Nila Hospital (Pvt) Ltd vs State Of Kerala And Another
2022 Latest Caselaw 11161 Ker

            IN THE HIGH COURT OF KERALA AT ERNAKULAM
                               PRESENT
        THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
FRIDAY, THE 2ND DAY OF DECEMBER 2022 / 11TH AGRAHAYANA, 1944
                    WP(C) NO. 37630 OF 2010
PETITIONER/S:

    1       KERALA PRIVATE HOSPITALS ASSOCIATION
            REP BY ITS SECRETARY, HUSSAIN KOYA THANGAL,, AGED
            39, NIMS HOSPITAL, P.B.NO.17, WANDOOR, MALAPPURAM
            DISTRICT.
    2       DR.V.K.JAYAKUMAR AGED 64 YEARS
            S/O.KESAVAN VELAYUDHAN,
            SABARIGIRI HOSPITAL ,R.O.JUCTION,, ANCHAL P.O.,
            KOLLAM DISTRICT.
            BY ADVS.
            SRI.P.RAVINDRAN (SR.)
            SMT.A.LOWSY
            SRI.K.SHIBILI NAHA

RESPONDENT/S:
    1     THE STATE OF KERALA, REPRESENTED BY THE
          CHIEF SECRETARY, SECRETARIAT,THIRUVANANTHAPURAM.
    2     THE DRUGS CONTROLLER OF KERALA
          THIRUVANANTHAPURAM 695 001.
    3     THE DRUGS INSPECTOR (IB)
          OFFICE OF THE ASSISTANT DRUGS CONTROLLER OF
          KOLLAM
OTHER PRESENT:

            SENIOR GOVERNMENT PLEADER SRI. B. UNNIKRISHNA
            KAIMAL


     THIS    WRIT   PETITION    (CIVIL)   HAVING   COME   UP   FOR
ADMISSION ON 11-10-2022, ALONG WITH WP(C).14320/2011, THE
COURT 2-12-2022 DELIVERED THE FOLLOWING:
                                    -2-
W.P.(C. Nos. 14320 of 2011
c/w. 37630/2010



             IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                 PRESENT
         THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
FRIDAY, THE 2ND DAY OF DECEMBER 2022 / 11TH AGRAHAYANA, 1944
                      WP(C) NO. 14320 OF 2011
PETITIONER/S:

             NILA HOSPITAL (PVT) LTD.
             PATTAMBI, PALAKKAD DISTRICT, REPRESENTED BY ITS,
             CHAIRMAN, SRI.P.ALI, S/O.ALIKUTTY (LATE),, AGED
             55 YEARS, PALATHINGAL HOUSE, PATTAMBI,, PALAKKAD
             DISTRICT.
             BY ADV SRI.K.SHIBILI NAHA

RESPONDENT/S:

     1       STATE OF KERALA AND ANOTHER
             REP.BY THE CHIEF SECRETARY, SECRETARIAT,,
             THIRUVANANTHAPURAM-695 001.
     2       THE DRUGS INSPECTOR
             OFFICE OF THE DRUGS INSPECTOR,, PALAKKAD-678 001.

             SENIOR   GOVERNMENT PLEADER SRI. B. UNNIKRISHNA
             KAIMAL


      THIS    WRIT    PETITION    (CIVIL)   HAVING   COME   UP   FOR
ADMISSION ON 11-10-2022, ALONG WITH WP(C).37630/2010, THE
COURT 2-12-2022 DELIVERED THE FOLLOWING:
                                                 -3-
W.P.(C. Nos. 14320 of 2011
c/w. 37630/2010




                         MOHAMMED NIAS C.P., JJ
                ..................................................................

                         W.P. (C ) Nos. 37630 of 2010
                                    & 14320 of 2011
               .....................................................................

                 Dated this the 2nd day of December, 2022


                                    JUDGMENT

Mohammed Nias.C.P., J.

The above Writ Petitions are filed challenging Ext. P3

communication, issued by the Drugs Controller, Thiruvananthapuram,

extending the exemption from taking out the drug license under the

provisions of the Drugs and Cosmetics Act, 1940 (for short "the Act and

the Rules"),to Clinics/Hospitals owned and maintained by single

registered medical practitioners or hospitals owned and maintained by

husband and wife as single entity.

2. Ext. P4 is a consequential demand from the Local Drug

Inspector directing the second petitioner herein to take out the

requisite license. In W.P.C. No. 14320 of 2011, the petitioners

challenges the direction issued to them to take out license. W.P.C.

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

No. 37630 of 2010 is treated as the leading case.

3 The learned counsel for the petitioner Sri. Shibili Naha

argues that limiting the exemption to the Clinics/Hospitals owned and

maintained by the single registered medical practitioners or hospitals

owned and maintained by husband and wife as a single entity is not a

valid classification at all, as no nexus to the object sought to be

achieved. He argues that the hospital run by two medical

practitioners who are brothers or any other close relationships are

not granted exemption. He argues that there is no nexus in restricting

the hospitals run by a couple alone and the said classification being

wholly irrational is liable to be interfered. It is further argued by the

learned counsel that Ext. P3 is in violation of the Section 18 and

Rules 61 and 62 of the Act. He also questions the exemption granted

to the hospitals run by Government or local authority and argues that

the service rendered in the Government Hospitals as well as the

private hospitals being the same, there is no justification for any

differential treatment. It is thus, the submission of the learned

counsel for the petitioner that the exemption must be enlarged to all

the hospitals in the State and the benefit under Rule 5A cannot be

confined to the group mentioned in Ext. P3.

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

4. Learned Counsel for the petitioner further argues that there

is no sale when the practitioners dispense or sell medicines in a

hospital and relies on the judgment of the Full Bench in Sanjose

Parish Hospital (M/s.) and Others v. Commercial Tax Officer and Others

[ 2019 (1) KHC 377] for the said proposition . As a sequel, he argues

that there being no sale, there is no requirement to take out a license

under the provisions of the Act. He also relies on the definition of

retail sale and wholesale sale set out in Rule 2 (f) and 2 (g) of the

Rules.

5. The learned counsel also argues that Rule 123 confers the

power of exemption and that exercise of power has not been used

properly while issuing Ext. P3. He refers to Schedule 'K', particularly

table No. 5 and argues that the drugs supplied by registered medical

practitioner to his own patients or any drug specified in Schedule 'C'

supplied by registered by a medical practitioner at the request of

another such practitioner are exempted and that as Table 5-A, the

drugs supplied by a hospital or dispensary maintained or supported by

Government or local body subjected to the conditions enumerated

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

there under are exempted. According to the learned counsel, there is

no justification at all for not extending the same benefit to the private

hospitals. For these reasons he seeks to quash Ext. P3 and P4 in W.P.C.

37630 of 2010 and Ext. P1 in W.P.C. 14320 of 2011. Petitioner also

seek a declaration that they are not legally bound to take out license

under Chapter IV of the Drugs and Cosmetics Act, 1945.

6. The learned Government Pleader Sri. Unnikrishna Kaimal

on the other hand submitted that the matter is covered by the

judgment in Qualified Private Medical Practitioners' Association and

Others v. State of Kerala and Others [2010 (2) KLT 375] where the

challenge mounted by private hospitals was repelled and it was found

that they are obliged to take out license under the Act. Thus, it was

specifically found that the Government Hospitals and Private Hospitals

belong to different class and they cannot be equated as a class and

such classification was found to be based on an intelligible differentia.

The learned Government Pleader also argues that the judgment relied

on by the petitioners in Sanjose Parish (supra) was considering the

meaning of the sale under the Kerala Value Added Tax Act "for short

"KVAT Act" as well as in the context of Article 366 (29A) and has

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

nothing to do with the issue in hand.

7. Heard both sides and perused the pleadings and the

record.

8. The question as to the exemption granted to Government

Hospitals owned and controlled by the Government and the Local

Bodies qua the private hospsitals, is no more res integra. The issue

stands squarely covered by the judgment reported in Qualified Private

Medical Practitioners' Association (supra). The Special Leave Petition

filed against the said judgment also stands dismissed and the review

filed before this Court was dismissed with costs.

9. The only contention that remains to be considered is whether

exempting Clinics/hospitals owned and maintained by the doctor

couples as a single medical practitioners or hospitals owned and

maintained by single entity is a valid classification as it does not

include all the hospitals. It is pertinent to note that under Section 18 (c

) of the Act, license is mandatory for manufacture, sale or for

distribution, or sell, or stocking or exhibiting or offer for sale, or

distributing any drug or cosmetics. Rule 61 Part VI of the Rules deals

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

with the forms of licenses to sell drugs. The licenses in Form 20 and

20-A is prescribed for retail sellers of drugs other than those specified

in Schedules C, C (1) and X. Form 20 (B) is the form of license

prescribed for sale of drugs by wholesale other than those specified in

Schedules C, C(1) and X. Rule 123 provides for exemption under

Chapter IV of the Act viz., the group exempted from taking out license

under Section 18 of the Drugs and Cosmetics Act, 1940. The exempted

groups under Rule 123 are enumerated in Schedule K. Table 5 of

Schedule K exempts drugs supplied by "a registered medical

practitioner to his own patient" while 5-A exempts drugs supplied by

"a hospital or dispensary maintained or supported by the government

or local body". The contention that the said exemption is not extended

to the private hospital is bad was specifically repelled in the judgment

mentioned above [Qualified Private Medical Practitioners' Association

(supra)] judgment and accordingly the contentions of the petitioner in

that regard is rejected.

10. It is to be noticed that a single medical practitioner cannot

be identified with a group of medical practitioners nor can it be

identified as a hospital. The argument of the learned counsel that a

registered medical practitioner would take within its purview a hospital

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

with a group of medical practitioners cannot be countenanced at all.

Eventhough Section 13 of the General Clauses Act states that a

singular word would include the plural and vice versa applies only if

there was nothing repugnant in the subject or context. In as much as

Clause 5 specifically mentions 'a' registered medical practitioner, the

same word would not, therefore, include the plural in so far as the word

'a' qualifies the word medical practitioner. The alphabet 'a' is used in

the place of one to denote a singular term. It was after the judgment

in [Qualified Private Medical Practitioners' Association (supra) that

discussions were held and a decision arrived on consensus whereby

the benefit of exemption was enlarged to the hospitals owned and

maintained by Single registered medical practitioner and also when it

was carried on by the medical practitioners' couples as a single entity.

Those hospitals, dispensaries, nursing homes and clinics, which cater

to a large number of patients and which are being conducted with the

involvement of a number of medical practitioners or doctors cannot be

identified with a single medical practitioner. The doctrine of equality

before law is a necessary corollary to the concept of rule of law

accepted by Constitution. It is well settled that if a person complains

of unequal treatment, the burden lies on that person to place before

the court sufficient materials which leads to an influence of unequal

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

treatment. In the absence of the same, the plea of provisions being

violative of Article 14, cannot be entertained. It is pertinent to note

that there are making provisions which accord special treatment to a

husband and wife. Provisions like Sections 120 and 122 of the Indian

Evidence Act are typical examples. The basis of the said grouping

can only be because both husband and wife are conceived, in such

circumstances as a single legal entity on the basis of the sociological

conceptualization of the institution of marriage. The inviolability

and sanctimony of the domestic life was treated as important aspect of

human existence. For this reason also giving a special treatment

cannot be faulted. The contention of the learned counsel for the

petitioners, for the above reasons, has necessarily to fail.

11. In the decision in Ram Krishna Dalmia v. Justice S.R.

Tendolkar - [1959 SCR 279], the Court enumerated the principles thus:

" ... The principle enunciated above has been consistently adopted and applied in subsequent cases. The decisions of this Court further establish -- (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

him who attacks it to show that there has been a clear transgression of the constitutional principles; W.A.Nos.131 & 202 of 2022 :: 11 :: (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest;

(e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and (f) that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and un-known reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. (at page 297, 298)"

12. In Union of India and Others v. N.S. Rathnam and Sons

- [(2015) 10 SCC 681], it was observed as follows at paragraphs 13 and 14 of the said judgment:

"13. It is, thus, beyond any pale of doubt that the justiciability of particular Notification can be tested on the touchstone of Article 14 of the Constitution. Article 14, which is treated as basic feature of the Constitution, ensures equality before the law or equal protection of

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

laws. Equal protection means the right to equal treatment in similar circumstances, both in the privileges conferred and in the liabilities imposed. Therefore, if the two persons or two sets of persons are similarly situated/placed, they have to be treated equally. At the same time, the principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position. It would mean that the State has the power to classify persons for legitimate purposes. The legislature is competent to exercise its discretion and make classification. Thus, every classification is in some degree likely to produce some inequality W.A.Nos.131 & 202 of 2022 :: 18 :: but mere production of inequality is not enough. Article 14 would be treated as violated only when equal protection is denied even when the two persons belong to same class/category. Therefore, the person challenging the act of the State as violative of Article 14 has to show that there is no reasonable basis for the differentiation between the two classes created by the State. Article 14 prohibits class legislation and not reasonable classification. 14. What follows from the above is that in order to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that, that differential must have a rational relation to the object sought to be achieved by the statute in question. If the Government fails to support its action of classification on the touchstone of the principle whether the classification is reasonable having an intelligible differentia and a rational basis germane to the purpose, the classification has to be held as arbitrary and discriminatory...................................................................."

13. Regarding the contention on the basis of the Full Bench

decision in Sanjose Parish Hospital (M/s.) and Others (supra) the said

contention has also to fail. The Full Bench in the above case was

considering the scope of definition of 'sale' appearing in Article 366

(29A) of the Constitution and also that of Kerala Value Added Tax Act,

2003. The fine point that fell for consideration in Sanjose Parish

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

Hospital (M/s.) and Others (supra) was whether the administration of

drugs on patients as part of treatment would amount to sale.

Considering the constitutionality of the levy under the KVAT Act in

the backdrop of Entry 54 of the Constitution, it was held that

dispensing of medicines in the hospitals cannot be taken as a sale.

The said principles of law can have no relevance at all in the context

of the Drugs and Cosmetics Act, 1940 and Rules made thereunder.

Apart from that, it has to be noted that the KVAT Act, 2003 is a taxing

statute while the Drugs and Cosmetics Act, 1940 and Rules has to fall

under the category of regulatory legislation made under Entry 19 of

List III. It cannot be treated as a statute in pari materia. The definition

under both the enactments do not denote the same meaning or

context. As observed by Justice G.P. Singh in his text o Interpretation

of Statutes:

"It is hazardous to interpret a statute in accordance with a definition in another statute and more so when such statute is not dealing with any cognate subject or the statutes are not in pari materia".

14. The Hon'ble Supreme Court has also held on multiple

occasions that the definition of a term in one statute does not accord

to the construction of the same term in another statute. It is also

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

been held that importing of a definition in a statute in the regulatory

regime into a fiscal statute would not be warranted in view of the fact

that the exemptions or concessions granted in a fiscal statute are to be

strictly construed. (See the decision in Maheswari Fish Seed Farm v.

T.N. Electricity Board [(2004) 4 SCC 705, CIT v. Benoy Kumar (AIR 1957

SC 768) ; Himalaya Drug Company v. State of Kerala [2020 (3) KLT 799).

15. In the light of the principles of law discussed above, the

contention of the petitioner has to necessary fail. No grounds are

made out to invalidate the action in the orders impugned in the Writ

Petition.

Accordingly, these Writ Petitions are dismissed.

Sd/-MOHAMMED NIAS C.P., JUDGE

ani.

/true copy/

W.P.(C. Nos. 14320 of 2011 c/w. 37630/2010

APPENDIX

EXHIBITS IN W.P.C. NO. 37630 OF 2010

EXT.P1: TRUE COPY OF THE FORMAT OF FORM 20B EXT.P2: TRUE COPY OF THE JUDGMENT IN W.P.C. NO. 38494/03 DATED 25-3-2010 EXT. P3: TRUE COPY OF THE CIRCULAR DATED 14-08-2020 EXT.P4: TRUE COPY OF THE COMMUNICATION DATED 9-9-2020

EXT. R1 A:TRUE COPY OF THE ORDER DISMISSING THE SPECIAL LEAVE PETITIONS

EXT. R1B: A TRUE COPY OF THE ORDER ISSUED IN THE REVIEW PETITION

EXT. R1 C: TRUE COPY OF THE LICENSE ISSUED TO THE FIRST PETITIONER

EXT. R1D: TRUE COPY OF THE LICENSE ISSUED TO THE SECOND PETITIONER

EXHIBITS IN W.P.C. NO. 14320 OF 2011

EXT. P1: TRUE COPY OF THE NOTICE ISSUED BY THE 2ND RESPONDENT ON 29-4-2011

EXT. P2: TRUE COPY OF THE FORMAT OF FORM 20 B

EXT. P3: TRUE COPY OF THE JUDGMENT IN W.P.C. NO. 38494/03 DATED 25-3-2020

EXT. R1 A:TRUE COPY OF THE ORDER DISMISSING THE SPECIAL LEAVE PETITIONS

EXT. R1B: A TRUE COPY OF THE ORDER ISSUED IN THE REVIEW PETITION

EXT. R1 C: TRUE COPY OF THE LICENSE ISSUED TO THE FIRST PETITIONER

EXT. R1D: TRUE COPY OF THE LICENSE ISSUED TO THE SECOND PETITIONER