Hospitals cannot treat doctors like workmen in a factory: Madras High Court

Madras High Court rules hospitals can't impose non-compete clauses on doctors, emphasizing their professional independence and service-oriented role.

In a significant verdict, the Madras High Court has held private hospitals cannot treat doctors like workmen in a factory and include non-compete and non-solicit clauses in the agreements reached with them. It has also said rivalry between hospitals is a misnomer since they are expected to be service-oriented and not business-oriented institutions.

Justice N. Anand Venkatesh passed the judgement while dismissing a petition filed by MIOT Hospitals Private Limited for appointing an arbitrator to resolve a dispute between it and cardiothoracic surgeon Balaraman Palaniappan. The judge also imposed costs of ₹1 lakh on the petitioner hospital and directed the hospital to the pay the money to the surgeon.

The judge found the petitioner-hospital and the surgeon had entered into a professional agreement on September 8, 2022 for a period of three years. Clause 8.3 of the agreement stated the surgeon shall not join any rival hospital or set up practice, in the vicinity of 15 km from the petitioner-hospital, for a further period of three years after the termination of the contract.

Since the surgeon had terminated the contract midway in 2025 and joined Apollo Hospitals, the petitioner hospital demanded liquidated damages of ₹42 lakh, which was the sum equivalent to his three months’ professional fees, along with interest and approached the court for appointment of an arbitrator under the Arbitration and Conciliation Act, 1996.

Shocked by the act of the hospital, Justice Venkatesh wrote: “It must be kept in mind that the respondent, who is a doctor by profession, cannot be construed as an employee of the petitioner hospital since, by the very nature of service provided by a doctor, at the best, a hospital can only utilize the services and cannot treat a qualified doctor like a regular employee of an organisation.”

On clause 8 of the agreement, he said: “It is quite unfortunate that a hospital has incorporated such a clause in an agreement entered into with a doctor. Either the above clause is as a result of cut, copy and paste syndrome from an agreement, which is regularly entered into between technology companies with their employees or the petitioner hospital has forgotten the fact that they are running a hospital to serve the patients and that they are indirectly admitting that the organisation is nothing short of a profit making entity.”