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rajatpradhan'sProfileanddetails

RajatPradhanStudent,IIyear,Dr.

RamManoharLohiyaNationalLawUniversity,Lucknow

FeeStructurevisavisPrivateUnaidedEducationalInstitutions

Source:http://www.Author:rajatpradhanPublishedon:April17,2010

TheLawOperatingInThisFieldThespecificquestionthat:HowfarisitpermissibleundertheConstitutionfortheStatetocontrolandregulateadmissionandfeeinprivateunaidededucationalinstitutions?hasbotheredtheSupremeCourtonaplethoraofoccasions.Theapexcourtinitswisdomhasansweredtheabovementionedquestionalthoughmeticulouslybuthasleftitopenended.TheprimaryandthecontemporaneousissuethatwhethertheconstitutionofIndiaguaranteesafundamentalrighttoeducationtoitscitizens,wasansweredinaffirmativebytheSupremecourtinthecaseofUnnikrishnan,J.P.v.StateofAndhraPradesh.[1]AnelevenjudgebenchoftheSupremeCourtforthefirsttime,interaliaaddressedtheissueoffeestructureindetailinthecaseofT.M.A.PaiFoundation&Ors.v.StateofKarnataka&Ors.[2](hereinafterreferredtoasthePaiFoundationcase).Abenchofelevenjudgeswasconstitutedsothatitwouldnotbeboundbyanyoftheirearlierdecisions.Thefactthatmeritsconsiderationisthattheapexcourtwasdividedinitsopinioninthiscase,whichgaverisetosubsequentquestions,arisingfromthedifferentinterpretationsbythedifferentHighcourts.

Theapexcourtwasvigilantenoughtotakeintocognisancetheambiguitieswhichhadarisenfromtheaforesaidjudgment,henceitconstitutedaconstitutionbenchcomprisingoffivejudgestoclarifythedoubtswhichhadariseninthePaifoundationcase.ThePaifoundationcasewaselaboratedandsimplifiedinthecaseofIslamicAcademyofEducationandAnr.v.StateofKarnatakaandOrs.[3]DespitethesincereeffortsmadebytheSupremeCourttoclarifythedoubtsandtoanswerthequestionswhichhadarosesubsequenttothePaiFoundationcase,theIslamicAcademycasehaditsownlacunaandfailedtoservethesaidpurpose.

Finally,in2007anotherbenchoftheSupremeCourtcomprisingofsevenjudgesinP.A.InamdarandOrs.v.StateofMaharashtraandOrs.[4]assembledtoclarifythePaiFoundationcaseandtoaddresstheissueswhichhadcroppeduppursuanttotheIslamicAcademycase.Theapexcourtforthefirsttimedeliveredaunanimousopinion.ThedecisionintheInamdarcaseilluminatedseveralvitalaspectswhichwereconducivetowardstheansweringofseveralquestionsposedafterthePaifoundationandtheIslamicAcademycases.

However,evenafterthedecisionintheInamdarcasetherearestillsomedoubtsorgreyareasinrelationtothequestionofextentofStatecontrolovertheprivateunaidedinstitutionsimpartingeducation.ThesameconclusioncanbederivedonperusalofPara153oftheInamdarjudgementwhichisbeingmentionedherein:

153.ThereareseveralquestionswhichhaveremainedunansweredandtherearecertainquestionswhichhavecroppeduppostPaiFoundationandIslamicAcademy.Totheextenttheareaisleftopen,theBencheshearingindividualcasesafterthisjudgmentwouldfindtheanswers.IssuesreferabletothoseareaswhicharealreadycoveredbyPaiFoundationandyetopento

CNLU592

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questionshallhavetobeansweredbyaBenchofalargercoramthanPaiFoundation.Weleavethoseissuestobetakencareofbyposterity.

ThesameviewhasbeenexpressedbytheSupremeCourtinsomeoftheveryrecentjudgments.Theapexcourtaftercarefullymarshallingitsthreeaforesaidjudgementswasofthefollowingopinion:

InModernDentalCollege&ResearchCentrev.StateofM.P[5]theapexcourtopined:.Thus,itisevidentthateveninInamdarcase,ithasbeenobservedthattherearestillsomedoubtsorgreyareasinrelationtothequestionofextentofStatecontrolovertheprivateunaidedinstitutionsimpartingprofessionaleducation.

TheSupremeCourtreiteratedtheabovenotionvisvisfeestructure,inActionCommittee,UnaidedPrivateSchoolsofDelhiv.DirectorofEducation[6]inthefollowingwords.

24.InthiscontextitmaybenotedthatinT.M.A.PaiFoundationCaseandinIslamicAcademyofEducationtheprinciplesforfixingfeestructurehavebeenillustrated.However,theywerenotexhaustive.Theydidnotdealwithdeterminationofsurplusandappropriationofsavings.

TheopenendedquestionpostInamdarcaseistowhatdegreetheStatecaninterferewithrespecttoprivateunaidedinstitutions.

TheMandateoftheConstitutionandtherealityInademocraticandwelfarecountrylikeIndia,thestatehastheprimaryresponsibilitytoimparteducationamongallagesofstudents.TheconstitutionhasthroughAr.21AspecificallymandatedthatitshallbethedutyoftheGovernmenttoimpartfreeandcompulsoryeducationamongstudentsofsixtofourteenyearsofage.EducationandmattersincidentaltoithavebeenincorporatedinEntry25[7]oftheConcurrentlistorListIII(mentionedinscheduleVII)oftheConstitutionofIndia.Butthesameissubjecttoentries63,64,65and66ofListI.TheintentionofthelegislaturebythesaidentriesisthateducationisbothaStateandUnionsubject,i.e.matterspertainingtoeducationaretobedealtbothbythestateandtheunion.Both,thecentreandthestategovernmentsarewithintheirlegislativecompetencetoenactlawspertainingtoeducation.But,itiswellsettledthatincaseofconflictbetweentheStateandUnionlaws,thelatterprevails.

Ar.41oftheConstitutionwhichisadirectiveprincipleofStatepolicy,interalia,contemplatesthattheStatewithinthelimitsofitseconomiccapacityanddevelopment,makeeffectiveprovisionforsecuringtherighttoeducation.ThearticledoesnotprescribeanyparticularagegroupofstudentsforwhichthisrightistobesecuredascontrastedfromAr.21AoftheConstitution.ThearticlebeingonlyadirectiveisunenforceableinacourtoflawasdifferentfromAr.21AwhichisenshrinedintheformofaFundamentalrightofchildren.ButthefactthatmeritsattentioninAr.41isthattherightcanonlybesecuredwithinthelimitsofeconomiccapacityoftheState.Astatehastocatertothemultipleneedsofitscitizens,whichnodoubtrequiresalargeamountofcapital,whichitindirectlyreceiveseitherfromtheUnionorfromthetaxesorrevenuescollectedbyit.ThestateduetofinancialconstraintsisoftenunabletosecureeffectivelyalltherightswhichhavebeenmandatedbytheConstitution.TherighttoeducationisnotanexceptiontothisnotionandithasclearlybeenexpressedbytheSupremeCourtinthefollowingjudgment.ThesamenotionhasbeenacknowledgedbytheapexcourtintheIslamiccase[8]asfollows:

ImpartingofeducationisaStatefunction.TheState,however,havingregardtoitsfinancialandotherconstraintsisnotalwaysinapositiontoperformitsduties.Thefunctionofimparting

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educationhasbeen,toalargeextent,takenoverbythecitizensthemselves.Somedoitaspurecharitysomedoitforprotectionoftheirminorityrightswhetherbasedonreligionorlanguageandsomedoitbywayoftheir"occupation".SomesuchinstitutionsareaidedbytheStateandsomeareunaided.

ThenecessityofPrivateUnaidedEducationalInstitutionsSpecificallyArticle38harmoniouslyreadwithArticles41,45and46oftheConstitutionproclaimsabouteducationofthepeople,naturallysubjecttoavailabilityofthefunds,isthedutyoftheStates.Butifstateisnotinapositionofprovideequalopportunitiesoftheeducationtoallsectionsofthehumanbeingitmayliberatetheopportunitiesthroughprivateeducationalinstitutions.Thewords"withintheeconomiccapacity"inArticle41empowersthestatestopermittheprivateeducationalinstitutionstobeestablishedandadministeredonitsown.Andforthistheyshouldhavetheirfundswhichwillnaturallyandreasonablybeincurredfromthestudentsintheformoffeescollectedfromthembytheinstitutions.[9]

Hence,theneedofprivateinstitutionscropsup.PrivateunaidedinstitutionsarethebulwarkofRighttoeducationandtherealityisthatinthepresentscenariotheyareanecessity.Thesameprinciplehasbeenacknowledgedbytheapexcourt:

InUnniKrishnans[10]case,ithasbeenobservedbyJeevanReddy,J.,atpage749,para194,asfollows:"Thehardrealitythatemergesisthatprivateeducationalinstitutionsareanecessityinthepresentdaycontext.ItisnotpossibletodowithoutthembecausetheGovernmentsareinnopositiontomeetthedemandparticularlyinthesectorofmedicalandtechnicaleducationwhichcallforsubstantialoutlays.WhileeducationisoneofthemostimportantfunctionsoftheIndianStateithasnomonopolytherein.Privateeducationalinstitutionsincludingminorityeducationalinstitutionstoohavearoletoplay."

JusticeKirpal,C.J(asthelordshipwasatthattime)inthePaiFoundationcaserecognisedtheimportanceofprivateunaidededucationalinstitutionsbycitingdismalfiguresthatwhilethenumberofGovernmentcollegesincertainstateshadremainedstagnant,privateinstitutionshadconstantlymushroomed:

39.Thatprivateeducationalinstitutionareanecessitybecomesevidentfromthefactthatthenumberofgovernmentmaintainedprofessionalcollegeshasmoreorlessremainedstationary,whilemoreprivateinstitutionshavebeenestablished.Forexample,intheStateofKarnatakathereare19medicalcollegesoutofwhichthereareonly4governmentmaintainedmedicalcolleges.Similarly,outof14DentalCollegesinKarnataka,onlyonehasbeenestablishedbythegovernment,whileinthesameState,outof51EngineeringColleges,only12havebeenestablishedbythegovernment.Theaforesaidfiguresclearlyindicatetheimportantroleplayedbyprivateunaidededucationalinstitutions,bothminorityandnonminority,whichcatertotheneedsofstudentsseekingprofessionaleducation.[11]Educationasabusiness:lucrativeandrecessionproof

Educationnodoubtisbigbusinesswhichinthecontemporaryscenarioisregardedaslucrativeandrecessionproof.ThenotionthateducationhasbeenabusinessfromtimesimmemorialhasbeenacknowledgedbytheapexcourtinthecaseofModernSchoolv.unionofIndia[12]inthefollowingwords:(Paras3,4and5ofthejudgement)

3.Inmoderntimes,allovertheworld,educationisbigbusiness.On18thJune,1996,Professor

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G.RobertsChairmanoftheCommitteeofViceChancellorsandPrincipalscommented:"Theannualturnoverofthehighereducationsectorhasnowpassedthe$10billionmark.Themassiveincreaseinparticipationthathasledtothisfigure,andtheneedtoprepareforfurtherincreases,nowdemandsthatwemakerevolutionaryadvances,inthewaywestructure,manageandfundhighereducation."

4.Inthebooktitled'HigherEducationLaw'(SecondEdition)byDavidPalfreymanandDavidWarner,itisstatedthatinmoderntimes,allovertheworld,educationisbigbusiness

ItisforthesamereasonthatforthepastfewdecadesIndiahasexperiencedthemushroomingofprivateunaidededucationalinstitutions.TheeducationsectorhaslatelycaughttheattentionoflargeMNCsandtheCorporate,experiencinglargeamountofinvestments,astheeducationsectorisnotonlylucrativebutrecessionproof.Withthinningdemandforrealestateandgrowingcashconstraints,manydevelopersarenowlookingatthrivingsectors.Theyaredivestinginnoncorebusinessessuchaseducationwithaconvictionthatitsarecessionproofsector.Highrateofreturnoninvestmentcoupledwithhugedemandsupplygapisattractingrealtorstothissector,whowillbecomfortablesettinguptherequiredinfrastructure.[13]TheAEZgrouphasrecentlyannouncedatieupwithMothersPride,achainofschools,byinvestingRs500croreinthecompany.Thisunprecedentedinvestmentintheeducationsector,althoughtermedasaphilanthropicmeasurebytheinvestors,needscarefulscrutiny.

Inallofthesecases,thecentralissueisthatwhentheprivatepartyinvestsmoneyineducation,thequestionofcontrolcomesin.Theexperiencehasbeenthatwhereverprivatecontrolishigh,educatorsfeelstifledandeducationultimatelysuffers.

TheTatasandBirlashavemanyeducationalinterestsforalongtime.Inadifferentway,sodotheManipalGroup,theApeejaygrouportheAmitygroup.Whileintheformercase,valuesandphilanthropyhasbeentheridingmotive,thelatterhavededicatedthemselveslargelytoeducationalone.Educationisperhapsseenmoreasacommercialventureformakingmoney.TheprimaryquestionwhichconcernsusisthatwhetherandtowhattoextenttheStatecanimposerestrictionsandregulationsvisvisthefeestructureofsuchinstitutions.Theprimaryobjectiveofthestateistoensurethatqualityeducationisimpartedbysuchinstitutionsandtoensureexcellenceinit.However,theissueofcommercialisationofeducationandillegalprofiteeringbysuchinstitutionsisofparamountimportanceanditisinthislightthattheapexcourthaslaiddowntheguidelinesinthePaifoundationcaseandsubsequentlyclarifieditintheIslamicandtheInamdarcasevisvisfeestructure.

GuidelinesLaidDownByThePaiFoundationCaseAndItsClarificationsInTheSubsequentCasesAlthoughthePaifoundationcaseoverruledUnnikrishnanscase,thenotionthatthereshouldbenochargingofcapitationfeeorcommercialisationofeducationlaiddowninthelatterwasupheld.ThePaifoundationcasewasinconsonancewiththeUnnikrishnanscaseinthisaspect.InPaifoundationcase,thecourtwasoftheopinionthattherehastobeadistinctionbetweentheaidedandnonaidededucationalinstitutionsanditwouldbeunfairtoapplythesamesetofrestrictionsandregulationstothetwosetofinstitutions.Therightoftheprivateunaidededucationalinstitutionstoregulatetheirfeestructurefortheirrespectivecoursesderivesitscompetencefromtherighttoadministerwithsufficientautonomy.Now,thecontemporaneousquestionwhichcropsupisthatwhatdegreeofautonomyshouldbepermissibletotheseinstitutionsandwhereandinwhichareasshouldthestaterestrictionscomeintoplay?ThequestionhasbeenleftopenbythePaifoundationandthesubsequentcases.However,theanswertothisquestioncannotbeencompassedwithina

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straightjacketformulatoenablethestatetointerfereintheadministrativemattersofprivateunaidededucationalinstitutionsinspecificareasandatfixedpoints.PrivateUnaidedEducationalInstitutionsenjoygreaterautonomyinmattersofadministration,includingthefixationoffeestructure

Noticinginextensoparas68,69and70ofthePaifoundationcase,itwasheldinP.A.Inamdarscase:129.InT.M.A.Paiithasbeenveryclearlyheldatseveralplacesthatunaidedprofessionalinstitutionsshouldbegivengreaterautonomyindeterminationofadmissionprocedureandfeestructure.Stateregulationshouldbeminimalandonlywithaviewtomaintainfairnessandtransparencyinadmissionprocedureandtocheckexploitationofthestudentsbychargingexorbitantmoneyorcapitationfees.[14]

TheabovenotionthatallowsgreaterautonomytoprivateeducationalinstitutionswasincorporatedbytheapexCourtinthecaseofModernSchoolv.UnionofIndia.Thecourtpointedoutvisvisfeestructurespecifically,thatthesaidinstitutionswereallowedtogeneratereasonablesurplusoutofthefeeslevied,butwhatwasprohibitedwascommercialisationofeducation.(Para14ofthejudgementisbeingmentionedherein)

14...itisnowwellsettledbycatenaofdecisionsofthiscourtthatinthematterofdeterminationofthefeestructuretheunaidededucationalinstitutionsexercisesagreaterautonomyas,they,likeanyothercitizencarryingonanoccupationareentitledtoareasonablesurplusfordevelopmentofeducationandexpansionoftheinstitution.Suchinstitutions,ithasbeenheld,havetoplantheirinvestmentandexpendituresoastogenerateprofit.Whatishowever,prohibitediscommercialisationofeducation.Hence,wehavetostrikeabalancebetweenautonomyofsuchinstitutionsandmeasurestobetakentopreventcommercializationofeducation.However,innoneoftheearliercases,thiscourthasdefinedtheconceptofreasonablesurplus,profit,incomeandyield.[15]

TheabovenotionhasbeenreiteratedbytheapexcourtinaveryrecentjudgementinthefollowingwordsinthecaseofModernDentalCollege&ResearchCentrev.StateofM.P.:

10.Itwasalsoobserved,followingthedecisioninT.M.A.PaiFoundationthatgreaterautonomymustbegrantedtoprivateunaidedinstitutionsascomparedtoprivateaidedinstitutionsthereasonforthisisobvious.Theunaidedinstitutionshavetogeneratetheirownfundsandhencetheymustbegivenmoreautonomyascomparedtoaidedinstitutions,sothattheycangeneratethesefunds.However,thisdoesnotmeanthattheprivateunaidedprofessionalinstitutionshaveabsoluteautonomyinthematter.TherecanvalidlybeacertaindegreeofStatecontrolovertheprivateunaidedprofessionalinstitutionsforthereasonthatrecognitionhastobegrantedbytheStateauthoritiesanditisalsothedutyoftheStatetoseethathighstandardsofeducationaremaintainedinallprofessionalinstitutions.However,towhatdegreetheStatecaninterferewithrespecttoprivateunaidedinstitutionsisamatterdeservingcarefulconsideration.[16]

GeneralfindingsoftheSupremeCourtvisvisFeeStructureinthePaiFoundationCase

AsregardsfeestructureofprivateunaidedprofessionalinstitutionstheSupremeCourtwasoftheopinion(PaiFoundationcase):69ArationalfeestructureshouldbeadoptedbytheManagement,whichwouldnotbeentitledtochargeacapitationfee.Appropriatemachinerycanbedevisedbythestateoruniversitytoensurethatnocapitationfeeischargedandthatthereisnoprofiteering,thoughareasonable

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surplusforthefurtheranceofeducationispermissible.[17]

InthePaifoundationcase,thecourtdrewareasonablenexusbetweenthefixationoffeesbytheprivateunaidededucationalinstitutionsandthestandardsmaintainedbythem.ThecourtacceptedtheharshrealitythatthestandardsmaintainedinprivateunaidededucationalinstitutionswasfarbetterthanGovernmentinstitutionsandcurtailingtheirfeestructureormanipulatingitwouldgiverisetounwarrantedconsequencesaffectingtheexcellenceofsuchinstitutions.ThecourtinteraliawasoftheopinionthatitwasinfactthestandardsmaintainedbysuchinstitutionsthatencouragedthestudentstoenrolinprivateinstitutionsratherintheGovernmentinstitutions.TheabovementionednotionwasenvisagedbytheapexcourtinthePaifoundationcaseinthefollowingwords:

Inthecaseofunaidedprivateschools,maximumautonomyhastobewiththemanagementwithregardtoadministration,includingtherightofappointment,disciplinarypowers,admissionofstudentsandthefeestobecharged.Attheschoollevel,itisnotpossibletograntadmissiononthebasisofmerit.Itisnosecretthattheexaminationresultsatalllevelsofunaidedprivateschools,notwithstandingthestringentregulationsofthegovernmentalauthorities,arefarsuperiortotheresultsofthegovernmentmaintainedschools.Thereisnocompulsiononstudentstoattendprivateschools.Therushforadmissionisoccasionedbythestandardsmaintainedinsuchschools,andrecognitionofthefactthatstaterunschoolsdonotprovidethesamestandardsofeducation.TheStatesaysthatithasnofundstoestablishinstitutionsatthesamelevelofexcellenceasprivateschools.Butbycurtailingtheincomeofsuchprivateschools,itdisablesthoseschoolsfromaffordingthebestfacilitiesbecauseofalackoffunds.Ifthisloweringofstandardsfromexcellencetoalevelofmediocrityistobeavoided,thestatehastoprovidethedifferencewhich,therefore,bringsusbackinaviciouscircletotheoriginalproblem,viz.,thelackofstatefunds.ThesolutionwouldappeartolieintheStatesnotusingtheirscantyresourcestopropupinstitutionsthatareabletootherwisemaintainthemselvesoutofthefeescharged,butinimprovingthefacilitiesandinfrastructureofstaterunschoolsandinsubsidizingthefeespayablebythestudentsthere.Thefearthatifaprivateschoolisallowedtochargefeescommensuratewiththefeesaffordable,thedegreeswouldbe"purchasable"isanunfoundedonesincethestandardsofeducationcanbeandarecontrollablethroughtheregulationsrelatingtorecognition,affiliationandcommonfinalexaminations.[18]

SummaryofFindingsoftheSupremeCourtvisvisFeestructureintheIslamicCaseThefirstquestionwhichcamebeforetheapexcourtinIslamicacademyofEducationv.StateofKarnataka[19],whichweareconcernedherein,waswhethertheprivateunaidededucationalinstitutionsareentitledtofixtheirownfeestructure.ClarifyingstandofreasonablefeestructureasmentionedinthePaifoundationcaseandharmonisingtheinterestsoftheeducationalinstitutionstoearnreasonablesurplusandtopreventthecommercialisationofeducation,thefindingsoftheapexcourtcanbesummarisedasfollows:

ItwasheldperKhare,CJ.(forhimselfandforVariava,BalkrishnanandPasayat,JJ)thatsofarasfeestructureisconcernedthemajorityJudgementinthePaiFoundationcaseisveryclear.TherecanbenofixingofarigidfeestructurebytheGovernment.Eachinstitutemusthavethefreedomtofixitsownfeestructuretakingintoconsiderationtheneedtogeneratefundstoruntheinstituteandtoprovidefacilitiesnecessaryforthestudents.Theymustalsobeabletogeneratesurpluswhichmustbeusedforthebettermentandgrowthofthateducationalinstitution.Again,itwasreiteratedthat"thedecisiononthefeestobechargedmustnecessarilybelefttotheprivateeducationalinstitutionsthatdonotseekandwhicharenotdependentuponanyfundsfromthegovernment.

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Eachinstitutewillbeentitledtohaveitsownfeestructure.Thefeestructureforeachinstitutionmustbefixedkeepinginmindtheinfrastructureandfacilitiesavailable,theinvestmentsmade,salariespaidtotheteachersandstaff,futureplanforexpansionand/orbettermentoftheinstitutionetc.[20]Ofcourse,therecanbenoprofiteeringandcapitationfeecannotbecharged.ItthusneedstobeemphasisedthataspermajorityJudgmentinthePaifoundationcaseimpartingtheeducationisessentiallycharitableinnature.Thus,thesurplus/profitthatcanbegeneratedmustbeonlyforthebenefit/useofthateducationalinstitution.Surplus/profitscannotbedivertedforanyotheruseorpurposeandcannotbeusedforpersonalgainorforanyotherbusinessorenterprise.[21]

TheCourtnoticedthattherewerevariousstatutes/regulationswhichgovernedthefixationoffeeand,therefore,thisCourtdirectedtherespectiveStateGovernmentstosetupcommitteeheadedbyaretiredHighCourtJudgetobenominatedbytheChiefJusticeofthatStatetoapprovethefeestructureortoproposesomeotherfeewhichcouldbechargedbytheinstitute.

ThepositionasclarifiedbyInamdarscasevisvisFeestructureInInamdarscasethecourtclassifiedtheaggrievedpersonsintotwoclasses,i.e.unaidedminorityandnonminorityinstitutionsimpartingprofessionaleducation.Thethirdissuewhichcameupbeforethebenchforconsideration,concernsusherein,i.e.thefeestructureofsuchinstitutions.[22]Asregardsregulationoffee,inInamdarscase,itwasopined:

139.Tosetupareasonablefeestructureisalsoacomponentof"therighttoestablishandadministeraninstitution"withinthemeaningofArticle30(1)oftheConstitution,asperthelawdeclaredinPaiFoundation.Everyinstitutionisfreetodeviseitsownfeestructuresubjecttothelimitationthattherecanbenoprofiteeringandnocapitationfeecanbechargeddirectlyorindirectly,orinanyform(Paras56to58and161[AnswertoQ.5(c)]ofPaiFoundationarerelevantinthisregard).[23]

RighttoAdministerincludestherighttofixareasonablefeestructureRegulationoffeestructurestemsfromthebroaderrighttoadministrationofeducationalinstitutions.However,thisrightisnotabsoluteinnature,i.e.blanketpowerstoframeitsrulesandregulationsandtosetafeestructureoftheirownchoicecannotbegiventotheprivateunaidededucationalinstitutions.Thestatecaninterfereinmattersoffeeregulationwhereitdeemsfitthattheinstitutionisexploitingthestudentsbyprovidinginadequatefacilitieswhichisnotcommensuratetothefeecharged.However,itisnottosaythattheserestrictionsorregulationsimposedbythestatearealwaystoberegardedpristineinnatureorundisputable.Iftheprivateunaidededucationalinstitutionscanfairlyprovethatthefeestructureframedbythemisconducivetothewelfareofthestudentswhoarebeingprovidedcommensuratefacilitieswhichistoachievethegreatergoalofexcellenceineducation,thenthestatewouldbeobligedtowithdrawthechargesortherestrictionsimposedbyitearlier.Butthecontentionsoftheeducationalinstitutionsthatthefeechargedbythemisreasonableandnotinexcessshallbesupportedbysufficientmaterialtoprovebeyondreasonabledoubtthatinstitutionisinnomannerindulginginthecommercializationofeducation.

ThecorrectpositionastotheextentofstateregulationonprivateeducationalinstitutionsandtheautonomytofixthefeestructurewasenvisagedbytheapexcourtinthePaifoundationcaseinthefollowingwords:(Paras54,56and57ofthePaifoundationcasearehereinbeingproduced)

54.Therighttoestablishaneducationalinstitutioncanberegulatedbutsuchregulatorymeasuresmust,ingeneral,betoensurethemaintenanceofproperacademicstandards,atmosphereand

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infrastructure(includingqualifiedstaff)andthepreventionofmaladministrationbythoseinchargeofmanagement.Thefixingofarigidfeestructure,dictatingtheformationandcompositionofagoverningbody,compulsorynominationofteachersandstaffforappointmentornominatingforadmissionswouldbeunacceptablerestrictions.

56..ThedecisiononthefeetobechargedmustnecessarilybelefttotheprivateeducationalinstitutionthatdoesnotseekorisnotdependentuponanyfundsfromtheGovernment.

57Therecan,however,beareasonablerevenuesurplus,whichmaybegeneratedbytheeducationalinstitutionforthepurposeofdevelopmentofeducationandexpansionoftheinstitution.

TheBurningissueofCapitationFeeTheexpressioncapitationfeedoesnothaveafixedmeaningitneitherhasbeendefinedbyanycentralstatutenorbytheSupremeCourt.However,differentstatelegislaturesinhavedefinedthetermdifferently.TheTamilNaduEducationalInstitutions(ProhibitionofCollectionofCapitalisationFee)Act,1982,definesCapitationfeeas:

"capitationfeemeansanyamountbywhatevernamecalled,paidorcollecteddirectlyorindirectlyinexcessofthefeeprescribed,underSection4"

TheexpressioncapitationfeeasdefinedinS.2(a)oftheMaharashtraEducationalInstitutions(ProhibitionofCapitationFee)Act,(6of1988)is:

Capitationfeemeansanyamount,bywhatevernamecalled,whetherincashorkind,inexcessoftheprescribedorasthecasemaybeapproved,rateoffees.

Thewideprevalentnotionthatcapitationfeeisonlyincashiserroneous.Astheabovedefinitionsuggests,capitationfeecanbeinkindalso.Thetermkindisofwideimportandcanbeconstruedtoincludeanyproperty,favour,acommodityoranythingwhichisgivennotbeingcommensuratetothefeecharged.

TheRightofChildrentofreeandCompulsoryEducationAct,2009definescapitationfeeinS.2(b)asfollows:Capitationfeemeansanykindofdonationorcontributionorpaymentotherthanthefeenotifiedbytheschool.

Onperusaloftheabovetwodefinitionsitisevidentthatthetermcapitationfeemayhavedifferentcharacteristicsatdifferentlevelsofeducation.Attheprimaryorelementarylevel,thetermisconfinedtodonationorcontribution,whereasatthehighereducationleveltheterminadditiontothemeaningattributedtoitattheprimarylevelalsoenvisagesthequalitiesoffavours.

TheprohibitionagainstthechargingofcapitationfeehasbeenlaiddownbytheSupremeCourtinacatenaofjudgments.However,therealityisthattheunscrupulousactivityofchargingcapitationfeeisstillbeingmarshalledbysomeoftheinstitutions.Theneedofthehouristopiercetheveilandtoexposetheactivityofchargingcapitationfee,whichisnotinconsonancewiththeconstitutionalfabric.ChargingcapitationfeeisthepatentdenialofthefundamentalrighttoeducationofcitizensofIndia.

ThequestionaroseforthefirsttimebeforeatwoJudgebenchoftheSupremeCourtin

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MohiniJainv.StateofKarnataka[24],inthefollowingcontext:Withaviewtoeliminatingthepracticeofcollectingcapitationfeeforadmittingstudentsineducationalinstitutions,theKarnatakaLegislaturepassedanActpurportingtoregulatetuitionfeeinprivatemedicalcollegesintheState.Byissuinganotificationundertheact,theGovernmentfixedRs.2000/peryearastuitionfeepayablebycandidatesadmittedagainstgovernmentseats,butotherstudentsfromtheStateweretopayRs.25,000/perannum.TheIndianstudentsfromoutsidetheStateweretopayRs.60,000/perannum.OnawritpetitionfiledbyanoutoftheStatestudent,theSupremeCourtquashedthenotificationunderAr.14.Injustificationofthenotification,theprivatemedicalcollegeshadarguedthattheydidnotreceiveanyfinancialaidfromtheGovernmentandsotheymustchargemuchhigherfeesfromprivatestudentstomakegoodthelossincurredogovernmentstudents.

Thebenchcharacterisedcapitationfeeasnothingbutapriceforsellingeducationwhichamountstocommercialisationofeducationadverselyaffectingeducationalstandards,characterisingsuchinstitutionschargingcapitationfeeasteachingshops.TheconceptofteachingshopsiscontrarytotheconstitutionalschemeandiswhollyabhorrenttotheIndiancultureandheritage.

Thus,thenotionwhichwasfirstobservedinMohiniJainscase[25],wasupheldintheUnikrishnanscase[26],inFatherThomasShingareandothersv.StateofMaharashtraandothers[27],thePaifoundationcase[28],IslamicAcademyofEducation[29],ModernSchoolv.UnionofIndia[30],P.A.InamdarandfinallyinModernDentalCollege&ResearchCentrev.StateofM.P[31]inthefollowingwords:

17Capitationfeeisprohibited,bothtotheStateGovernmentaswellastheprivateinstitutions,videPara140ofInamdarcase.[32]

TheStatesofTamilNadu,Maharashtra,KarnatakaandAndhraPradeshenactedstatutesprohibitingcollectionofcapitationfeeandregulatingadmissioninprofessionalcolleges.IntermsoftheprovisionsofthesaidActs,themanagementoftheprofessionalcollegesisprohibitedfromcharginganyfeeotherthanfeedeterminedunderthesaidActs.

TheReasonableSurplusDoctrinePrivateUnaidedEducationalInstitutionsareallowedtomakeProfitsbutnotProfiteering.

TheunanimousopinionoftheSupremeCourtinalltheabovementionedcaseswasthatwhiletheprivateunaidedinstitutionswereallowedtomakesomeprofits,inthecourseoftheiroccupation,chargingofcapitationfeeandillegalprofiteeringwasandisstrictlyprohibited.Thereforewhatisprohibitedisillegalprofiteeringandnotprofits.ThetermprofiteeringwasdefinedbySinha,J.intheIslamiccasetakingtheaidofBlackslawdictionaryinthefollowingmanner:

137.ProfiteeringhasbeendefinedinBlack'sLawDictionary,Fiftheditionas:"Takingadvantageofunusualorexceptionalcircumstancestomakeexcessiveprofits."[33]

ThenotionthatprivateunaidededucationalinstitutionsareentitledtoearnprofitsandnottoprofiteerhasbeenaffirmedbytheSupremeCourtinaveryrecentcase,namelyUnaidedPrivateSchoolsofDelhiv.DirectorofEducationinthefollowingwords:

68.OnaperusalofT.M.APaiFoundationandP.A.Inamdar,itcanbeinferredthatprivateunaidedinstitutionsarepermittedtohaveaprofitbutnotpermittedtoprofiteer.[34]

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ReasonableSurplusTheapexcourtwasalsooftheopinionthatsuchinstitutionswerejustifiedinearningreasonablesurplusinthecourseoftheiroccupation.TheapexcourtwasofthefollowingopinionvisvisreasonablesurplusinthePaifoundationcase:

69Appropriatemachinerycanbedevisedbythestateoruniversitytoensurethatnocapitationfeeischargedandthatthereisnoprofiteering,thoughareasonablesurplusforthefurtheranceofeducationispermissible..[35]

Thefactthatmeritsattentionisthattheapexcourthasconstantlyreiteratedthatthereasonablesurplusearnedbysuchinstitutionscanonlybeutilisedforthepurposeofeducation,i.e.fortheexpansionandaugmentationofeducationandnotforanyotherpurpose.Furtherthereasonablesurplusdoctrineisonlyavailabletothoseinstitutionsmakingprofitsoutoftheirowninvestments.InthePaifoundationcaseithasbeenclearlymentionedthatreasonablesurpluswouldnotcomeintheambitofprofiteering:

.Reasonablesurplustomeetthecostofexpansionandaugmentationoffacilitiesdoesnot,however,amounttoprofiteering.[36]

Theabovepositionwasaffirmedandfurtherelaborated.Theapexcourtwasoftheopinionthatearningreasonablesurpluswasanintegralpartofanoccupation,henceitwasvalid.Para128oftheIslamiccaseisworthyofperusalinthisregard:

128..They,(unaidededucationalinstitutions)likeanyothercitizenscarryingonanoccupation,mustbeheldtobeentitledtoareasonablesurplusfordevelopmentofeducationandexpansionoftheinstitution.Reasonablesurplusdoctrinecanbegiveneffecttoonlyiftheinstitutionsmakeprofitsoutoftheirinvestments.Asstatedinparagraph56(ofthePaifoundationcase),economicforceshavearoletoplay.They,thus,indisputablyhavetoplantheirinvestmentandexpenditureinsuchamannerthattheymaygeneratesomeamountofprofit.Whatisforbiddenis(a)capitationfeeand(b)profiteering.[37]

ThenotionofreasonablesurpluswasfurthercrystallizedbytheapexcourtintheInamdarcase.InthiscasethecourttriedtoexplainthegistoftheanswerswhichhadbeenformulatedbytheSupremeCourtinthePaifoundationcaseasfollows:

16Aprovisionforreasonablesurpluscanbemadetoenablefutureexpansion.Therelevantfactorswhichwouldgointodeterminingthereasonabilityofafeestructure,intheopinionofmajority,are:(i)theinfrastructureandfacilitiesavailable,(ii)theinvestmentsmade,(iii)salariespaidtotheteachersandstaff,(iv)futureplansforexpansionandbettermentoftheinstitutionetc.[38]

TheSupremeCourtforthefirsttimeintheInamdarcaseaftertheModernschoolcase(2004)discussedtheconceptsofrevenueexpenditurevisvisreasonablesurplus,reiteratingitsearlierstand,butthistimebackingitwithacogentreasonfortheinstitutionstoearnreasonablesurplusinthefollowingwords:

Equally,areasonablesurplusshouldbepermittedsothatthefeeschargedcovertheentirerevenueexpenditureandinadditionleavesareasonablesurplusforfutureexpansion.Thisalonewouldpreventtheclandestinecollectionofcapitationfeesandwouldresultinentrepreneursinvestinginnewmedicalcolleges.

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ExpenseasdistinctfromExpenditureRightfromtheModernSchoolv.U.O.IcasetotheInamdarcase,theSupremeCourthastermededucationasacharitableoccupation.Thisimpliesthateducationalinstitutionsarerunonphilanthropicpurposesandtheaccountingprinciplestobeappliedtothemarethatofnotforprofitornonbusinessorganisations.Intherecentyears,ithasbeenausualphenomenonthatsuchinstitutionshavetriedtocashinexcessiveprofitsbymanipulatingtheirbooksofaccount,showingfrivolousentrieswhichwillentitlethemtorecovermoneyontheannualorrecurringbasis,althoughwithdepreciatinginterest.Inthisregarditisimperativetogetcognisantwiththeconceptsofexpenseandexpenditure.TheseconceptsweredefinedbytheSupremeCourtinthecaseofModernSchoolv.UnionofIndia:

20.UndertheGenerallyAcceptedAccountingPrinciples,expenseisdifferentfromexpenditure.Alloperationalexpensesforthecurrentaccountingyearlikesalaryandallowancespayabletoemployees,rentforthepremises,paymentofpropertytaxesarecurrentrevenueexpenses.Theseexpensesentailbenefitsduringthecurrentaccountingperiod.Expenditure,ontheotherhand,isforacquisitionofanassetofanenduringnaturewhichgivesbenefitsspreadovermanyaccountingperiods,likepurchaseofplantandmachinery,buildingetc.Therefore,thereisadifferencebetweenrevenueexpensesandcapitalexpenditure.Lastly,wemustkeepinmindthataccountinghasalinkagewithlaw.Accountingoperateswithinlegalframework.Therefore,banking,insuranceandelectricitycompanieshavetheirownformofbalancesheetsunlikebalancesheetsprescribedforcompaniesundertheCompaniesAct1956.Therefore,wehavetolookattheaccountsofnonbusinessorganizationslikeschools,hospitalsetc.inthelightofthestatuteinquestion.[39]

Thusthefinethreadwhichdifferentiatesexpensefromexpenditureisthatwhiletheformerisonannualbasis,thelatterisofenduringnatureandisnotaccountedduringthefinancialyear.Theunjustifiedpractiseobservedbysomeoftheinstitutionsistoshowfrivolousentriesintheirexpenseaccountssothattheycanincurprofitsonthesame.

Ex.Itisausualfeaturethattheprivateinstitutionsadvertisetheircollegesinthenewspapersthroughouttheyear.Themoniesincurredforthesameisshownintheexpenseaccounts.However,thispractiseiserroneousinnatureasadvertisingisonlyameasuretopopularisethebrandnameofsuchinstitutionsandcannotbetermedasaproperexpense.Hence,theinstitutionsarenotentitledtoearnprofitsonthesame.

TheschemeformedbytheIslamiccasethatthebooksofaccountaretobescrutinisedbyaChartedAccountantactsasasafetyvalveagainstsuchunwarrantedpractices.Anotherfeaturethatdistinguishesexpensefromexpenditureandwhichisrelevantinregardtothefeechargedbytheinstitutionsisthatwhileexpensesaretocomeoutofthefeecharged,whereastheexpenditurehastocomeoutofthesavingsoftheinstitutions.ThisconceptwaspointedoutbytheapexcourtintheModernschoolcase(2004)inthefollowingwords:21..

Therefore,rule177(oftheDelhischoolEducationact,1973)showsthatsalariesandallowancesshallcomeoutfromthefeeswhereascapitalexpenditurewillbeachargeonthesavings.Therefore,capitalexpenditurecannotconstituteacomponentofthefinancialfeesstructureasissubmittedonbehalfoftheschools.Italsoshowsthatsalariesandallowancesarerevenueexpensesincurredduringthecurrentyearand,therefore,theyhavetocomeoutofthefeesforthecurrentyearwhereascapitalexpenditure/capitalinvestmentshavetocomefromthesavings.[40]

WhatamountofReasonableSurplusisReasonable?

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Now,thetermsreasonableandsurplusaresomewhatrepugnanttoeachother.Althoughtheapexcourtdidnotelaborateontheissueofreasonablesurplus,abstainingfromfixingacertainamountwhichcouldbecalledasreasonablesurplus,Sinha,J.intheIslamicAcademycasewasofthefollowingopinion:

135.WhilethisCourthasnotlaiddownanyfixedguidelinesasregardfeestructure,inmyopinion,reasonablesurplusshouldordinarilyvaryfrom6%to15%,assuchsurpluswouldbeutilizedforexpansionofthesystemanddevelopmentofeducation.[41]

However,itissubmittedthatinordertofixthereasonablesurpluscarehastobetakeninrespectivecases.Aninstitutionchargingexorbitantfeesandnotprovidingcommensuratefacilitiestoitspupilscannotbeallowedtoearnareasonablesurplusof15%.Thenotionofreasonablesurpluscannotbecabinedwithindoctrinairelimitsorgeneralized,hencespecialcarehastobetakenwhileexaminingtheissueofreasonablesurplus.

ConclusionAlthoughtheSupremeCourthasdealttheissueoffeestructureindetail,itisevidentashasbeenpointedoutbytheapexcourtitself,thatthefindingsarenotexhaustiveinnature.Itismysincereopinionthattheinstantissuecannotbecabinedwithinastraightjacketformula.Thebasicnotionthathastoborneinmindwhileforminganystatuteorwhileimposinganyregulationonsuchinstitutionsisthateducationisacharitableoccupation,inwhichtheprivateplayersareallowedtoearnprofitsbutnottoprofiteer,i.e.tomakeunreasonableorexcessiveprofits.Aharmoniousbalancehastobestruckbetweentheconflictinginterestsoftheautonomyofprivateunaidededucationalinstitutionsinfixingareasonablefeestructureononeside,ensuringthattheyearnareasonablesurplus,whilethestudentsarenotcompelledtopayexorbitantorunjustifiedfees,ontheotherhand.Thegoldenthreadwhichrunsthroughthisissueisthatprivateunaidededucationalinstitutionsenjoyagreaterautonomyinmattersofadministrationwhichencompassesthefixationoffeestructurealso.Aworkableformula,whichisnotrigidinnatureneedstobeformulatedsothattheinstitutionscanbeallowedtoearnreasonablesurplus,takingintoconsiderationthenatureofthecoursei.e.superspecialitycoursesorothercoursesetc.Theobjectiveisnotonlytofixareasonablefeestructurevisviseducationalinstitutions,butthatthestudentsgetcommensuratefacilitiesandqualityeducationinexchangeofthefeepaidbythem.

[1](1993)1SCC645.AlthoughthiscasewasoverruledbythePaiFoundationcasesubsequently,thenotionthatthecitizenshaveafundamentalrighttoeducation,whichinherentlyflowsfromAr.21andthepracticeofchargingcapitationfeewasabhorrenttotheconstitutionalscheme,henceprohibited,wereupheldbythelater.ThePaifoundationcasewasinconsonancewiththiscaseinthese2aspects.[2](2002)8SCC481.ThemajorityjudgmentwasdeliveredbyKirpal,CJwithRumaPal,S.N.VariavaandAshokBhan,JJconcurringwithhim.Khare,J.deliveredaseparatebutconcurringopinion.Thejudgmentwasdeliveredon31stOctober,2002.[3](2003)6SCC697.ThemajorityjudgementwasdeliveredbyKhare,CJonbehalfofVariava,BalakrishnanandPasayat,JJ.WhileSinha,Jdeliveredaseparateopinion.Thejudgementwasdeliveredon14thAugust,2003.[4](2005)6SCC537.ThedecisionwhichwasdeliveredbyLahoti,CJ.[5](2009)7SCC751.Para4.[6](2009)10SCC1.Para24,perKapadia,J.[7]Entry25ofListIII(VIIthschedule)oftheConstitutionofIndia:Education,includingtechnical

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education,medicaleducationanduniversitiesanduniversities,subjecttotheprovisionsofentries63,64,65and66ofListIvocationalandtechnicaltrainingoflabour.[8]IslamicAcademyofEducationandAnr.v.StateofKarnatakaandOrs.(2003)6SCC697Para1,perSinha,J.[9]ChaturbhujNathTewari,CapitationFeeVisvisSurplusFundInHigherEducation[10]J.P.Unnikrishnanv.StateofAndhraPradesh(1993)1SCC645[11]T.M.A.PaiFoundationv.StateofKarnataka(2002)8SCC481,para39.[12](2004)5SCC583,Para3,4and5,perKapadia,J(Khare,C.JconcurringwithSinha,J.dissenting)[13]PraveenK.Singh,Educationisrecessionproof.[14]P.A.Inamdarv.StateofMaharashtra(2005)6SCC537,Para129[15]ModernSchoolv.UnionofIndia(2004)5SCC583,Para14[16]ModernDentalCollege&ResearchCentrev.StateofM.P.(2009)7SCC751,Para10.[17]T.M.A.PaiFoundationv.StateofKarnataka(2002)8SCC481,Para69,perKirpal,C.J.[18]T.M.A.PaiFoundationv.StateofKarnataka(2002)8SCC481,Para61,perKirpal,C.J.[19]IslamicAcademyofEducationandAnr.v.StateofKarnatakaandOrs.(2003)6SCC697[20]IslamicAcademyofEducationv.StateofKarnataka(2003)6SCC697,Para56[21]Ibid.Paras5and6[22]P.A.Inamdarv.StateofMaharashtra(2005)6SCC537,Para26[23]Ibid.para139[24](1992)3SCC666[25](1992)3SCC666[26](1993)1SCC645[27]AIR2002SC463[28](2002)8SCC481[29](2003)6SCC697[30](2004)5SCCLE583[31](2009)7SCC751[32]Ibid.Para17[33]PerSinha,J.intheIslamicacademycase,Para137[34]UnaidedPrivateSchoolsofDelhiv.DirectorofEducation(2009)10SCC1.PerSinha,J.Para68.ThiscasecamebeforetheapexcourtintheformofareviewpetitionunderAr.137oftheConstitutionofIndia.ThecourtrevieweditsearlierdecisioninthecaseofModernSchoolv.UnionofIndia(2004)6SCC537.Sinha,J.dissentedinthiscaseonthesamelinesashedidintheModernSchoolcase.[35]PerKirpal,C.J.inthePaiFoundationcase,Para69(asperManupatracitation)[36]PerKirpal,C.J.inthePaifoundationcase.(answertoQ.9)ThecourtatthispointoverruledtheUnnikrishnancase,butupheldittotheextentthatrighttoeducationisafundamentalrightandchargingcapitationfeeisprohibited.[37]PerSinha,J.intheIslamicAcademyEducationcase,Para128(asperManucitation)[38]Para16(1)oftheInamdarcase(asperManucitation)[39]ModernSchoolv.UnionofIndiaAIR2004SC2236,perKapadia,J.Para20.[40]Ibid.Para21[41]Ibid.Para135

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