panel of specialist doctors furnished by the service provider. The special terms of contract also incorporate the rules of procedure as extracted above. These clauses of special contract are binding on the petitioners as well as respondents.
W.P.No.16556 of 2013:
39. W.P.M.P.No.20070 of 2013 was filed by the petitioner in W.P.No.16556 of 2013 praying for grant of interim order. On the prayer sought by the petitioner in W.P.M.P.No.20070 of 2013, notice was issued by order dated 12.06.2013. Aggrieved by non-granting of interim order as prayed for, petitioner filed Writ Appeal No.1417 of 2013. The Bench of two learned judges of this Court disposed of the writ appeal observing that single judge of this Court should take up and decide W.P.M.P.No.20070 of 2013 in W.P.No.16556 of 2013 keeping in view the earlier interim order passed by this Court in similar circumstances in W.P.M.P.No.16381 of 2013 in W.P.No.13347 of 2013. Accordingly, the matter was taken on 25.10.2013.
40. At the time of hearing of W.P.M.P.20070 of 2013, the following contentions were urged on behalf of the petitioner:
i) that the order dated 26.3.2013 was issued with the approval of C.E.O. and, therefore the C.E.O. could not have sat in appeal filed against the orders dated 26.3.2013 and on that ground alone the order is vitiated,
ii) the procedure mandates granting personal hearing before passing orders and that was not afforded to the petitioner and
iii) on appeal, the matter should be referred to the panel of experts for consideration of grounds as urged in the appeal before the decision taken by the appellate authority, but the matter was straightway taken by the appellate authority without referring the matter to the panel.
41. On the contentions urged on behalf of the petitioner, records were called and on verification of records, there was no material available on record to dislodge the contentions urged on behalf of the petitioner. Having regard to the said submissions made, interim suspension was granted.
42. No new material is produced to show that the infirmities noticed by this Court during the course of hearing on 30.10.2013, were not correct.
43. It thus emerges from the record in W.P.No.16556 of 2013, that not only the order dated 26.03.2013, but the earlier show-cause notices dated 13.8.2012, 19.01.2013 and 31.01.2013 were also issued by the Chief Medical Auditor (CMA) as per the directions of the Chief Executive Officer. Thus, CEO was actively involved at the initial stage of taking action against the petitioner, whereas as per the clause-8 of special conditions of contract, the EDC has to initiate and take action. As seen from the show-cause notices dated 13.8.2012, 19.1.2013 and 31.01.2013, they were not issued by the EDC, but were issued by CMA as per the directions of Chief Executive Officer.
44. As evident from the record, no such notice was caused from the EDC and no personal hearing was held before the EDC. The specific contention of the petitioner that in fact EDC was not involved in issuing show-cause notices referred to above, and in so called meeting dated 14.3.2013 of EDC, does not contain a decision to delist the petitioner hospital, but it only talks about the basis of the charges levelled against the petitioner is not controverted. This should have been followed by issuing show-cause notice, instead, straightway order was passed on 26.03.2013 by the Chief Medical Auditor to delist petitioner as if a decision was taken by EDC.
45. It is also curious to notice that the order referred to various clauses of chapter-8 of the Aarogyasri Scheme manual, which deal with disciplinary action, whereas what is noted to take action to delist was infrastructural deficiencies and manpower deficiencies as per clause 10(1) of special conditions of contract. These infrastructural deficiencies and manpower deficiencies were noticed as per the report of the General Manager, who had inspected the hospital premises on 7.3.2013. There is also a reference to the UO note. These documents were not supplied to the petitioner and petitioner was not put on notice after 07.03.2013 and before delisting orders were passed. These deficiencies should not result in delisting.
46. No panel was constituted to decide the appeal filed by the petitioner. Appeal was heard and decided by the CEO in his personal capacity. Thus, apart from the fact that having been involved at the initial stage of adverse decision, he ought not to have been involved at the appellate stage, the impugned order is also vitiated since the appeal was to be considered by a Panel consisting of three persons, whereas it was considered by Chief Executive Officer only.
47. Furthermore, though the initial order of delisting the petitioner only refers to infrastructural deficiencies and manpower deficiencies, the order of the Chief Executive Officer at length discussed about the past illegalities committed by the petitioner. Though the order of the Chief Medical Auditor also refers to previous notices, the disciplinary action was not preceded by procedure as mandated by the special conditions of contract read with clause 8 of the manual. The contention of the petitioner that many of the documents relied upon and referred to in the order dated 26.3.2013 were not supplied to him is not disputed.
48. The relevant paras of the order of the appellate authority, supports the contention of the petitioner that no personal hearing was held by the EDC.
The relevant portion of the order of CEO reads as under:
“Point No.5 puts that the Network Hospital (NWH) shall have the opportunity to attend the disciplinary proceedings of their case. In the above, the Network Hospital shall have the opportunity to attend, but it is observed that the Network Hospitals has not availed such opportunity to make his personal presence either by himself or his representative. Instead, the Appellant hospital has submitted its written explanations. Even in their written explanations they never stated with regard to the personal appearance. Further, I do not find any material filed by the Network Hospital prior to the Appeal requesting their Personal appearance.
……. In the present context the Empanelment and Disciplinary Committee has recommended the action based on available material on record. As per point no.6 of the circular the Empanelment and Disciplinary Committee is competent to proceed with the enquiry basing upon material on record even if the Network Hospital does not appear. In this matter Empanelment and Disciplinary Committee has recommended the action against the hospital based on reports of FOSS and Medical Audit Team, Vigilance and Grievance.”
4 9 . The extracted portion of the order is clearly contrary to what is mandated by clause 8.2.2(6) of the special conditions of contract.
W.P.No.27622 of 2013
50. This writ petition was also considered along with W.P.No.13347 of 2013 on 25.10.2013 to consider grant of interim orders. Same grounds as urged in the said writ petition were urged. Records produced showed that there were no answers to all the three contentions. No new material is produced to dispel the earlier view.
51. As mandated by Clause 8.3 of manual and clause 8.2 of special conditions of contract, no show cause notice was issued by the EDC. Letter dated 31.05.2012 was issued to the first petitioner and similar letter dated 05.03.2013 was also issued. Both these letters are not inconformity with the clauses 8.3 and 8.2 respectively. No charge was levelled against the first petitioner calling upon him to submit explanation. Prior to order of delisting the first petitioner, procedural mandate as required was not followed.
52. The CEO was involved in the decision making process resulting in order of delisting of petitioner dated 26.03.2013. Having participated in the decision making process at the initial stage, the CEO could not have decided the appeal. Petitioners allegation that there was no corum when the EDC considered the e-mail complaint was not controverted.
53. The EDC claims to have obtained an expert opinion, but the name and other details of the person whose opinion was obtained was not disclosed. Relying on such undisclosed expert opinion, conclusion was arrived at by the EDC holding that there was deficiency in service.
54. What is alleged against 1st petitioner is a solitary instance. The extreme action of delisting has to be taken only if the deficiencies are recurring over a period of time. Thus, based on a solitary instance, there could not have been order of delisting of the 1st petitioner and the same is contrary to clause 8.4.(ii).c of the manual. According to said clause delisting should be ordered if repeated violations are noticed.
55. The CEO individually considered the appeal and rejected the appeal. The appeal has to be considered by a panel of three members (Clause 8.2.2(6) of Special conditions of contract) and, therefore, on that ground the order in appeal is vitiated.
56. The CEO erred in not appreciating the scope of clause 8.2.2(6) of special conditions of contract. The CEO proceeds on the assumption that petitioner should ask for personal hearing and petitioner did not ask for personal hearing. Instead of asking for personal hearing, petitioner submitted written explanation and, therefore there is compliance of the provision. As seen from record no date of personal hearing was notified to petitioner. There was no further communication after reply by petitioner dated 09.03.2013 to the letter dated 05.03.2013. Oral or written submissions as provided in clause 8.2.2.(6) refers to oral or written submissions during the course of personal hearing and not by way of a reply to clarifications sought.
57. It is thus seen that in both writ petitions, the procedure adopted to delist the petitioner hospitals is not according to the special conditions of contract, the manual and the circular dated 05.07.2012.
58. It is mandatory for the EDC to hold a personal hearing and petitioners need not ask for personal hearing. As per the record placed before this court, no such notice was issued by the EDC indicating the date on which personal hearing was to be held. Some notices were issued by the Chief Medical Auditor. None of those notices indicated the date of personal hearing to be held before EDC. The appeal has to be considered by a panel consisting of three members, whereas appeal was considered by CEO in his individual capacity. The CEO was involved in the initial decision making process. Thus there were clear violations of special conditions of contract, which are equally binding on the respondent trust. The order of delisting has severe civil consequences. Petitioner hospitals are deprived of large group of patients on account of delisting. It also impacts the reputation of the hospitals. Thus, any decision having such far reaching consequences cannot be taken without observing procedural formalities. When consequences are severe observance of procedural formalities are more stringent. The violations noticed above are far and wide going to the root of the decision making process by the competent authority and competency.
59. The right of petitioners for an opportunity of hearing in due compliance of the principles of natural justice and special conditions of contract is affected. Thus, there is element of arbitrariness, unreasonableness and procedural impropriety vitiating the orders impugned herein and said orders are not sustainable and liable to be set aside. They are accordingly set aside.
60. It is made clear that the contentions urged on behalf of the petitioners and on behalf of the respondents are considered with reference to the scope of taking action and non-observance of procedural formalities and the nature of disciplinary action that could have been taken and all other contentions are left open. No finding is recorded on merits of the allegations made against petitioner hospitals by the respondent trust. The respondent trust is at liberty to proceed against the petitioner hospitals strictly according to its Manual and special conditions of contract.
61. Accordingly, the writ petitions are allowed. There shall be no order as to costs.
Miscellaneous petitions if any pending in these writ petitions shall stand closed.
JUSTICE P. NAVEEN RAO Date: 17-04-2014 Kkm HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION NO.16556 & 27662 OF 2013 Date: 17.04.2014 kkm
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