CHENNAI: The Madras High Court sharply criticised restrictive clauses in doctors’ contracts that bar them from competing with their former employer or soliciting patients and staff after leaving service, labelling such terms “unlawful on the face of it.”
Hearing a petition by MIOT Hospitals against Chennai-based cardiothoracic surgeon Dr Balaram Palaniappan, Justice N Anand Venkatesh questioned whether private healthcare institutions were behaving more like commercial businesses than medical facilities. The hospital had approached the court seeking the appointment of an arbitrator under the Arbitration and Conciliation Act to resolve a dispute over contractual obligations after the doctor’s exit.
Non-compete and non-solicitation clauses are contractual restrictions that typically stop a doctor from joining a rival hospital, starting a similar practice within a specified time or area, or approaching a former employer’s patients and staff after resignation. The court, however, expressed strong reservations about enforcing these provisions in the medical context.
Justice Venkatesh remarked that such covenants seem “unlawful on the face of it” and declared an intention to prevent hospitals from continuing to incorporate these terms in future contracts. He challenged the commercial mindset behind them: “Are you running a business? Are you running a hospital? Is this some commercial establishment?”
The judge also criticised certain practices within private healthcare, including what he described as excessive testing, commenting that patients with simple ailments often undergo unnecessary diagnostic procedures. He contrasted private facilities with government hospitals, saying people sometimes trust public institutions more. Emphasising patient choice, he observed that ultimately “the client can go to the person whom he trusts.”
The underlying dispute arose from a professional agreement signed in September 2022, under which the hospital claimed contractual dues relating to the doctor’s notice period — about 42 lakh based on his Rs 7 lakh monthly salary — because he allegedly joined another hospital without completing the notice period.
This ruling aligns with broader legal principles in India, where courts have often treated post-employment non-compete covenants as restraints on trade and therefore prima facie unenforceable under Section 27 of the Indian Contracts Act, 1872, except in narrow circumstances protecting confidential information or legitimate business interests.
