TMI Blog2016 (3) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... quire hospitalization or further specialized care, references are made to hospitals which are empanelled for the purpose. It is thus amply clear by its own admission that Respondent No. 1 is not just a facilitator for its target group to seek healthcare in empanelled hospitals but itself provides healthcare in its 273 allopathic dispensaries, 19 polyclinics, 73 labs and 85 Ayush hospitals. This network is further supplemented by private hospitals (648) and diagnostic centres (148). The last two are empanelled following a procedure given out in the Office Memorandum which has fixed differential rates for NABH accredited and non-accredited hospitals. Central Government Health Scheme (CGHS) is a health scheme for serving/retired Central Government employees and their families." Further the DGHS is clearly in the nature of a service provider that does not perform a function which can be termed as inalienable, as explained in several cases referred above. It cannot be said to be performing a sovereign function and, therefore, warranting exclusion from the definition of enterprise. CGHS is clearly an enterprise which provides healthcare services to the target group and in order to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the proceedings of the case under Section 26(2) of the Competition Act, 2002. The Commission dwelt into the information provided by the informant and the alleged Office Memorandum quoted above. The principal allegation by the appellant - informant is that under Central Government Health Scheme, the DGHS discriminates between hospitals on the basis of their accreditation to the National Accreditation Board for Hospitals and healthcare providers (NABH). The same practice is followed under Ex-servicemen Contributory Health Scheme (ECHS). The appellant - informant has alleged that there is no scientific basis to this discrimination. Through the issue of this Office Memorandum, DGHS, who is in a dominant position, is abusing its dominance and thereby thwarting competition among hospitals. It is not providing a level playing field and thereby discriminating against non-accredited hospitals. The informant had also alleged that the opposite parties had created a cartel for providing higher hospital rates to a selected few hospitals. 4. According to the Commission, in order to see whether DGHS was exercising any abuse of dominance, its existence as 'enterprise' under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 have empanelled several hospitals across the country. b) QCI and NABH (subsidiary body of QCI) are acting certification bodies to empanel hospital for the purpose of providing indoor and outdoor healthcare facilities to the eligible person and to their dependent family members of CGHS and ECHS. c) Respondent No. 4 (through QCI) are identified and empanelled hospitals to provide indoor and outdoor patient healthcare facilities to the eligible personnel of CGHS and ECHS. d) Appellant has submitted information with Competition Commission of India (CCI) regarding formation of cartel consisting of Respondent Nos. 1, 2, 3 and 4 leading to unfair trade practice and against the principal of competitive neutrality. e) It is submitted that the Respondent No. 1 vide their letter No. S.110011/23/2009-CGHS D.II/Hospital Cell (Part 1) dated 17th August 2010 (Annexure 2) has arbitrarily hiked the hospital rate based on unsubstantiated certification provided by Respondent No. 3. It is submitted that there is no scientific proof available or peer review regarding authenticity and efficacy of Respondent No. 3 certification. f) Respondent No. 1 vide its above quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the impact made by it on the national economic development and the technological growth of various sectors of Indian industry. The Government of India felt that a new thrust had to be given to standardization and quality control activities, and that a national strategy had to be evolved for giving appropriate recognition and importance to standards and for integrating them with the growth and development of production and exports in different sectors. The Government of India therefore decided to create a statutory organization as the national standards body which was named as the Bureau of Indian Standards (BIS), with adequate autonomy as well as flexibility in its operations to achieve harmonious development of the activities of standardization, certification making and connected matters. The Bureau of Indian Standards Act was passed by the Parliament in 1986 and BIS came into being on 1 April 1987. k) It is submitted that neither ISO nor BIS certifies adherence to its standards to its own. Probably NABH is the solitary body in the world which sets its own standards; it inspects in its own behalf and also awards accreditation which are excepted norm worldwide. The curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fixed as ₹ 58/- whereas the rates for the non-NABH accredited hospitals is ₹ 50/-. Similarly, a consultation charge for the inpatient is ₹ 72/- for NABH accredited hospitals and ₹ 63/- for non-NABH accredited hospitals. Similarly, rates for compressed air/piped oxygen is ₹ 58/- for NABH accredited hospitals and ₹ 50/- for non-NABH accredited hospitals and ₹ 1300/- for Super Speciality hospitals. 7. In their replies, Respondent Nos. 3 and 4 have contested the allegations made by the appellant. According to the reply, NABH is a constituent board of Quality Council of India which is a Government-industry joint venture. NABH standards for hospitals prepared by Technical Committee contain complete set of standards for evaluation of hospitals for grant of accreditation. The standards provide framework for quality of care for patients and quality improvement for hospitals. NABH standards cover patient centered standards as well as organization centered standards. NABH issues an accreditation certificate to the hospital with a validity of three years. NABH conducts one surveillance of the accredited hospital in one accreditation cycle of thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealthcare institutions for the target group. The second point of their argument was that in order to proceed against them, the appellant should first prove that they should be considered as 'enterprise' under Section 2(h) of the Act. Since Respondent Nos. 1 and 2 neither themselves provide healthcare services nor they provide healthcare services in return for profits or in the nature of commercial activities, they cannot be termed as enterprise and, therefore, they are not covered under Sections 3 and 4 of the Act. This case has broadly raised two major issues. 1) Whether DGHS and ECHS can be termed as 'enterprise' under Section 2(h) to make them liable under Sections 3 or 4 as the case may be. 2) Whether there has been any discrimination introduced by the fact of accreditation of hospitals to NABH by fixing higher rates for the accredited hospitals and thereby creating a discriminatory environment not based on sound reasons leading to abuse of dominance by Respondent Nos. 1 and 2. 11. If Respondent Nos. 1 and 2 are found to be eligible to be considered as enterprise, a response to the second issue becomes unnecessary which is a matter of detailed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the definition of enterprise. It is further seen that the definition does not cover only those institutions connected with activities relating to goods but also covers activities relating to provision of services of 'any kind' which gives a very broad connotation to the gamut of activities that can be covered in the definition of services. As far as exclusion is concerned, there are two possibilities. Firstly, the activities of the Government relating to sovereign functions of the Government are excluded. Further, this is a matter of situation specific facts as to what activities can be considered as relatable to the sovereign functions. The second exclusion is categoric, i.e. activities covered by the departments of Central Government dealing with atomic energy, currency, defence and space. 14. As far as the scope of sovereign function is concerned, the issue has been examined in a plethora of cases. In the landmark case of Bangalore Water Supply and Sewage Board v. A. Rajappa (1978) 2SCC 213, a seven judge Bench of the Supreme Court while interpreting the term Industry as defined in Section 2(j) of the Industrial Disputes Act 1947 exempted only sovereign functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, education, commercial, social, economic, political and even marital. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the States cannot claim any immunity. 17. In N. Nagendra Rao Co. V. State of A.P. AIR (1994) SC 2663, which defined non-sovereign functions as discharge of public duties under a Statute, which are incidental or ancillary and not primary or inalienable function of the State . This decision holds that the State is immune only in cases where its officers perform primary or inalienable functions such as defense of the country administration of justice, maintenance of law and order. 18. In fact, all governmental function cannot be construed as either primary or inalienable sovereign function. Hence e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit making or mere quid pro quo would also not make such enterprise to be outside the ambit of 'industry' as also in State of Bombay Ors. case . 21. In a more recent case, State of U.P. v. Deep Chandra (MANU/UP/0733/2003), the SC in Para 31 held that: Applying the principles laid down by the Apex Court......regarding dominant nature test and sovereign functions to the facts of the present case we find that the construction and repairs of road undertaken by the Public Works Department cannot be said to be a sovereign function. The dominant nature is the construction activity undertaken by a Department of the Government in discharge of its being a welfare State. Thus, the PWD of the Government of Uttar Pradesh is an industry and provisions of the U.P. Act are applicable to it. (Emphasis added). 22. The scope of exclusion, therefore, on the grounds of the sovereign nature of functions is normally constrained by the decisions quoted above. The specific exclusions stated in the definition are also not applicable in the present cases. 23. According to the Annual Report of the Ministry of Health and Family Welfare for the Year 2014 Chapter 13 describes the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly complements its resources by empanelling hospitals which include private hospitals as well. Therefore, the process of empanelment is essentially an expansion of CGHS' activities of providing healthcare to the target group. It is not a facilitation but a clear provision of service. 27. The second question of whether a differential pricing for treatment/facilities provided by accredited and non-accredited hospitals is justified is a matter for further examination. Both sides did not dwell on the subject at length. Whether the differential pricing is justified or not or in what manner it creates alleged environment for abuse of dominance are matters of detailed investigation and this Tribunal would refrain from going into the same at this stage. 28. We, therefore, find that the Commission has taken a simplistic view of the activities of a Government department and has erred in appreciation of the scope of the definition of enterprise. 29. In the result, this appeal succeeds. The order of the Commission is set aside. The matter is remitted to the Commission for reconsideration. In view of the observation made above, the Commission would take a prima facie view on wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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