Karnataka HC refuses to entertain writ petition against Bharat Biotech vis-à-vis a private contract with United Brothers Healthcare Services for supply of Covaxin doses

Karnataka High Court


Karnataka High Court: While deciding over a writ petition under Art. 226 revolving around a private contract between Bharat Biotech and United Brothers Healthcare Services Pvt. Ltd., the Bench of M. Nagaprasanna, J., deliberated over its maintainability and has held that the writ petition is neither maintainable nor entertainable as the High Court would not issue a writ to interfere with a private contract between the two private entities. “Writ petition for recovery of money by a private entity from a private entity, arising out from a private contract, cannot be entertained

Facts of the Case: The petitioner-hospital is a state-of-the-art super-speciality hospital having in-depth expertise in advance medical and surgical interventions and engaging in procurement, storage and administering Covid-19 vaccines.

Bharat Biotech entered into a supply agreement with the petitioner-hospital for 25,000 (2500 vials) doses of Covaxin and the entire invoice of Rs. 2,62,50,000 was agreed to be paid in advance. Pursuant to this agreement, the petitioner-hospital also undertook advertisements worth Rs. 30 lakhs for the distribution of Covaxin.

However, from 17-09-2021, the petitioner-hospital started communicating to Bharat Biotech regarding its helplessness to create a positive outlook towards Covaxin to general public owing to the negative publicity that had surrounded already surrounded the covid-19 vaccine and Bharat Biotech’s inability to obtain necessary approvals from World Health Organisation (WHO).

Thus, the petitioner-hospital requested Bharat Biotech to take back the remaining Covaxin doses and either compensate the petitioner-hospital for the same or replace the remaining doses with new ones having a longer shelf life or to facilitate transfer of the remaining doses to hospitals where Covaxin was in demand.

Bharat Biotech reverted that since the remaining 15000 doses are due to expire in November 2021, the petitioner- hospital itself can undertake the task of transferring the doses to places where demand for Covaxin exists.

The petitioner-hospital claimed that Bharat Biotech back-tracked from its earlier offer and refused to process any refund as per the terms of their supply agreement. The petitioner-hospital thus sent a legal notice to Bharat Biotech seeking refund of Rs. 1,69,15,500 which was denied, hence, the present lis.

Contentions: Regarding the maintainability of the petition, it was contended by the petitioner-hospital that the flair of contract between the parties is in the realm of public function as Covaxin was to be distributed to the public and the Government had capped its price to a certain amount. Therefore, the element of public function is writ large in the instant case.

The counsels for Bharat Biotech contended that the petition would not be maintainable under Art. 226 as the contact between the parties is private in nature, which also envisages Arbitration as alternate mode of dispute resolution. It was submitted that the petitioner-hospital should have filed a civil suit for recovery.

The counsels for CCI and Indian Council of Medical Research contended that they have been unnecessarily dragged into the instant dispute.

Court’s Assessment: Upon perusal of the facts and arguments presented, the Court culled out the issue in the present case to be that of maintainability.

Carefully examining the contract between the parties, the Court noted that it is ‘purely a private contract’. The conditions and obligations of the manufacturer and purchaser are the one that have been mutually agreed upon by the parties. It was further noted that there is no element or any wing of the State, which has stepped into the contract. The contract also includes provision for Arbitration.

Regarding the events leading up to this petition, the Court perused the exchange of invoices and afore-stated communications and stated that all these were transactions between the parties itself with no State as defined under Art. 12 of the Constitution, being privy to it. It was held that the contract may have been for the supply and administering of vaccines to the general public, but the same cannot transform a private contract into a statutory contract.

The Court noted that through its contentions, the petitioner-hospital has tried to dress up a private interest in the garb of public interest. Merely because Covaxin is being taken by public, it will not make a private contract enforceable or justiciable in the Courts of law, which are pre-dominantly meant for public law remedy. The Court held the petitioner-hospital’s submissions on maintainability to be fundamentally flawed.

Discussing the cases referred by the petitioner-hospital and pointing out the petitioner-hospital’s ‘herculean effort’ to prove a public nature of a private contract, the Court held that remedy under Art. 226 is not available against private wrongs. “I fail to understand what is the public duty that sought to be projected in the case at hand”. It was stated that the petitioner-hospital is not a discharging any public duty and neither they can be construed as ‘Other Authorities’ under Art. 12, so as to seek public law remedy from the High Court. Therefore, the Court held the instant petition to be unmaintainable.

[United Brothers Healthcare Services Pvt. Ltd., v. Ministry of Health and Family Welfare, 2022 SCC OnLine Kar 1600, decided on 06-12-2022] ]

Advocates who appeared in this case :

Petitioners- B.K. Sampath Kumar, Sr. Advocate a/w Thammaiah H.N., Advocate;

Respondents- Jagannath V.C for R1; Madhukar Deshpande for R2; Harish B.N, Sr. Advocate and Nayantara B.G for R3; Agnesh Aditya and Akash V.T for R4.

*Sucheta Sarkar, Editorial Assistant has prepared this brief.

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