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Director General of Health Services (DGHS) – Does it qualify as an ‘enterprise’ as per the Competition Act?

Faheem Rasheed Shah

The Competition Commission of India (CCI), in an order dated 23rd June 2014, held that there is no prima facie violation of Competition Act in the Central Government Health Scheme (CGHS). It thereby closed the matter under section 26(2) of the Act and also observed that DGHS does not fall under the ambit of ‘enterprise’ as defined in section 2(h) of the said statute.

As per the submissions of the said party, it was only a government agency facilitating healthcare to all past and present government employees and therefore cannot be regarded as an ‘enterprise”. However the definition of the said term is quite huge in its scope and includes governmental departments “engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring”. The definition also covers services of “any kind”, thereby further enlarging the scope by including all amble activities under its purview. The only exception to it is governmental activities related to sovereign functions, the same depending upon the facts of the case.

As per the ruling in Bangalore Water Supply and Sewage Board v. A. Rajappa case, it was held that only chief, inevitable, inalienable and non-delegable functions should be qualified within the sovereign domain. Therefore welfare, commercial and economic activities are not covered in the domain of the sovereign function. In N. Nagendra Rao & Co. v. State of A.P. order, it was held that only functions like maintenance of law and order and suppression of crime qualify as sovereign state functions. Other than that, the state cannot claim immunity under the same head.

In Agricultural Produce Market Committee v. Ashok Harikunt and Anrs case, the court held that sovereign functions like defence, making peace or war, foreign affairs, power to acquire territory etc. are non-amenable and inalienable. However other functions such as welfare, distributing licenses etc. are non-sovereign. In State of UP v. Deep Chandra case, the court held that functions like construction and repair of the roads cannot said to be sovereign. The said work is undertaken by the Public Works Department and therefore the nature of the work shows the characteristic of a welfare state. Therefore there are plethora of rulings, which elaborate what functions of state qualify as sovereign, and which does not.

The Government of India (Allocation of Business) Rules 1961 provides the scope of medical care to central government servants in Department of Health and Family Welfare and Ministry of Health and Family Welfare. The CGHS has number of facilities available which makes it more than a facilitator as far as dispensation of medical services to governmental employees are concerned. Some of them include OPD treatment and medicines from CGHS Wellness centers, Specialist Consultation at Government Hospitals, Hospitalization at Government and CGHS empaneled hospitals and Investigation at Government and empanelled Diagnostic hospitals.

Therefore, the role of ‘CGHS’ as a facilitator comes clearly in question. Simple perusal of the above records show that it provides healthcare to the out-patient departments. It provides healthcare in 273 Allopathic Dispensaries, 19 polyclinics, 73 Labs and Ayush Hospitals. The network is again supplemented by 648 private hospitals and 148 Diagnostic centers. Business allotted to the Department of Health and Family Welfare provides that Central Government Health Scheme (CGHS) is a health care scheme for serving/retired Central Government employees and their families.

In light of the above discussion it becomes clear that DGHS comes under the ambit ‘Enterprise’ as per section 2(h) of the Act. The Appellate Tribunal rightly set-aside the said order on 1st March 2016 and referred it back to the commission for further consideration. The exemption under ‘sovereign function’ is also remotely available to DGHS in the light of case laws discussed.