Hospitals directed to add “charitable” to their name

In our Blog post of 9^th July 2018 we had written about the Maharashtra State Charity Commissioner Shiv kumar Dige issuing an order directing around 400 NGOs and trusts registered in the state to remove the words “corruption” and “human rights” from their names or risk suspension. 

Within less than a month he has now issued a new order on 19^th July 2018, directing all government-aided private hospitals in Maharashtra run by public charitable trusts to add "charitable" to their names so that poor patients easily know they can avail free or concessional treatment under the reserved quota.

Facts & figures

Reportedly, there are more than four hundred such hospitals in Maharashtra; including over seventy in the city of Mumbai. We are informed that Lilavati hospital, Jaslok hospital, Nanavati hospital and Breach Candy are also among the hospitals affected by this new order.

In September 2017 Mr. Dige, pretending to be a poor patient, had visited Nanavati Hospital and was denied admission. Subsequently, he ordered a criminal case against the trustees of this hospital.

Between September 2006 and December 2017, 709,5000 patients were treated in private charitable hospitals; of these, 456,000 were treated in Mumbai.

Reservation of hospital beds

As per section 44A of the Maharashtra Public Trust Act, private charitable hospitals are mandated to reserve 10 per cent of their beds for poor patients and 10 per cent for economically weaker sections of the society. While those with income below Rs. 85,000 per annum are given free treatment at these hospitals, those with income of Rs. 1.6 lakh per annum are charged at concessional rates. Reportedly, under this provision the state of Maharashtra has 5,000 beds for poor patients and 5,000 for the weaker sections of society.

Everyone, including the State’s law and judiciary department is also aware that while reservation of these beds for the poor and needy is good, the advantage is often taken by persons who are far from poor and only because they are referred to the hospitals by politicians or political parties.

The rationale

The state charity commissioner is of the view that since the word charitable does not appear in the names of these hospitals, poor patients are often clueless whether these are charitable hospitals or not. But if "charitable" or "dharmaday" is added to the name of these hospitals, there would be no doubt in the minds of the patients wanting to get admission in these hospitals.

It is also argued that charitable hospitals get several benefits, including discounted land on long lease and subsidies in utility bills, waivers and exemptions from income tax etc., but most of them hardly pass these benefits to the needy patients.

Judicial activism

In our opinion, orders like this smack of judicial activism which means that instead of judicial restraint quasi-judicial authorities like the charity commissioner are becoming activists and are compelling or attempting to control organisations which they are only supposed to regulate within the frame-work of the law.

While the bard of Avon, William Shakespeare would have quipped that a rose by any other name would smell as sweet the charity commissioner does not seem to have taken into consideration the fact that official change in name would mean obtaining a new Permanent Account Number (PAN), changing the name in all bank accounts and with all other regulatory bodies.

Understandably, representatives of about twenty hospitals recently met Mr. Dighe and the Minister of State for Home Ranjit Patil asking them to review the directive since there are several legal hassles in officially changing the name of any institution. In our opinion, perhaps the term charitable could be added in parenthesis.

Scope of the word charity or charitable

In its widest sense, the word ‘charity’ denotes “all the good affections that men ought to bear towards each other”. 

While both the Maharashtra Public Trusts Act and the Income tax Act refer to “charitable purpose” (which includes “medical relief”), the term “charitable” is nowhere defined or explained.

It is a clearly established principle of the law of charity that a trust is not charitable unless it is directed to public benefit (unreported decision of the Bombay High Court in Appeal No.5 of 1975). Negatively, a trust is not a charitable trust if it confers only private benefits. In the case of trusts for educational purposes, the conditions of public benefit must be satisfied. A trust by a father for the education of his son is not a charity. The public element is not supplied by the fact that from that son’s education, all may benefit. But the establishment of a college or university is, beyond doubt, a charity.

Whether any particular object of a bounty falls within the definition of charity must, to a large extent, depend upon the standard of customary law and common opinion amongst the community to which the parties interested belong (Trustees of Tribunal Press vs. Commissioner of Income Tax, 66 IA. 241-A.I.R. 1939 P.C. 280-182 I.C. 882-41 BOM.L.R. 1150).

Eleemosynary element not essential

It is also interesting to note that in the matter of the trustees of ‘The Tribune’ [(1939) 7 ITR 415, 423)], it was held, “It is not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price.” In other words, an eleemosynary element is not essential. A trust may provide educational assistance to a student by way of a loan and not an outright non-refundable grant or gift. In law, if the purpose of the trust is charitable, it does not matter whether it is fulfilled by extending a “gift” or a “loan”.

It may also be pointed out that it is not necessary that a “charity” should benefit “only the poor” (unless clearly specified in the trust deed) to the exclusion of those who are “not so poor”. The House of Lords held in Commissioners for Special Purposes of Income Tax vs. Pemse [3 T.C. (53), 96, (1981) AC 531, 583 (H.C.)] that poverty is not a necessary element in a charitable trust.

Noshir H. Dadrawala