The relationship between a hospital and a medical practitioner is ordinarily governed by a Hospital–Doctor Service Agreement, which outlines the rights, duties, remuneration, tenure, and termination provisions applicable to both parties.1 While such agreements are contractual in nature, disputes frequently arise where either the hospital or the doctor seeks to terminate the agreement before the expiry of its term or without complying with the agreed notice period.2

The principal legal issue is whether a hospital may lawfully terminate a doctor’s service agreement without notice and, if such termination is wrongful, what legal remedies are available to the aggrieved party. Since these agreements are generally regarded as contracts for personal service, Indian courts have consistently distinguished them from ordinary commercial contracts by limiting the availability of specific performance and emphasising monetary compensation as the primary remedy.3

This memorandum examines the relevant statutory provisions, contractual principles, and judicial precedents of the Supreme Court and High Courts and the practical implications for hospitals and medical practitioners.

RELEVANT STATUTORY FRAMEWORK

A. Indian Contract Act, 1872

The Hospital–Doctor Service Agreement is governed primarily by the Indian Contract Act, 1872.

1. Section 10 – What Agreements are Contracts

Section 10 provides that agreements become enforceable contracts where there is:

1. free consent;
2. lawful consideration;
3. competent parties; and
4. a lawful object.

Accordingly, a hospital–doctor service agreement becomes legally enforceable once these essential elements are satisfied.

• 1 The Indian Contract Act 1872, s 10.
  2 The Indian Contract Act 1872, ss 37–39.
  3 Pearlite Liners (P) Ltd v Manorama Sirsi (2004) 3 SCC 172.
  4 The Indian Contract Act 1872, s 10.

2. Sections 37–39 – Performance of Contracts

These provisions require parties to perform their contractual obligations.
Failure to perform contractual duties, including compliance with termination provisions, may constitute breach of contract5

3. Sections 73–75 – Compensation for Breach

These provisions govern remedies for breach.

Section 73 permits compensation for losses naturally arising from a breach.

Section 74 allows reasonable compensation where the contract contains a liquidated damages or penalty clause.

Section 75 entitles a party who rightfully rescinds the contract to claim compensation.6

These provisions are frequently relied upon where a hospital terminates a doctor’s services without complying with contractual notice requirements.

4. Section 27 – Agreements in Restraint of Trade

Hospitals often include restrictive clauses preventing doctors from joining competing hospitals after termination. Section 27 generally renders post-employment restraints void unless they fall within recognised legal exceptions.7

• 5 The Indian Contract Act 1872, ss 37–39.
  6 The Indian Contract Act 1872, ss 73–75.
  7 The Indian Contract Act 1872, s 27; Niranjan Shankar Golikari v Century Spinning & Manufacturing Co Ltd AIR 1967 SC 1098.

B. Specific Relief Act, 1963

Section 14

Contracts involving personal qualifications or personal service are ordinarily incapable of specific performance. 8Accordingly, courts generally refuse to compel hospitals to reinstate doctors after wrongful termination.

Section 41

Courts generally decline injunctions compelling continuation of personal service contracts.9

Consequently, damages remain the principal remedy.

• 8 The Specific Relief Act 1963, s 14; Executive Committee of Vaish Degree College v Lakshmi Narain (1976) 2 SCC 58.
  9 The Specific Relief Act 1963, s 41.

ESSENTIAL INGREDIENTS OF A HOSPITAL–DOCTOR SERVICE AGREEMENT

Although each agreement differs, a valid hospital–doctor service agreement typically contains the following provisions:

1. Appointment and designation;
2. Scope of professional duties;
3. Duration of engagement;
4. Salary or professional fees;
5. Working hours and responsibilities;
6. Confidentiality obligations;
7. Compliance with medical ethics;
8. Termination clause;
9. Notice period;
10. Grounds for immediate termination;
11. Dispute resolution mechanism;
12. Governing law and jurisdiction.

Among these provisions, termination clauses are the most significant in determining whether termination without notice is lawful.10

• 10 Indian Oil Corporation Ltd v Amritsar Gas Service (1991) 1 SCC 533.

RIGHTS AND OBLIGATIONS OF THE PARTIES

A. Rights of the Hospital

A hospital is entitled to:

1. maintain professional standards;
2. monitor patient safety;
3. discipline doctors for misconduct;
4. terminate the agreement where contractually permitted;
5. protect confidential information.

Obligations of the Hospital

The hospital must:

1. pay remuneration;
2. provide agreed facilities;
3. comply with contractual termination procedures;
4. observe principles of fairness where applicable.

B. Rights of the Doctor

The doctor is entitled to:

1. receive agreed remuneration;
2. practise professionally without unreasonable interference;
3. receive contractual notice before termination;
4. claim compensation for wrongful termination.

Obligations of the Doctor

The doctor must:

1. exercise reasonable professional skill;
2. maintain registration with the Medical Council;
3. comply with hospital policies;
4. maintain confidentiality;
5. adhere to professional ethics.

WHETHER TERMINATION WITHOUT NOTICE IS PERMISSIBLE

General Rule

Termination without notice is permissible only where:

1. the contract expressly authorises immediate termination; or
2. The doctor commits a fundamental breach of the agreement.11

Examples include:

1. gross misconduct;
2. fraud;
3. criminal conduct;
4. suspension or cancellation of medical registration;
5. serious negligence affecting patient safety;
6. breach of confidentiality.

• 11 Indian Oil Corporation Ltd v Amritsar Gas Service (1991) 1 SCC 533.

Where none of these circumstances exists, the hospital must ordinarily comply with the contractual notice period. Failure to do so constitutes breach of contract.12

WRONGFUL TERMINATION

Wrongful termination may arise where:

1. the required notice period is ignored;
2. termination is contrary to the contractual procedure
3. no valid contractual ground exists;
4. termination is arbitrary or malicious.13

Since these agreements are contracts for personal service, the remedy is generally compensation rather than reinstatement.14

• 12 The Indian Contract Act 1872, ss 37–39, 73.
  13 The Indian Contract Act 1872, s 73.
  14 Pearlite Liners (P) Ltd v Manorama Sirsi (2004) 3 SCC 172; Executive Committee of Vaish Degree College v Lakshmi Narain (1976) 2 SCC 58.

JUDICIAL PRECEDENTS

1. Executive Committee of Vaish Degree College v. Lakshmi Narain (1976) 2 SCC 58¹⁵

Facts

The respondent, an employee of a private educational institution, challenged the termination of his employment and sought reinstatement.

Judgment

The Supreme Court held that a contract of personal service cannot ordinarily be specifically enforced. The Court recognized only three exceptions to this rule:

1. where the employee is a public servant protected under Article 311 of the Constitution;
2. where reinstatement is granted under industrial law; and
3. where a statutory body acts in breach of mandatory statutory provisions.

The Court concluded that a private employment contract falls outside these exceptions, and therefore the appropriate remedy for wrongful termination is damages rather than reinstatement.

Relevance

Hospital–Doctor Service Agreements are generally private contracts of personal service. Consequently, a wrongfully terminated doctor is ordinarily entitled to compensation rather than reinstatement.

• 15 Executive Committee of Vaish Degree College v Lakshmi Narain (1976) 2 SCC 58.

2. Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991) 1 SCC 533¹⁶

Facts

The respondent’s distributorship agreement with Indian Oil Corporation was terminated under a contractual clause allowing termination upon notice. An arbitrator directed restoration of the distributorship.

Judgment

The Supreme Court held that where a contract is inherently determinable, it cannot be specifically enforced under the Specific Relief Act. The Court set aside the order restoring the distributorship and limited the respondent’s remedy to compensation equivalent to the contractual notice period.

Relevance

Where a Hospital–Doctor Service Agreement contains a contractual termination clause, wrongful termination generally gives rise to a claim for damages or notice pay rather than reinstatement.

• 16 Indian Oil Corporation Ltd v Amritsar Gas Service (1991) 1 SCC 533.

3. Pearlite Liners (P) Ltd. v. Manorama Sirsi (2004) 3 SCC 172¹⁷

Facts

The respondent challenged her transfer by a private employer and sought a declaration that she continued in service together with an injunction restraining disciplinary proceedings.

Judgment

The Supreme Court reaffirmed that contracts of personal service are generally incapable of specific enforcement. It held that courts cannot compel a private employer to continue employing a person against its will, except in the recognized exceptions identified in Vaish Degree College. Since the employer was a private company and no statutory protection applied, the Court rejected the employee’s claim for reinstatement and held that the suit itself was not maintainable.

Relevance

The decision strongly supports the proposition that doctors engaged by private hospitals cannot ordinarily obtain reinstatement following wrongful termination.

• 17 Pearlite Liners (P) Ltd v Manorama Sirsi (2004) 3 SCC 172.

4. Niranjan Shankar Golikari v. Century Spinning & Manufacturing Co. Ltd. AIR 1967 SC 1098¹⁸

Facts

An employee agreed not to work for competitors during the contractual period of employment. He later challenged the restrictive covenant as being void under Section 27 of the Indian Contract Act.

Judgment

The Supreme Court held that negative covenants operating during the subsistence of an employment contract are generally valid and enforceable, provided they are reasonable and necessary to protect the employer’s legitimate interests. However, restraints extending beyond the termination of employment are generally void unless recognised by law.

Relevance

Hospital–Doctor Service Agreements frequently contain exclusivity or restrictive clauses. This decision assists in determining whether such clauses remain enforceable after termination.

• 18 Niranjan Shankar Golikari v Century Spinning & Manufacturing Co Ltd AIR 1967 SC 1098.

5. Gujarat Bottling Co. Ltd. v. Coca Cola Co. (1995) 5 SCC 545¹⁹

Facts

The dispute concerned the termination of a commercial agreement and the enforceability of a negative covenant preventing dealings with competitors during the agreement’s subsistence.

Judgment

The Supreme Court held that negative covenants operating during the life of a contract are generally enforceable, provided they are reasonable and do not amount to an unlawful restraint of trade. The Court further observed that parties are bound by the contractual terms governing termination and that courts should ordinarily give effect to those provisions.

Relevance

The principles governing contractual termination clauses and restrictive covenants are equally applicable when interpreting Hospital–Doctor Service Agreements.

• 19 Gujarat Bottling Co Ltd v Coca Cola Co (1995) 5 SCC 545.

6. Dr. Debajyothi Mandal v. Fortis Hospital Ltd. RFA No. 2877 of 2025 (Karnataka High Court, decided 30 January 2026)²⁰

Facts

The appellant, a consultant doctor, challenged the termination of his engagement by Fortis Hospital. The agreement permitted either party to terminate the arrangement by giving two months’ written notice or payment in lieu of notice.

Judgment

The Karnataka High Court held that the consultant agreement was a contract of personal service, making it unsuitable for specific performance under the Specific Relief Act. The Court ruled that reinstatement could not be ordered and that the parties’ rights were governed by the contractual termination clause. Accordingly, the doctor’s remedy, if any, lay in contractual damages rather than compulsory continuation of the engagement.

Relevance

This is one of the most directly relevant recent Indian authorities on hospital–doctor service agreements, confirming that termination disputes are primarily governed by contractual terms and monetary remedies rather than reinstatement.

• 20 Dr Debajyothi Mandal v Fortis Hospital Ltd RFA No 2877 of 2025 (Karnataka High Court, 30 January 2026).

REMEDIES FOR WRONGFUL TERMINATION

Where termination is unlawful, the doctor may claim:

1. Damages²¹
   Under Section 73 of the Indian Contract Act for financial losses naturally arising from breach.
2. Salary in place of Notice²²
   Where the hospital fails to provide the agreed notice period.
3. Outstanding Professional Fees
   Payment for services already rendered.
4. Contractual Compensation
   Where provided by the agreement.
5. Interest and Costs
   Courts may award interest and litigation costs where appropriate.

• 21 The Indian Contract Act 1872, s 73.
  22 Dr Debajyothi Mandal v Fortis Hospital Ltd RFA No 2877 of 2025 (Karnataka High Court, 30 January 2026).

PRACTICAL LEGAL ADVICE AND KEY TAKEAWAYS

For Hospitals

1. Draft comprehensive written agreements.
2. Clearly define grounds for summary termination.
3. Include notice and payment-in-lieu provisions.
4. Document misconduct before termination.
5. Follow contractual disciplinary procedures.
6. Avoid arbitrary or discriminatory termination.

For Doctors

1. Review termination provisions before signing.
2. Maintain documentary evidence of contractual compliance.
3. Preserve records of remuneration and correspondence.
4. Seek damages where termination breaches the agreement.
5. Challenge unreasonable post-employment restrictive covenants where appropriate.

CONCLUSION

A hospital–doctor service agreement may only be terminated without notice if the contract expressly permits immediate termination or the doctor commits a serious breach, such as misconduct or fraud. Otherwise, failure to comply with the agreed-upon notice period constitutes a breach of contract under the Indian Contract Act, 1872.

As these agreements are contracts of personal service, Indian courts generally do not order reinstatement. Instead, the primary remedies are monetary compensation, including damages, payment in lieu of notice, and recovery of outstanding professional fees. To avoid disputes, both hospitals and doctors should ensure that agreements include clear termination provisions, notice requirements, and dispute-resolution mechanisms and maintain proper documentation of their contractual obligations.

Bibliography (OSCOLA)

Legislation

1. The Constitution of India 1950.
2. The Indian Contract Act 1872.
3. The Specific Relief Act 1963.

Cases

1. Dr Debajyothi Mandal v Fortis Hospital Ltd RFA No 2877 of 2025 (Karnataka High Court, 30 January 2026).
2. Executive Committee of Vaish Degree College v Lakshmi Narain (1976) 2 SCC 58.
3. Gujarat Bottling Co Ltd v Coca Cola Co (1995) 5 SCC 545.
4. Indian Oil Corporation Ltd v Amritsar Gas Service (1991) 1 SCC 533.
5. Niranjan Shankar Golikari v Century Spinning & Manufacturing Co Ltd AIR 1967 SC 1098.
6. Pearlite Liners (P) Ltd v Manorama Sirsi (2004) 3 SCC 172.

Books

1. Avtar Singh, Law of Contract and Specific Relief (Eastern Book Company, latest edn).
2. Pollock and Mulla, The Indian Contract and Specific Relief Acts (LexisNexis Butterworths, latest edn).
3. Chitty, Chitty on Contracts (Sweet & Maxwell, 35th edn).