Hindi Vidya Bhavan Society And ... vs State Of Maharashtra And Ors.
2005 Latest Caselaw 352 Bom

JUDGMENT

Chandrachud D.Y., J.

1. The first petitioner is a society registered under the Societies Registration Act, 1860 and is a public trust registered under the Bombay Public Trusts Act, 1950. In 1963, the First Petitioner set up Hindi Vidya Bhavan which at all material times has been and continues to be an unaided private school. The school comprises of three sections - the pre-primary, primary and secondary sections. The dispute in the present case pertains to fees that have been proposed by the school for its primary section. The primary section is recognized by the Municipal Corporation under the Grant in Aid Code for approved private primary schools in Greater Mumbai.

2. The Municipal Corporation exercises control over private primary schools under the provisions of the Grant in Aid Code. The Code has been framed under the provisions of Section 62-C(3) of the Mumbai Municipal Corporation Act, 1888. The Code provides for recognition of primary schools. Rule 5 prescribes the conditions for recognition. One of these conditions is that the fees to be charged shall be in accordance with instructions issued by the Education Department of the Municipal Corporation.

3. The legislature in the State of Maharashtra enacted the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Section 3(1) of the Act inter alia provides that notwithstanding anything contained in any law for the time being in force, no capitation fee shall be collected or demanded by or on behalf of any educational institution or by any person who is in charge of, or is responsible for, the management of such institution, from or in relation to, any student in consideration of his admission to, prosecution of any course of study, or promotion to a higher standard in a class in such institution. The expression "capitation fee" is defined by Section 2(a) of the Act to mean any amount, by whatever name called, whether in cash or in kind, in excess of the prescribed or, as the case may be, approved rates of fee regulated under Section 4. Sub-section (1) of Section 4 empowers the State Government to regulate the tuition fee or any other fee that may be collected by any educational institution for admission to and prosecution of study in any class, standard or course of study. Under Sub-section (2) of Section 4 the fees to be regulated shall in the case of aided institutions, be such as may be prescribed by a university under the relevant university statute for the time being in force or, as the case may be, by the State Government. In the case of unaided institutions, the fees to be regulated shall be such as the State Government may approve having regard to the usual expenditure excluding any expenditure on lands and buildings or on any such items as the State Government may notify for unaided institutions. Different fees may be proved in relation to different institutions, for different classes or standards, for different courses of study or for different areas.

4. The provisions of the Act came up for consideration before a Division Bench of this Court of Chief Justice Y.K. Sabharwal and Mr. Justice S.H. Kapadia, (as the learned Chief Justice and the learned Judge then respectively were) in Forum for Fairness in Education v. State of Maharashtra, . The Division Bench noted that the object of the Act is to provide a complete prohibition against collection of capitation fees and the definition of what constitutes a capitation fee is wide and comprehensive. The Court held that the label given to the amount collected by the school is immaterial the question being the substance of the collection that is made. In the case before the Division Bench, various charges had been collected by the management of a school by way of donations and the Division Bench held that the demand or collection of any amount either as interest free deposit, charges for advertisements or in any other name or at the time of admission of a child in the school without the approval of the authorities was illegal. The Bench held that no computer fee was chargeable from Standard I to Standard VIII except with the approval of the State Government. The Court issued directions to the Government and its authorities to remain vigilant by taking appropriate steps when a violation of the Act was brought to their notice.

5. The provisions of the Act were also considered by the Supreme Court in Father Thomas Shingare v. State of Maharashtra, . The Supreme Court held that so far as unaided schools are concerned, the statute conferred an option on the State Government to approve the rates of fees. Such rates, it was held, need not be uniform for different institutions and different rates could be fixed for different institutions, classes, standards and courses of study. The Supreme Court while repelling the submission that the restriction imposed was contrary to Article 30(1) of the Constitution, held thus :

"It is a question of fact in each case whether the limit imposed by the Government regarding approved fees would hamper the rights under Article 30(1) of the Constitution insofar as they apply to any unaided educational institution established and administered by the minorities. If the legislature feels that the nefarious practice of misusing school administration for making huge profit by collecting exorbitant sums from parents by calling such sums either as fees or donations, should be curbed, the legislature would be within its powers to enact measures for that purpose. Similarly, if the management of an educational institution collects money from persons as quid pro quo for giving them appointments on the teaching or non-teaching staff of such institution, the legislature would be acting within the ambit of its authority by bringing measures to arrest such unethical practices. Such pursuits are detestable, whether done by minorities or majorities. No minority can legitimately claim immunity to carry on such practices under the cover of Article 30(1) of the Constitution. The protection envisaged therein is not for shielding such commercialised activities intended to reap rich dividends by holding education as a facade."

The Supreme Court held that it was not necessary to make any final pronouncement on the right of the legislature to fix an upper limit regarding the fees to be collected by such institutions from students since the State Government had not fixed any upper limit on approved rates of fee for unaided schools administered by minorities in the State of Maharashtra.

6. The petitioners made an application on 25th March, 1997 to the Superintendent of Private Primary Schools, the fourth respondent, to enable them to increase their monthly fees for the primary section from Rs. 200/- to Rs. 410/- for 1997-98, to Rs. 460/- for 1998-99 and to Rs. 510/- for 1999-2000. In March, 1999, an application was made for the revision of fees for 1999-00, 2000-01 and 2001-02. The grievance of the petitioners was that the earlier application dated 25th March, 1997 had not been disposed of. In July 1999, additional documents were sought from the petitioners which came to be furnished. On 13th May, 1999 the State Government issued a Resolution accepting the recommendations of the 5th Pay Commission in relation to schools and directed implementation with effect from 1st June, 1996. The Petitioners have stated that they implemented the recommendations of the 5th Pay Commission from June 2000. On 14th December, 1999 they submitted a revised application for permission to increase the monthly tuition fees to Rs. 985/- for 1999-00, Rs. 1,085/- for 2000-01 and Rs. 1,185/- for 2001-02. In their application the Petitioners stated that upon the additional liability arising on account of the dues payable under the 5th Pay Commission's report the deficit for 1999-00, 2000-01 and 2001-02 would be of Rs. 13.03 lacs, Rs. 16.42 lacs and Rs. 20.48 lacs respectively. The petitioners have stated that for 1997-98 and 1998-99 fees were recovered at the rate of Rs. 535/- p.m., and for the year 1999-00 at the rate of Rs. 685/- p.m. Several parents complained of the enhancement and fees for several students were not received for 2000-01. On 26th July, 2000, the application submitted by the Petitioners for revision of fees was returned by the Superintendent of Private Primary Schools on the ground that required documents had not been furnished. The Education Inspector addressed a letter dated 15th September, 2000 to the Petitioners to desist from charging amounts in addition to what had been approved. On 13th August, 2001, the Petitioners resubmitted their application for revision. On 17th September, 2001 an order was passed by the 4th and 5th Respondents declining to grant approval to the proposal of the Petitioners for enhancement of the fees to Rs. 985/- per month and instead fees of Rs. 410/ - were sanctioned with effect from June, 2000 with a 10% increase for each of the next two years. This would be in force for 2000-01, 2001-02 and 2002-03.

7. In support of their challenge to the decision of the 4th and 5th respondents of 17th September, 2001, the Petitioners rely upon the state of the finances of the school which, according to them, shows a serious deficit. According to the Petitioners at the rate of Rs. 410/- approved by the Municipal Corporation for 2000-01, the primary section will realise tuition fees of Rs. 28.19 lacs. The total income of the primary section would be Rs. 33.62 lacs as against an expenditure of Rs. 37.08 lacs towards staff salaries and allowances alone. The total expenditure of the primary section for 2000-01 would be Rs. 54.25 lacs which would result in a deficit of Rs. 20.63 lacs. Counsel for the Petitioners placed on the record a chart based on audited accounts. The deficit for the primary section for 2000-01 is Rs. 32.69 lacs, for 2001-02 Rs. 16.17 lacs and for 2002-03 Rs. 19.25 lacs.

8. By an interim order of 26th March, 2002 the school was permitted to collect monthly fees of Rs. 410/- inclusive of arrears. Ori 29th April, 2002 an extension of time was granted to parents to deposit arrears. On 5th March, 2003, an interim direction was issued by which in accord with the permission granted by the Municipal authorities an increase of 10% was allowed for the second year and of 20% in the third year.

9. A Government Resolution issued on 22nd July, 1999 lays down principles for approving increases in fees in pre-primary, primary, secondary and higher secondary schools and junior colleges. A formula is prescribed by which the estimated amount of expenditure on salary and non-salary items certified by the Education Officer or Inspector is divided by the number of students on the muster roll to arrive at an annual term fee. The annual fee is divided by twelve to give the monthly fee. On 27th January, 2000 another Government Resolution was issued. The Resolution records that under Section 4(4) of the Capitation Fees Act an approved fee is normally fixed for three years. Government noted that the introduction of computer education and the implementation of revised pay scales under the 5th Pay Commission recommendations resulted in an increase in expenditure. Hence, Government permitted Deputy Directors of Education to consider proposals for increase of fees before the completion of a three year period. Government issued a Resolution on 4th August, 2000 stipulating that the increase in fees on account of the revised pay scales payable under the report of the 5th Pay Commission should not exceed 40%. This was subsequently revised on 31st August, 2000 to 50%.

10. The Unaided Schools Forum filed a petition under Article 226 before this Court (W.P. 340 of 2000). In an interim order dated 15th March, 2000 a procedural arrangement was laid down by the Division Bench by which managements were to furnish prior intimation to the Parents Teachers' Associations and to forward the objections, if any, received thereupon to the authorities who in turn would scrutinize and decide upon applications for revision of fee. On 31st March, 2001, in another Writ Petition (W.P. 2552 of 2000) filed by the Unaided Schools Forum, a Division Bench issued directions in regard to fee fixation. Clause 1 (a) of the order of the Court provided as follows :

"1 (a) Factors stipulated in paragraph 6 of the Government Resolution dated 22nd July, 1999 and in Government Resolution dated 27th January, 2000 shall be the basis for fixation of fees and for this purpose, the Government shall also take into account expenses incurred for activities in or conducted by schools to improve quality of education, provision of 3% of the total admissible expenditure for creating a development fund for the school and expenses for employing additional numbers of or better qualified teachers/staff/personnel without being restricted to aided-school norms. The teachers will be recruited in accordance with the qualifications and norms which are not lower than those prescribed in the Maharashtra Employees of Private Schools (Conditions of Service) Regulation Act, 1977."

11. On 28th May, 2003, upon the decision of the Supreme Court in T.M.A. Pai Foundation v. State of Karnataka, Government issued a Resolution stating that non-aided educational institutions including primary schools conducted by private managements, shall be at liberty to determine tuition fees. However, while determining the fee, school managements shall consider the minimum expenditure to be incurred on salaries and non-salary expenditure, including the expenditure to be incurred in accordance with the recommendations of the 5th Pay Commission and an additional income of 5% for physical and other facilities including expansion and development. However, if a complaint is received from the Parents-Teachers' Association that the school is profiteering, the Deputy Directors of Education would be at liberty to pass appropriate directions.

12. In an affidavit filed on 19th August, 2004 the management states that in a meeting of the Executive Committee of the Parents-Teachers' Association of the primary section on 13th August, 2004, a unanimous decision was taken that the school may collect fees of Rs. 775/- for 2000-01, 2001-02, 2002-03 and that the difference between these fees and those actually collected by the school be recovered in equal quarterly instalments of Rs. 2250/ -. In a subsequent affidavit of 8th October, 2004 it has been stated that on 21st September, 2004 a circular was displayed on the notice board of the school informing parents of the decision which had been taken by the Executive committee of the Parents- Teachers' Association on 13th August, 2004. By a letter dated 22nd September, 2004 parents of students who were studying in the primary section for the academic years 2000-01 to 2002-03 and who are presently studying in standards 5 to 8 of the secondary section were requested to attend a meeting on 23rd September, 2004 to discuss the issue. It has been stated that a meeting was held and 287 parents consented to the decision taken on 13th August, 2004. 11 parents opposed. The Court has been informed on affidavit that the proposal has also been approved on 5th October, 2004 at a meeting of parents of students who are presently in the primary Section 245 parents approved the proposal whereas 3 have opposed the implementation of the resolution. The affidavit states that those students who have paid fees in excess of Rs. 775/- per month during any part of the academic years 2000-01, 2001-02, 2002-03 will receive a refund in the event that they have left school or otherwise, if they continue to be students of the school, by adjustment.

13. The figures in relation to the finances of the school have been adverted to earlier. The primary section of the school had a deficit of Rs. 32.69 lacs for 2000-01 during the course of which, it has been stated by Counsel for the petitioners, arrears on account of the recommendations of the 5th Pay Commission were paid. The deficit for the years 2001-02 and 2002-03 is stated to be Rs. 16.17 lacs and Rs. 19.25 lacs respectively. The fees which have been permitted to be charged for the aforesaid period are Rs. 410/- for 2000-01, Rs. 451/- for 2001-02 and Rs. 492/- for 2002-03. The proposal which has now been approved by the Parents-Teachers' Association and by an overwhelmingly large majority of parents is for the enhancement of fees to Rs. 775/- for the aforesaid three years. The chart which has been submitted by the management before the Court shows that as a result of the proposed enhancement, the deficit of the primary section would reduce to Rs. 12.54 lacs for 2000-01, while there will be a net surplus of Rs. 7 lacs for 2001-02 and of Rs. 0.43 lacs for 2002-03. There would be a net deficit of Rs. 5.07 lacs for the three years. The figures of deficit do not account for capital expenditure during the period.

14. The facts of the case have been narrated in a considerable degree of detail since the matter has a chequered history. When the Petition was filed, the Parents- Teachers' Association was being represented by Mr. Ranjeet Jaiswal who opposed the increase in fees. There appeared to have been a considerably degree of resistance on the part of parents for the proposed fees which at that stage were to be Rs. 985/ for 1999-00, Rs. 1.085/- for 2000-01 and Rs. 1,185/ - for 2001-02. Subsequently, Mr. Jaiswal's ward sought a school leaving certificate and left the school. An amendment of the Petition was allowed to bring on record the new secretary of the Parents- Teachers' Association. Mr. Jaiswal and two other parents then took out a chamber summons in which intervention has been permitted by the Court. Counsel appearing on behalf of the three parents who have opposed the proposed increase in fees has been heard. Counsel appearing on behalf of the three parents has stated that the wards of all the three intervening parents have since left the school and are pursuing their education elsewhere. Counsel appearing for the intervenors further stated that Mr. Jaiswal and Mr. S.A. Modi have not paid in excess of Rs. 410/- which was the fee fixed by the Municipal Corporation. In so far as the third parent Mr. Sisodia is concerned, Counsel appearing on behalf of the Petitioners has stated that in the event that any amount has been paid in excess of what is now proposed viz. Rs. 775/- per month for the period during which the child was receiving education in the school, that would be refunded to the parent forthwith.

15. In T.M.A. Pai Foundation v. State of Karnataka, , the Supreme Court held that in the case of unaided private schools "maximum autonomy has to be with the management with regard to administration, including the right of appointment, disciplinary powers, admission of students and the fees to be charged" (para 61 page 546). Chief Justice B.N. Kirpal held thus:

"The State says that it has no funds to establish institutions at the same level of excellence as private schools. But by curtailing the income of such private schools, it disables those schools from affording the best facilities because of a lack of funds. If this lowering of standards from excellence to a level of mediocrity is to be avoided, the State has to provide the difference which, therefore, brings us back in a vicious circle to the original problem viz., the lack of State funds. ... It is in the interest of the general public that more good quality schools are established; autonomy and non-regulation of the school administration in the right of appointment, admission of the students and the fee to be charged will ensure that more such institutions are established."

The Court noted that the provision of amenities to students in the form of competent teaching faculty and infrastructure costs money. Hence, if an institution chooses not to seek aid from the Government, it must have the discretion to determine the scale of fee that can be charged from students:

"The decision on the fee to be charged must necessarily be left to the private educational institution that does not seek or is not dependent upon any funds from the Government" (para 56 page 545).

The Court, however, held that the Government can provide regulations that forbid the charging of a capitation fee and profiteering by the institution. While the object should not be to make a profit, the institution can, however, generate a reasonable revenue surplus to be utilised for the purpose of the development of education and the expansion of the institution. (para 57 page 545).

16. The school is an unaided school. To compel the school to run at a deficit is not in the interests of education. Faced with a serious deficit, an unaided institution will either have to close down or to continue operations without adequate facilities for the pursuit of education. Neither consequence would be in the interests of parents, the students or of society.

17. Undoubtedly, in a matter such as the present, adequate care has to be taken to ensure that managements do hot profiteer. Parents in contemporary times have little choice but to pay what is demanded for the education of their children, so competitive are the times. This is liable to result in grave exploitation of children and their parents. A balance has hence to be struck. Unaided private institutions have the discretion to determine their own fees but this freedom is premised on the foundation that they charge what is necessary to maintain facilities for a good standard of education and a reasonable surplus to provide for improvements. The nexus between what is charged and what it takes to provide quality education is the safeguard against profiteering. The concept of proportionality must hence structure the discretion which the law confers upon private managements. Proportionality is what preserves the balance between the societal interest in ensuring the quality of education and the societal interest in protecting parents and their children from the vice of profiteering. Proportionality preserves the balance between the rights of managements who do riot depend upon aid from the State and their duty to provide conscionable levels of fees to the community they serve. In a competitive environment no service provider can charge what is unconscionable. Here as elsewhere, proportionality between what is charged on the one hand and, the expenditure incurred and the need for a reasonable surplus on the other hand maintains the balance. A balance there must be if rights are not to conflict with rights and rights are not to be exercised in a manner that would conflict with duties. Education, like many other sectors of our society is confronted with serious questions about the mariner in which the content of a fundamental human right will be shaped by private initiative. Education is unquestionably a fundamental human right. When it is education at the primary and most elementary level, basic education and literacy are building blocks to ensure the protection of fundamental constitutional values. Empowerment of women, gender justice, protection for minorities, the underprivileged and the oppressed are values which emerge from an educated society, a society particularly in which education has spread to women and the most backward strata of society. Primary education has a special place in the constitutional scheme. Article 29(f) emphasises the need for children to be given opportunities and facilities to develop in a healthy manner in conditions of freedom and dignity and to ensure that childhood and youth are protected against exploitation. Under Article 41, the State has to make effective provision for inter alia securing the right to education, within the limits of its economic capacity and development. By virtue of Article 45, the State must endeavour to provide free and compulsory education to children until they complete the age of fourteen. These are part of the Directive Principles -fundamental in the governance of the country. One of the fundamental duties in Article 51-A(j) is the duty to strive towards excellence in all spheres of individual and collective activity. There are not just exhortations - they provide a beacon for administrative policy and guiding principles for judicial interpretation.

18. Counsel appearing on behalf of the Petitioners has stated that save and except for the tuition fee of Rs. 775/- for 2000-01, 2001-02 and 2002-03, and the admission fee and term fee which has been permitted in the communication of the Superintendent dated 17th September, 2001 (Exh.W), the school has not charged any additional amount and will not do so in any circumstances. An undertaking to that effect which is tendered before the Court on the instructions of the Principal who is present in the Court is accepted. A statement has also been made before the Court on instructions that the recommendations of the 5th Pay Commission have been implemented by the management. The facts which have been adverted to in the earlier part of the judgment would show that the primary section of the school suffers a serious deficit at the fee approved by the Fourth Respondent. From the facts which have emerged before the Court it cannot be said that the management would profiteer or would be charging a capitation fee if the proposal of a fee of Rs. 775/- per month for the years 2000-01, 2001-02 and 2002-03 is approved. The decision of the fourth respondent has, in my view, not taken into account, the requirements of the school, particularly the additional expenditure that has been required to be incurred as a result of the implementation of the recommendations of the 5th Pay Commission. Obviously at a fee of Rs. 410/ - that was fixed by the fourth respondent the primary section cannot function save and except at a serious deficit. The large body of parents has approved of the proposed increase in fees and these fees for 2000-01, 2001-02 and 2002-03 are lower than what was initially proposed by the management.

19. Hence, I am of the view that the order passed by the fourth respondent should be modified so as to permit the Petitioners to charge an amount of Rs. 775/- p.m. for each of the three years 2000-01, 2001-02, 2002-03 which formed the subject of the order of the Fourth Respondent dated 17th September, 2001. This would be subject to the undertaking which has been tendered by the Petitioners to the effect that no amount shall be charged in excess of the aforesaid fee (and the prescribed admission and term fees as noted above) for any reason or under any other head whatsoever. In the approval granted by the Fourth Respondent on 17th September, 2001, the Petitioners were permitted to collect term fees of Rs. 410/- for each of the two terms and admission fees of Rs. 410/- per year. The Court is informed that those fees have already been collected and no further enhancement in so far as those fees are concerned shall be made. For the recovery of the difference it was initially proposed before the Court that the arrears would be recovered at the rate of Rs. 2250/- per quarter. Counsel appearing on behalf of the Petitioners stated that in order to obviate hardship to the parents, the arrears, if any payable by the concerned parent, would be required to be paid at the rate of Rs. 1,500/- per quarter. Refund to those parents whose wards have since left the school shall be granted within a period of two weeks from today. Similarly, in the event that any amount has been recovered in excess of the fee of Rs. 775/- that shall be adjusted in the next instalment of fees that is to be paid by the parents whose wards continue in the school.

20. The petition is disposed of in the aforesaid terms. There shall be no order as to costs.