Ms Dr S Sharans Testing Center Through Its Partner Dr Nitin Sharan vs. The State Of Jharkhand Through Its Additional Chief Secretary Deptt Of Health

Facts

The petitioners, M/s. Dr. S. Sharan’s Testing Center and M/s. MicroPraxis Labs, are private laboratories accredited by NABL and recognized by ICMR for conducting RT-PCR tests for COVID-19. They challenged an order dated January 20, 2022, passed by the Additional Chief Secretary, Department of Health, Medical Education & Family Welfare, Government of Jharkhand, which unilaterally re-fixed the rate for RT-PCR tests at Rs. 300/- per sample and for home visits for sample collection at Rs. 100/- per sample. The petitioners argued that these rates were unworkable and economically unprofitable, as they did not account for various overhead expenses and were fixed without any negotiation, contrary to ICMR's advice. They also contended that the State lacked the jurisdiction to fix such rates without subsidizing the difference. Previously, an order dated December 14, 2020, had fixed rates at Rs. 400/- for testing and Rs. 200/- for home visits, which were considered workable by the petitioners.

Held

The Court held that the impugned order dated January 20, 2022, passed by the Additional Chief Secretary, Department of Health, Medical Education & Family Welfare, Government of Jharkhand, was quashed. The Court reasoned that while the ICMR, in its communication dated May 25, 2020, advised State Governments to negotiate with private laboratories to fix feasible prices for RT-PCR testing, the State of Jharkhand unilaterally fixed the rates on this occasion. The Court noted that a previous negotiation in June 2020 had resulted in a mutually agreed rate of Rs. 2,400/- per test. The Court emphasized that the principle of natural justice demands affording an opportunity of hearing to private laboratories, especially when the State's decision fixing rates has civil consequences and the petitioners claim that incidental charges were ignored. Citing Supreme Court judgments in Asha Sharma vs. Chandigarh Administration & Others and Manohar S/o Manik Rao Anchule vs. State of Maharashtra and Another, the Court stated that prior show-cause notice and a reasonable opportunity of hearing are essential elements of administrative decision-making when civil consequences are involved, unless specifically excluded by law. The Court directed the Additional Chief Secretary to negotiate with the petitioners and other eligible private laboratories to arrive at a mutually agreeable rate for RT-PCR tests and home sample collection. Until new rates are fixed through this process, the rates effective from the order dated December 14, 2020 (Rs. 400/- for testing and Rs. 200/- for home visit) would remain applicable.

Key Issues

1. Whether the Additional Chief Secretary, Department of Health, Medical Education & Family Welfare, Government of Jharkhand, had the authority and jurisdiction to unilaterally fix the rates for RT-PCR tests and home sample collection by private laboratories, without negotiation or considering their input costs and overheads, as per the guidelines issued by ICMR? 2. Whether the impugned order dated January 20, 2022, fixing the rates for RT-PCR tests and home sample collection, violates the principles of natural justice by being passed without affording an opportunity of hearing to the affected private laboratories? Petitioner's Arguments: The petitioners contended that the impugned order was passed without negotiation, contrary to ICMR's advice to negotiate mutually agreeable prices. They argued that the fixed rates of Rs. 300/- for testing and Rs. 100/- for home visits were unworkable and economically unprofitable, as their actual costs were Rs. 350/- for testing and Rs. 150/- for home visits, excluding other overheads like electricity, salaries, rent, and logistics. They asserted that the State executive power could not legislate in a field reserved for the Central Government. They also argued that the order was passed without adhering to the principles of natural justice, as they were not given an opportunity to be heard, leading to civil consequences. Revenue/State's Arguments: The judgment does not record any specific arguments made by the revenue or state respondents in response to the petitioners' contentions regarding jurisdiction, ICMR guidelines, or principles of natural justice.