Posted On by &filed under Gujarat High Court, High Court.

Gujarat High Court
Aditya vs United on 18 March, 2011
Author: Jayant Patel,&Nbsp;Ms.Justice B.M.Trivedi,&Nbsp;
   Gujarat High Court Case Information System 







SCA/10797/2010	 9/ 9	ORDER 






CIVIL APPLICATION No. 10797 of 2010










Appearance : 
Petitioner(s) : 1, 
NOTICE SERVED BY DS for Respondent(s) : 1 -
MR VIBHUTI NANAVATI for Respondent(s) : 1 -







: 18/03/2011 




present petition is preferred for appropriate writ to quash and set
aside the order dated 10.08.2010 passed by the respondent insurance
company and it is prayed by the petitioner to declare that the
impugned decision taken by the respondent insurance company of not
giving medical reimbursement to the patients who may take the
treatment as illegal.

have heard learned counsel Mr.Mihir Joshi with Mr. Desai for the
petitioner and Mr.S.N.Shelat, learned counsel with Mr.Nanavati for
the respondent insurance company.

is an undisputed position that the petitioner is running the
hospital and respondent insurance company is rendering the services
in the field of insurance for indemnifying the expenses which may be
incurred by the insured for treatment. The present petition is not
preferred by any insured contending that by the impugned action of
the insurance company, any conditions of contract is breached or
that there is any breach of the statutory provisions or obligation
cast upon the insurance company has not been properly discharged.
The present petition is by one of the hospital which is desirous to
see that its name may not be de-panelled or excluded for the purpose
of consideration of the claim of the insured who may have taken
treatment with it. It is in this light of the facts and
circumstances, the contentions are to be considered.

may record that earlier, the action was taken for de-panelling the
petitioner but as the same was in breach of the principles of
natural justice, the challenge was made before this Court in the
proceedings of SCA No.3983/10 and allied matters and this Court
having found that the action was in breach of the principles of
natural justice, set aside the decision of the insurance company by
its judgement dated 14.05.2010 by observing thus –

the result, all the petitions are allowed. The impugned order at
Annexure A in so far as the petitioners are concerned is quashed
and set aside. Having done that, we at the same time cannot shut
our eyes to the rising tendency of medical malpractices in insurance
claims. It will, therefore, be open for the respondents to take a
fresh decision after giving an opportunity to the petitioners to meet
with the allegations of irregularities and malpractices against
them. For the said purpose, if the respondents so desire to proceed
further, show cause notice shall be issued to the concerned
hospitals within a period of two weeks from today and after
considering the representations of the petitioners, if made, pass
appropriate order latest by 15th August
2010. If such show cause notices are issued within the time
permitted, until final decision as mentioned above is taken, the
petitioners shall not insist on acceptance of mediclaims of cashless
or reimbursement for the treatment to the patients given after
1.4.10, which shall be governed by the ultimate outcome of such
exercise. However, it is clarified that for the treatment to the
patients given prior to 1.4.10, the respondents Insurance
Companies shall continue to process the mediclaim and pay the same
as found admissible under the Rules. It will also be open for the
Insurance Companies, if so found appropriate, to require the
petitioners to take such remedial measures as found necessary.”

appears that thereafter, show cause notice was given and the same
was replied by the petitioner. After reply, the matter came to be
considered by the steering committee and the matter was considered
and so far as the petitioner herein is concerned, the finding
recorded is thus –


Aditya Multispeciality Hospitality: All the TPAs have gone through
the replies given by the hospital against their observations made
during the investigations. The committee has interacted with the
concerned TPA and unanimously found that the replies given are not
satisfactory and hence the hospital continues to be in the declined

pertinent aspect is that the allegation against the petitioner
herein as it appears from the material produced by the insurance
company is that the claims together with the bills which were
submitted, upon a detailed scrutiny by recording statement of the
patients, it was found that they were not genuine. In some cases,
the relevant entries were not available for the examination of the
laboratory, etc., of the patients concerned. In some cases, the
patients declared upon the investigation by TPA that number of days
of hospitalisation were less than shown in the bills etc. When on
the face of this allegation, upon the investigation report of the
TPA, the explanation has also been considered and all the members of
the committee unanimously found the explanation as not worth
accepting and maintaining, the decision for continuation of the
declined list, in our view would be sufficient to justify the

if one has to keep in mind the larger public interest as that of the
insurance company and also to some extent the class of insured who
are to be benefited for getting the treatment, it is hardly required
to be stated that merely because the insured is covered by the
scheme gives no warrant to the insured or to the hospital to
exaggerate or to submit a non-genuine bill. If any hospital is
found to be a party in such an attempt and the insurance company has
found that the bills of such hospital should not be entertained by
putting the insured at guard, such action cannot be said to be
arbitrary on the ground as sought to be canvassed.

attempt was made by Mr.Joshi, learned counsel appearing for the
petitioner by contending that there was no power of blacklisting and
therefore, the order could be said as without their being any

our view, it is not a matter of tracing the source of power, but is
a matter where one has to consider the reasonableness of an action
of dealing in the business of insurance for the medical claim
keeping in view the interest of the insured who are to get the
treatment. When there is no privity of contract between the insurer
and the petitioner company, it is open for the insurance company on
a reasonable material to arrive at a decision that they may not be
entertaining the claim if the insured has taken treatment. We may
again reiterate that we are not examining the question of
admissibility of the claim at the instance of the insured, but the
only issue in the present matter is the assertion of the right of a
hospital who is rendering medical facility and the bill of such
medical facility may be admissible in the medical claim. Therefore,
the contention that there is no source of power cannot be accepted.

was next contended by Mr.Joshi, learned counsel that even if it is
considered that there is any power, then there cannot be any
de-panelling for indefinite period.

our view, so long as the ban is not lifted, it may continue but that
cannot be read as a ban for all time to come if in a given case
ultimately in future, the petitioner satisfies the requirement
having found upto the expectation of the insurance company, their
claims may be examined in future. But the action cannot be tested
on the ground that since the period has not been mentioned, it would
be bad in law more particularly when it is taken keeping in view the
larger public interest in the business of insurance.

was next contended by the learned counsel for the petitioner that
the action has to meet with the test of Article 14 of the
Constitution. It is in breach of the principles of natural justice,
hence would be illegal, therefore, this Court may interfere. In
furtherance to the said submission, it was contended that no
opportunity of hearing was given.

our view, the principles of natural justice cannot be injected by
way of a straight jacket formula. It may vary from facts to facts.
In a matter like this, if the show cause notice has been given and
the reply is considered, it would be sufficient compliance to the
principles of natural justice and it cannot be said that the action
is in breach of the principles of natural justice.

attempt was made by Mr.Joshi to contend that there is complete
non-application of mind inasmuch as the reasons must be reflected in
the form of the order and further, for two hospitals, relaxation has
been given, whereas in the case of the petitioner similar treatment
has not been given and therefore, it would not meet with the test of
Article 14 of the Constitution.

facie, the contention may appear to be attractive, but upon a close
scrutiny, it appears that it is not a matter for exercise of power
of testing a lis between the parties, but is a matter of dealing in
business with a hospital for the purpose of consideration of the
claim. The freedom is available to the hospital to admit the
patient and not to admit the patient or to render the treatment or
not to render the treatment. It has a complete freedom in the
business of medical profession so such freedom equally would be
available to the insurance company while dealing in the business of
insurance. There is no contract or inter se binding rights between
the insurance company and the hospital concerned, who is the
petitioner herein.

it is in that light of the situation, the alleged challenge for
application of mind is to be considered and examined. As we have
recorded earlier, there are materials on record which may justify
the decision. This court cannot on sit in appeal over the decision
nor would enter into the arena of sufficiency of the material unlike
examining the other administrative order. Further, the decision
communicated is supported by the minutes of meeting and if the
minutes of meeting are considered with the material produced
together with the affidavit in reply, in our view, it cannot be said
that there is non-application of mind on the ground as sought to be
canvassed. We may record that while testing the action taken in
larger public interest, in the field of business with the third
party with whom the insurance company is not having any privity of
contract and it is a dealing with the hospitals generally, such a
microscopic examination of the decision as sought to be canvassed
cannot be accepted.

may refer to the decision of the Apex Court in the case of Gronsons
Pharmaceuticals (P) Ltd. v. State of U.P. and others reported in AIR
2001 SC 3707 had observed at para 2 thus –

counsel appearing for the appellant, urged that seeing the nature and
seriousness of the order passed against the appellant, the respondent
ought to have supplied all the materials on the basis of which the
charges contained in the show cause notice were based along with show
cause notice and in the absence of supply of materials, the order
impugned is against the principles of natural justice. We do not find
any merit in this contention. Admittedly, the appellant has only
contractual relationship with the State Government and the said
relationship is not governed by any statutory Rules. There is no
statutory rule which requires that an approved contractor cannot be
blacklisted without giving an opportunity of show cause. It is true
that an order blacklisting an approved contractor results in civil
consequences and in such a situation in the absence of statutory
rules, the only requirement of law while passing such an order was to
observe the principle of audi alteram partem which is one of the
facets of the principles of natural justice. The contention that it
was incumbent upon the respondent to have supplied the material on
the basis of which the charges against the appellant were based was
not the requirement of principle of audi alteram partem. It was
sufficient requirement of law that an opportunity of show cause was
given to the appellant before it was blacklisted. It is not disputed
that in the present case, the appellant was given an opportunity to
show cause and he did reply to the show cause which was duly
considered by the State Government. We are, therefore, of the view
that that the procedure adopted by the respondent while blacklisting
the appellant was in conformity with the principles of natural

the another decision of the Apex Court in th case of Krishnan
Kakkanth v. Govt. of Kerala and others reported at AIR 1997 SC 128,
while deciding the legality and validity of the circular of the
Government, the Apex Court had observed at paras 29 and 30 as under:


But in the instant case, no fundamental right guaranteed under
Article 19(1)(g) of the Constitution has been infringed. Hence,
question of invalidity on account of imposition of reasonable
restriction on the exercise of such right by executive order instead
by a statute does not arise in the facts of the case.

It may be indicated that although a citizen has a fundamental right
to carry on a trade or business, he has no fundamental right to
insist upon the Government or any other individual for doing business
with him. Any Government or an individual has got a right to enter
into contract with a particular person or to determine person or
persons with whom he or it will deal.”

the facts of the present case are considered, we do not find that
there is any breach of any right under Article 19(1)(g) of the
Constitution as sought to be canvassed.

the result, the petition is meritless. Hence, dismissed.
Considering the facts and circumstances, no order as to costs.







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