Supreme Court of India
ACTION COMMITTEE,UN-AIDED PVT. SCHOOLS & ORS.versusDIRECTOR OF EDUCATION DELHI & ORS.
- Citation
- 2009 INSC 1024
- Decided
- 7 August 2009
- Disposal
- Dismissed
- Bench
- S B SINHA
Holding
The Director of Education has the authority to regulate the fee structure and utilisation of fees of unaided recognised schools under Rule 177, and clause 8 of the 1999 order does not conflict with that rule; therefore the review petitions are dismissed.
Summary
The Action Committee of unaided private schools challenged the Director of Education's (DOE) directions that fees and funds must be used strictly according to Rule 177 and that no amount could be transferred to the managing society or trust. The petitions argued that the DOE lacked authority under Section 24(3) of the Delhi School Education Act, 1973 and that the directions conflicted with the statutory rules and constitutional precedents. The Supreme Court examined whether the DOE could regulate fee structures and fund utilisation of unaided recognised schools and whether clause 8 of the 15‑December‑1999 order was inconsistent with Rule 177. Relying on the Constitution‑Bench judgments in T.M.A. Pai Foundation and P.A. Inamdar, the Court held that the DOE’s power to prescribe fee utilisation under Rule 177 is valid and that the clause does not exceed the rule. The Court further clarified that the directions are a permissible gap‑filling exercise to ensure transparency and accountability. Consequently, the review petitions were dismissed.
Issues considered
- The scope of the Director of Education's power under Section 24(3) of the Delhi School Education Act, 1973 to regulate fee structures of unaided recognised schools.
- Whether the clause 8 direction dated 15‑December‑1999 prohibiting transfer of school funds to the society or trust conflicts with Rule 177 of the Delhi School Education Rules, 1973.
- Whether the management of unaided schools may establish a development fund or account under the Act.
- Whether the directions infringe the constitutional principles laid down in T.M.A. Pai Foundation and P.A. Inamdar regarding autonomy of private unaided institutions.
Legislation cited
- Delhi School Education Act, 1973s. 17(3), s. 18(4)(b), s. 24(3)
Subjects
unaided private schoolsfee regulationRule 177Delhi School Education Acttransfer of fundsschool autonomyT.M.A. PaiP.A. Inamdarcommercialisation of education
Judgment
[2009] 12 S.C.R. 631
- ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS &
ORS.
v.
A
· DIRECTOR OF EDUCATION DELHI & ORS.
Review Petition (Civil) 1368 of 2004
In B
Civil Appeal No. 2700 of 2001
AUGUST 7, 2009
> [S.B. SINHA, S.H. KAPADIA AND CYRIAC
JOSEPH, JJ.] c
Education/Educational Institutions - Unaided recognized
schools - Regulation of fees and funds collected from
students - Transfer of funds by the schools to the Societies/
trusts/other schools run by the same society - Direction by D
Director of Education (DOE) make such transfer in
accordance with r. 177 of Delhi School Education Rules -
Supreme Court by majority holding that DOE had power to
regulate fee structure of private unaided schools including
utilization of fee - Review Petition - Held: Per majority: E
Direction of DOE does not go beyond r. 177 - The direction
is only a gap-filling exercise - Transfer of funds from one
--1
institution to other under the same management is
permissible - Per minority: The direction of DOE is not
maintainable because it runs contra Constitution Bench F
decisions of Supreme Court in TMA Pai, Islamic Academy
and P.A. lnamdar cases - The order of DOE was also without
jurisdiction - Delhi School Education Act, 1973 - s.24(3) -
Delhi School Education Rules, 1973 - r. 177.
Parents' Association had filed a writ petition against G
unaided recognized Schools interalia alleging that
transfer of funds by them to the societies/trusts/other
Schools run by the same society/trust was in violation of
631 H
632 SUPREME COURT REPORTS [2009] 12 S.C.R.
A Delhi School Education Act, 1973 and Rules framed
thereunder. Appellant also filed writ petition challenging
the order of Director of Education (DOE) dated 10.9.1997
whereby it was directed that fees and funds collected
-
from the students be utilized in accordance with Rule 177
B of Delhi School Education Rules, 1973. High Court
disposed of the writ petitions. High Court also appointed
a Committee (Duggal Committee) to look into justification
of increase in tuition fees etc. by the individual Schools.
Appellant filed appeal to this court challenging the
c validity of High Court order as· regards order of DOE
dated 10.9.1997 and also challenging appointment of
Committee. In the meantime Committee submitted its
report. The same was also challenged by the appellant.
D During pendency of the appeal, in terms of the report
of the Committee, DOE issued order dated 15.12.1999.
Clause 8 thereof directed that fees/funds collected from
students should be utilized strictly in accordance with
Rules 176 and 177 of the Rules. No amount should be
E transferred from the recognized unaided School Fund of
a school to the society or trust or any other institution.
This Court by the majority judgment held that DOE
had power to regulate the fee structure of private unaided
schools including utilization of fees u/r.177 (1) (b) and (c).
F The Court also held that there was no conflict between
r. 177 and clause 8 of Order dated 15.12.1999.
The review petitions were filed on the grounds t!lat
since the fee fixation is governed by statutory rules, no
G directions could have been issued by this Court contrary
thereto; and that this court could not have gone into the
validity of order dated 15.12.1999 as the same was not
challenged in the appeal.
During pendency of the petition, in P.A. lnamdar Case
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS & 633
ORS. v. DIRECTOR OF EDUCATION
Constitution Bench of this Court clarifying TMA Pai case A
and Islamic Academy case, laid down the law relating to
fee structure.
Dismissing the petitions by majority, the Court
HELD: B
Per S.H. Kapadia, J.
) 1. The Petitioner is correct in suggesting that if a
rider i.e. 'except under the management of the same
society or trust' is added to Clause 8 of the Order dated
c
15.12.1999, then it would subserve the object underlying
Delhi School Education Act, 1973. The Act and Delhi
· School Education Rules, 1973 cannot come in the way
of the management to establish more schools. So long
as there is a reasonable fee structure in existence and so D
-
\
long as there is transfer of funds from one institution to
the other under the same management, there cannot be
any objection from the Department of Education (DOE).
[Paras 19 and 20] (879-C-D]
E
2. It is not correct to say that Clause 8 of the Order
of DOE dated 15.12.1999 was never challenged and yet
' the Court has gone into the validity thereof. It was argued
on behalf of the management that clause 8 of the Order
goes beyond Rule 177 and, therefore, this Court has F
discussed in the judgment under review, the difference
between accrual and application of income. (Para 21]
(679-F]
lt
3. It is not correct to plead that where the Act and the
J
Rules thereunder operate, regulation of education would G
be governed jlereby, and the Court cannot impose any
other or fur~her restrictions by traveling beyond the
scope, object and purport thereof. In this context it may
be noted that in T.M.A. Pai Foundation case and in Islamic
Academy case, the principles for fixing fee structure have H
.
634 SUPREME COURT REPORTS [2009] 12 S.C.R.
A been illustrated. However, they were not exhaustive.
They did not deal with determination of surplus and
appropriation of savings. In fact in the majority view of
the present matter, this Court has found that the above
topics are not dealt with by the Rules and therefore,
B clause 8 was found not to be beyond Rule 177 or in
conflict thereto as alleged. The Additional Directions
given in the Judgment of the Majority do not go beyond
Rule 177 but they are a part of gap-filling exercise and
discipline to be followed by the management. If
c reasonable fee structure is the test, then transparency
and accountability are equally important. In fact, as can
be seen from Reports of Duggal Committee and the
earlier Committee , excessive fees stood charged in some
cases despite the Rules, because proper Accounting
Discipline was not provided for in the Rules. Therefore,
0
the further Directions given are merely gap-fillers.
Ultimately, Rule 177 seeks transparency and
accountability and the further directions merely brings -
about that transparency. [Para 22] [679-G-H; 680-A-E]
E T. M.A. Pai Foundation and Ors. v. State of Karnataka
and Ors. 2003 (6) SCC 697; Islamic Academy of Education
and Anr. v. State of Kamataka and Ors. (2003) 6 SCC 697,
referred to.
F Per Cyriac Joseph, J. (Concurring):
Though agreeing with the view of S.B. Sinha, J. that
any direction issued by the High Court or by the rule
making authority or any statutory authority must be in •
conformity with the decision of this Court in the case of
G T.M.A. Pai Foundation as clarified by the decision of this
Court in the case of P.A. lnamdar, the judgment of S.H.
Kapadia, J. does not question or contradict such a legal
proposition. On the contrary, it is in recognition of the
above legal proposition that modification suggested on
H behalf of the review petitioners in respect of Clause 8 of
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 635
ORS. v. DIRECTOR OF EDUCATION
the order dated 15.12.1999 issued by the Director of A
Education has been accepted. Hence, having regard to
the limited scope of a review petition and in view of the
submissions made by the parties the judgment rendered
by S.H. Kapadia, J. is concurred with. [Paras 2 and 3)
[680-G-H; 681-A-C] B
P.A. lnamdar and Ors. v. State of Maharashtra and Ors.
2005 (6) sec 537 referred to.
S.8. Sinha, J. (Dissenting):
c
1. In Unni Krishnan case whereon High Court in its
order had placed reliance, it was held that no citizen has
any fundamental right to set up an educational institution.
Some guidelines had been issued. Those guidelines
indisputably have been held to be unconstitutional in D
\ T.M.A. Pai Foundation and in P. A. lnamdar cases and,
thus, the directions contained in the order dated
15.12.1999 cannot be upheld. The Director of Education
moreover exercised its authority illegally and without
jurisdiction. [Para 21) [654-H; 655-A-B]
E
1.2. Sub-section (3) of Section 24 of Delhi School
Education Act, 1973 does not confer any power on the
Director to issue directions. The order dated 15.12.1999
is not a statutory order. Such a statutory order also could
not have been issued under the directions of the High F
Court as the very premise on which such directions have
been issued does not survive any longer in view of the
decision of this Court in T.M.A. Pai Foundation case.
[Para 23 and 24) [656-D-F]
' G
1.3. All regulations applicable to aided or unaided
recognised institutions, must be found in the statute a11d/
or the Rules. The Rules, require to be revisited by the
State in the light of the decision of this Court in P.A.
lnamdar case. [Para 26) [657-A-B]
H
636 SUPREME COURT REPORTS (2009] 12 S.C.R.
A 1.4. Rule 177 of Delhi School Education Rules, 1973
provides for utilisation of the fees realised by unaided
recognised schools. There is no regulation as regards
fee. Fee, of course, should not be such which would
amount to profiteering. So far as utilisation of savings
B from the fees collected by such school by its managing
committee is concerned, the same can be utilised for the
purpose of assistance of any other school or educational
institution under the management of the same society or
trust by which the first mentioned school is run. [Para 27)
C [657-8-C)
1.5. It is not correct to say that having regard to the
fact that the scheme for management of the school, as
contained in Section 5 of the Act, does not permit
utilisation of the fee collected by a managing committee
D of the school by another managing committee of another
school and, thus, the word 'management' should be
given a restricted meaning. Clause (c) of the proviso
appended to Rule 177(1) of the Rules itself raises a
distinction. It uses both the words "managing committee"
E and "management". They must be held to have different
meanings. [Para 28) [657 -D-E]
1.6. Clause (c) of the proviso appended to Rule
177(1) refers to the management of the same society or
F trust which means there may be more than one school
which is under the same management. If the word
"management" is substituted by the word the "managing
committee", the same would lead to an anomalous
situation. The very fact that grant of assistance to any
other school or educational institution, subject of course
G to the limitations provided for therein being permissible,
it, would not be correct to contend that the managing
committee of a school can under any circumstances
render any financial assistance to the managing
committee of another school. Such assistance can be
H ..
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 637
ORS. v. DIRECTOR OF EDUCATION
=( rendered if both the schools are under the management A
,J of the same society or trust. [Para 28] [657-F-H; 658-A-B]
1.7. The authorities of all the schools, particularly,
unaided schools, may lay down its own fee criteria.
Imposition of regulation, however, only is permissible for B
the purpose of exercising of control over profiteering and
not earning of a profit which would include reasonable
return of the investment made. [Para 29] [658-C-D]
.../
k 1.8. It would, be incorrect to lay down any general
rule and enforce them on a private unaided institutions c
by way of gap-filing exercise and discipline or otherwise,
despite the fact that Rule 177 of the Rules occupies the
field. Such restrictions sought to be imposed, for all intent
,. and purport, take away the autonomy regime of the
'
unaided schools which are applicable to these D
"\ l institutions. [Para 29] [659-D-E]
\.
., 1.9. The institutions, admittedly are entitled to earn
some profits and as such any direction contrary thereto
or inconsistent therewith by directing them to maintain E
books ·of account on the principles applicable to non-
business organization/not-for-profit organization. Even
"'· otherwise such directions run contrary to the ordinary
" accounting principles and/or Income Tax Laws. [Para 29]
... [659-F]
1.10. Any direction issued by the High Court, by the
F
rule making authority or any statutory authority must be
in conformity with the decision of this Court in T.M.A. Pai
Foundation as clarified by the decision of this Court in
P.A. lnamdar. [Para 31] [660-B] G
....
T.M.A. Pai Foundation and Ors. v. State of Kamataka
and Ors. 2003 (6) SCC 697; P.A. lnamdar and Ors. v. State
of Maharashtra and Ors. 2005 (6) SCC 537, followed.
Krishnan Narula v. Jammu and Kashmir AIR 1967 SC H
.,
638 SUPREME COURT REPORTS [2009] 12 S.C.R.
A 1368 Official Trustee of W.B. v. Stephen Court 2006 (14)
SCALE 285, referred to. ...
Arind Datar, "Privilege, Police Power and Res Extra
Commercium Glaring Conceptual Errors" 21(1) National Law
School of India Review 133 (2009), referred to.
B
2. The judicial discipline mandates the Bench
comprising of two or three Judges to follow the
Constitution Bench decisions having regard to Article 141
of the Constitution of India. [Para 30) [659-H; 660-A] ,;( .-
c
State of West Bengal v. Ashish Kumar Roy and Ors.
(2005) 10 sec 110 relied on.
3. The Government of NCT of Delhi has not amended
the statutory rules on the basis of the recommendations
D
of the Duggal Committee. The court has only considered
herein the validity of the directions issued by the Director
of Education in terms of the order dated 15.12.1999.
'•' ..
While, thus, it will be open to the State to amend its rules,
the management of the schools shall also be at liberty to
E challenge the validity thereof if and when such a question
arises. [Para 32) [660-C-D]
·'
Case Law Reference:
Judgment of S.H. Kapadia, J.
F 2003 (6) sec 697 referred to Para 13 ...
2003 (6) sec 697 referred to Para 13
Judgment of Cyriac Joseph, J.
2005 (6) sec 537 referred to Para 2
G
Judgment of S.B. Sinha, J. ,.
2003 (6) sec 697 followed Paras 21 and 29
2005 (6) sec 537 followed Paras 21 and 29
H 2009 (7) SCALE 34 referred to Para 21
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 639
ORS. v. DIRECTOR OF EDUCATION
'"' ...
2006 (14) SCALE 285 referred to Para 21 A
(2005) 10 sec 110 relied on Para 30
CIVIL APPELLATE JURISDICTION: Review Petition (C)
1368 of 2004.
B
IN
Civil Appeal No(s). 2700 of 2001
From the Judgment & Order dated 27.04.2004 of this
I.
Court in C.A. No. 2700 of 2001. c
WITH
R.P. (C) No. 1420 of 2004 in C.A. No. 2704 of 2001,
R.P. (C) No. 1421-1422 of 2004 in C.A. Nos. 2705-2706 of D
2001.
'\
.. R.P. {C) No. 1423 of 2004 in C.A. No. 2703 of 2001,
R.P. {C) No. 1774 of 2004 in C.A. No. 2701 of 2001.
E
Soli J. Sorabjee, Salman Khurshid, Reetesh Singh,
Jhanavi Wona, Rasmi Khanna, Surya Kant, Romy Chacko,
" Arpit Gupta, Ashok K. Mahajan, S. Wasim A. Qadri, Y.P.
" Mahajan, D.S. Mahra, Asha G. Nair (for Anil Katiyar), Ashok
Agarwal, Rajender Pd. Saxena, for the appearing parties.
F
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. The Parliament enacted the Delhi
School Education Act, 1973 (for short "the Act") to provide for
better organization and development of school education in the G
,_ National Capital Territory of Delhi (NCT) and for matters
connected therewith or incidental thereto. The Act deals with
education at pre-primary stage, primary stage, secondary stage
and senior secondary stage.
H
640 SUPREME COURT REPORTS [2009] 12 S.C.R.
A 2. The Act contains an interpretation clause defining a
large number of words mentioned therein including 'aided "'· .
school', 'minority school' and 'unaided minority school'.
Section 3 of the Act empowers an "Administrator" to
regulate education in schools. Section 5 provides for the
B
scheme of management of every recognized school in terms
of the rules framed under the Act. It provides for the mode and
manner in which fees and other charges to be levied and
collected by the schools.
J
c Section 18 provides for a 'school fund' known as the
"Recognised Unaided School Fund"; Sub-section (4) whereof
mandates that income derived by unaided schools by way of
fees shall be utilized for such educational purposes as may be
prescribed.
D
Section 24 provides for inspection of schools; sub-section .,
(3) whereof reads as under:
"(3) The Director may give directions to the manager to
..
rectify any defect or deficiency found at the time of
E inspection or otherwise in the working of the school."
Section 27 of the Act contains a penal provision. Rule ...
making power of the Administrator is specified in Section 28
thereof, clauses (r), (s), (u), (v) and (w) of Sub-section (2) "
F whereof read as under:
"(2) In particular, and without prejudice to the generality of
the foregoing power, such rules may provide for all or any
of the following matters, namely:-
G (r) fees and other charges which may be collected by an
aided school;
(s) the manner of inspection of recognised schools
(u) financial and other returns to be filed by the managing
H
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 641
ORS. v. DIRECTOR OF EDUCATION [S.S. SINHA, J.]
committee of recognised private schools, and the authority A
... ;.,
by which such returns shall be audited;
(v) educational purposes for which the income derived by
way of fees by recognised unaided schools shall be spent;
(w) manner of accounting and operation of school funds B
and other funds of a recognised private school;"
3. In exercise of the said rule making power, the
~
Government of National Capital Territory of Delhi framed rules
I • known as the Delhi School Education Rules, 1973 (for short "the c
Rules").
Chapter XIII of the Rules is divided in three parts. Part A
deals with fees and other charges in aided schools, Part B
deals with fee concessions and Part C provides for pupils 'fund.
D
'I Chapter XIV deals with 'School fund'.
•
I may notice Rules 172, 173, 177(1), 177(2)(b), (c), (d), (e)
(3) and (4), which read as under:
"172. Trust or society not to collect fees, etc., schools to
E
grant receipts for fees, etc., collected by it. -- (1) No fee,
• contribution or other charge shall be collected from any
' student by the trust or society running any Recognized
school; whether aided or not.
F
(2) Every fee, contribution or other charge collected from
any student by a Recognized school, whether aided or not,
shall be collected in its own name and a proper receipt
shall be granted by the school for every collection made
by it. G
173. School Fund how to be maintained.-(1) Every
School Fund shall be kept deposited in a nationalized bank
or a scheduled bank or any post office in the name of the
school.
H
642 SUPREME COURT REPORTS [2009] 12 S.C.R.
A (2) Such part of the School Fund as may be approved by
the Administrator, or any officer authorized by him in this "' .-
behalf, may be kept in the form of Government securities.
(3) The Administrator may allow such part of the School
Fund as he may specify in the case of each school,
8
(depending upon the size and needs of the school) to be
kept as cash in hand.
(4) Every Recognised Unaided School Fund shall be kept
deposited in a nationalized bank or a scheduled bank or ..
c in a post office in the name of the school, and such part of
the said Fund as may be specified by the Administrator
or any officer authorized by him in this behalf shall be kept
in the form of Government securities and as cash in hand
respectively :
D
Provided that in the case of an unaided minority •
school, the proportion of such Fund which may be kept in
the form of Government securities or as cash in hand shall
be determined by the managing committee of such
school."
E
177. Fees realized by unaided recognized schools how
to be utilized -
(1) Income derived by an unaided recognized school
F by way of fees shall be utilised in the first instance,
for meeting the pay, allowances and other benefits
admissible to the employees of the school.
Provided that savings, if any, from the fees collected
by such school may be utiljsed by its managing
G committee for meeting capital or contingent
expenditure of the school, or for one or more of the
following purposes, namely :-
(a) *** ***·
H
ACTION COMMITTEE, UN-AIDE.D PVT. SCHOOLS & 643 ·
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
(b) *** *** A
;.;,
or
,, '
.
(c) assisting any other school or educational institution,
not being a college, under the management of the
same society or trust by which the first mentioned B
school is run.
(2) the savings referred to ii] sub-rule (1) shall be arrived
at after providing for the following, namely:-
I-· ,.
(a) *** *** ***·
c
(b) ' the needed expansion of the school or any
expenditure of a development nature;
(c) the expansion of the school building or for the D
expansion or construction of any building· or
'•')
establishment of hostel or expansion of hostel ·
accommodation;
(d) co-curricular activities of the students;
E
(e) reasonable reserve fund not being less than
ten per cent, of such savings;
•
' (3) Funds collected for specific purposes, like sp_orts,
co-curricular activities, subscriptions for excursions F
or subscriptions for magazines, arid annual
charges, by whatever name called, shall be spent
solely for the exclusive benefit of the students of the
concerned school and shall not be included in the
savings referred to in sub-rule (2).
G
(4) The collections referred to in sub-rule (3) shall be
administered in the same manner as the monies,
standing to the credit of the Pupils Fund as~
administered."
H
644 SUPREME COURT REPORTS [2009J 12 S.C.R.
A 4. One Delhi Abibhavak Mahasangh filed a Writ Petition
impleading therein about thirty unaided recognised public
schools, Union of India, Government of National Capital Territory
"'
of Delhi and some other Government Departments to take
necessary steps to regulate admissions in the recognised
8 unaided private schools in Delhi in order to avoid and to check
demand of illegal money in the name of donations by the
schools at the time of admissions; to frame a policy or to make
necessary amendments in the law regulating recognition and
conditions thereof stipulating with regard to admission and
..
c payment of fee etc. of the recognised unaided private schools.
It was alleged that the private schools had been indulging in
large scale commercialization of education which had reached
an alarming situation on account of the failure of the
government to perform its statutory functions under the Act and
the Rules besides failing to insist on schools to follow the
D
affiliation bye-laws and the bye-laws framed by the Central
Board of Secondary Education.
5. Indisputably, the Director of Education, Delhi issued an
order dated 10.09.1997, directing:
E
"1. No Registration Fee of more than Rs. 25/- (Rupees
Twenty Five) per student prior to admission shall be
realised.
2. No Admission Fee of more than Rs. 200/- (Rupees Two
F Hundred) per student at the time of initial admission shall
be realised. Admission Fee shall not be realised again
from any student who is once given admission . The
Admission Fee realized from any student exceeding Rs.
200/- (Rupees Two Hundred) in the academic year 1997-
G 98 shall be refunded to the parents/students within 15 days
of the date of the issue of the direction.
3. No caution money/security of more than Rs. 500/-
(Rupees Five Hundred) per student shall be realized. The
H caution money thus collected shall be kept deposited in a
ACTION COMMITTEE, U~~-AIDED PVT. SCHOOLS & 645
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
-· "' scheduled bank in the name of the concerned schools and A
shall be refunded to the school at the time of his/her leaving
the school along with bank interest thereon. The caution
money collected in the session 1997-98 exceeding Rs.
500/- shall be refunded to the parents/students within 15
days of the issue of the directions. B
4. No separate science fee or computer fee shall be
realized from any student up to the secondary stage.
5. The fee structure of the school (excluding admission fee,
caution money, science fee and computer fee) shall be c
reviewed in a meeting having the proper representatives
of parents and the nominee of the Director of Education,
to consider the feasibility of reducing the fees and funds
keeping in view the actual financial requirement of the
school." D
" \
6. Several writ petitions were filed by the managements
of various Unaided Private Schools questioning the said
directions. The principal questions which fell for consideration
before the High Court were:
E
.. "... whether unaided recognised schools are indulging in
commercialisation of education. Are the students and their
" parents being exploited? If it is so, has the Government
power to issue the impugned order to control and check
menace of commercialisation and exploitation. The further F
question is whether the Government has performed its
statutory functions as envisaged by the Act and the Rules.
If not, what directions are required to be issued."
7. The High Court took notice of the provisions of the Act G
'><,
and various Rules issued thereunder as also the background
under which the impugned order dated 10.09. 1997 was issued.
A Committee headed by Mr. J. Veera Raghvan, former
Secretary in the Ministry of Human Resource Development had
H
646 SUPREME COURT REPORTS [2009] 12 S.C.R.
A been constituted to study the fee structure of the private " .,
recognized unaided schools along with other charges, which
in turn noticed wide variations in the tuition fees charged by the
private institutions. It filed its report suggesting guidelines in
respect of disbursement of the funds.
B
The High Court noticed the recommendations of the
Committee for the year 1997-98 and the circulars which were
issued pursuant thereto.
..j
The High Court also referred to the decision of this Court
c in Unni Krishnan, J.P. v. State of A.P. [(1993) 1 SCC 645] to
opine that no citizen has a fundamental right to deal in
education. It furthermore referred to other decisions of this Court
wherein Rule 177 of the Rules came up for consideration.
D It was held:
"(i) It is the obligation of the Administrator and or Director
of Education to prevent commercialisation and exploitation
in private unaided schools including schools run by
minorities.
E
(ii) The tuition fee and other charges are required to be
fixed in a validly constituted meeting giving opportunity to
the representatives of Parent Teachers Association and
Nominee of Director of Education of place their
F viewpoints.
(iii) No permission from Director of Education is necessary
before or after fixing tuition fee. In case, however, such
fixing is found to be irrational and arbitrary there are ample
powers under the Act and Rules to issue directions to
G school to rectify it before resorting to harsh measures. The >
question of commercialisation of education and
exploitation of parents by individual schools ca.n be
authoritatively determined on thorough examination of
accounts and other records of each school.
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS & 647
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
(iv) The Act and the Rules prohibit transfer of funds from A
the school to the society or from one school to another.
(v) The tuition fee cannot be fixed to recover capital
expenditure to be incurred on the properties of the society.
(vi) The inspection of the schools, audit of the accounts and B
compliance of the provisions of the Act and the Rules by
private recognised unaided schools could have prevented
the present state of affairs.
~
(vii) The authorities/Director of Education has failed in its c
obligation to get the accounts of private recognised
unaided schools audited from time to time.
(viii) The schools/societies can take voluntary donations
not connected with the admission of the ward.
D
) (ix) On the peculiar facts of these petitions there is no per
se illegality in issue of the impugned circular dated 1oth
September 1997.
(x) An independent statutory Committee, by amendment E
of law, if necessary, deserves to be constituted to go into
_, factual matters and adjudicate disputes which may arise
. in future. in the matter of fixation of tuition fee and other
charges.
(xi) The Government should consider extending Act and F
Rules with or without modifications to all schools from
Nursery onward."
8. The High Court directed the appointment of a
Committee comprising of Ms. Justice Santosh Duggal, a retired G
Judge of its Court as a Chairperson with power to nominate
two persons - one with the knowledge of Accounts and other
from the field of education in consultation with the Chief
Secretary of NCT of Delhi. The Duggal Committee in terms of
the said direction submitted its report to the respondent No. 1. H
648 SUPREME COURT REPORTS [2009] 12 S.C.R.
A 9. During the pendency of appe~I before this Court, •
pursuant to the report submitted by the Duggal Committee, the
Director of Education issued a notification on 15.12.1999, the
preamble whereof reads as under:
"Whereas by the judgment dated 30th October, 1998, in
B
C.W.P. No. 3723 of 1997 (Delhi Abhibhavak Magasangh
Vs Union of India, AIR 1999 Del 124), the Hon'ble High
Court of Delhi had considered the order No. DE.15/Act/
Spl.lncp/150/97/1293 -2093 dated 10th September, 1997
and had issued certain directions;
c
And whereas in pursuance of the aforesaid orders
of the Hon'ble High Court of Delhi, a committee was
constituted by the Govt. of NCT of Delhi vide notification
No. 323 dated 7th December, 1998 with (Ms.) Justice
D (Retd.) Santosh Duggal as Chairperson to decide the y
claims in fee like and other charges levied by individual
recognized unaided school for the period covered by the
orders referred to above and the report submitted by the
Committee has been considered by the Government of
E NCT of Delhi;
And whereas the report submitted by the Committee,
after going through the accounts submitted by the schools, ..,
cites a number of irregularities and malpractices, relating
to collection and utilization of funds, indulged in by the
F schools.
Now, therefore, I, S.C Poddar, Director of Education,
Govt. of NCT of Delhi hereby direct the managing
committees/manages of all recognized unaided schools in
G the NCT of Delhi under sub-section (3) of section 24 read
with sub -section (4) and (5) of section 18 of the Delhi
School Education Act, 1973 read with rules 50, 51,177
and 180 of Delhi Schools Education Rules, 1973 and all
other powers enabling me in this behalf, as follows:
H
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 649
ORS. _v. DIRECTOR OF EDUCATION [S.B. SINHA, J.)
); Direction Nos. 7 and 8 thereof, read as under: A
"7. Development fee, not exceeding ten per cent, of the
total annual tuition fee may be charged for supplementing
the resources for purchase, upgradation and replacement
of furniture, fixtures and equipment. Development fee, if B
required to be charged, shall be treated as capital receipt
and shall be collected only if the school is maintaining a
Depreciation Reserve Fund, equivalent to the depreciation
~ charged in the revenue accounts and the collection under
this head alongwith and income generated from the
investment made out of this fund, will be kept in a
c
separately maintained Development Fund Account.
8. Fees/funds collected from the parents/students shall be
utilized strictly in accordance with rules 176 and 177 of the
Delhi School Education Rules, 1973. No amount D
'T
\ whatsoever shall be transferred from the Recognized
unaided school fund of a school to the society or the trust
or any other institution."
10. The said appeals were disposed of by a judgment and E
order dated 27.04.2004 since reported in (2004) 5 sec 583.
,. This Court took into consideration the cost of inflation
between 15.12.1999 and 31.12.2003. In addition to the said
directions given by the Director of Education in its order dated
15.12.1999, other and further directions were also issued. F
11. Indisputably, Unn1 Krishnan (supra), on the basis
whereof the judgment of the High Court rested, was overruled
by an Eleven-Judge Bench of this Court in T.M.A. Pai
Foundation and Others v. State of Karnataka and Others G
"' [(2002) ~cc 481).
For clarification of TM.A. Pai Foundation (supra), another
Constitution Bench was constituted being Islamic Academy of
Education & Anr. v. State of Karnataka & Ors. [(2003) 6 SCC
H
650 SUPREME COURT REPORTS [2009] 12 S.C.R.
A 697]. Later on, a larger bench comprising of Seven-Judges of •
this Court was again constituted for clarification of T.M.A. Pai
Foundation (supra) and Islamic Academy of Education (supra)
in P.A. lnamdar and Others v. State of Maharashtra and
Others, the decision whereof is reported in (2005) 6 SCC 537.
B
12. When judgment in the instant case was pronounced,
this Court did not have the benefit of the decision of this Court
in P.A. lnamdar (supra).
13. Review petitions were filed by the petitioners herein
c for review of the aforementioned judgment dated 27.04.2004.
14. Noticing that the correctness or otherwise of Islamic
Academy of Education (supra) had been referred to a larger
bench and with a view to maintain consistency as also having
D regard to the fact that the issues raised in the review
applications have far reaching implications, notices were •
directed to be issued.
15. It is in the aforementioned backdrop, after the decision
of this Court in P.A. lnamdar (supra), this matter has been
E placed before us.
16. Mr. Soli J. Sorabjee, Mr. Salman Khurshid, learned '
senior counsels and Mr. Romy Chacko, learned counsel
appearing on behalf of the petitioners, in support of the Review
F Petitions, urged:
(i) In view of the larger bench decision pf this Court in
P.A. lnamdar (supra), the directions issued by the
Director of Education which have been upheld by
this Court cannot be sustained as the schools and
G in particular the minority schools have a greater
autonomy in laying down their own fee structure.
(ii) Although collection of any amount for establishment
of the school by a trust or a society is forbidden,
H the transfer of fund by one school to another school
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 651
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
under the same management being permissible in A
terms of Rule 177 of the Rules, the directions
prohibiting such transfer by the Director of
Education in its order dated 15.12.1999 must be
held to be illegal.
B
(iii) The decision of T.M.A. Pai Foundation (supra) with
regard to construction of Article 19(1 )(g) of the
Constitution of India should be considered in its
correct perspective as there exists a distinction
between 'profit' and 'profiteering'.
c
(iv) · The status of a minority institution being on a higher
pedestal, as has been noticed in T.M.A. Pai
Foundation (supra), the impugned directions could ·
not have been issued by the Director of Education
which would affect the autonomy of the minority D
institution ..
17." The· basis for issuing the directions by the High Court
was, as noticed hereinbefore, premised on Unni Krishnan
(supra). Unni Krishnan (supra) has since been overruled in E
TM.A. Pai Foundation (supra) holding that the right of a citizen
of India to set up educational institutions is a fundamental right
It was furthermore held that the right of the minority to set up
educational institution, however, is not absolute being subject
to regulations. So far as the statutory provisions regulating the
facets of administration of an educational institution are F
concerned, in case of unaided minority institutions, the
regulatory measure of control, however, should be minimum.
. The conditions of recognition as also conditions of affiliation
although are required to be complied with but in the matter of
day to day management like appointment of staff, both teaching G
and non-teaching, and in its administrative control, they should
have freedom from any external controlling agency. It was
furthermore held that fees to be charged by unaided institutions
cannot be regulated; however, no institution should charge
H
652 SUPREME COURT REPORTS [2009) 12 S.C.R.
A capitation fee.
18. Clarifying T.M.A. Pai Foundation (supra) and Islamic
Academy of Education (supra), it was held in P.A. lnamdar
(supra):
B "26. These matters have been directed to be placed for
hearing before a Bench of seven Judges under Orders of
the Chief Justice of India pursuant to Order dated July 15,
2004 in P.A. lnamdar and Ors. v. State of Maharashtra
and Ors., (2004) 8 SCC 139 and Order dated July 29,
C 2004 in Pushpagiri Medical Society v. State of Kera/a and
Ors., (2004) 8 SCC 135. The aggrieved persons before
us are again classifiable in one class, that is, unaided
minority and non-minority institutions imparting professional
education. The issues arising for decision before us are
D only three:
(i) the fixation of 'quota' of admissions/students in respect
of unaided professional institutions;
(ii) the holding of examinations for admissions to such
E colleges, that is, who will hold the entrance tests; and
(iii) the fee structure.
27. In the light of the two orders of reference, referred to
hereinabove, we propose to confine our discussion to the
F
questions set out hereunder which, according to us, arise
for decision:-
(1) *** ***
G (2) *** ***
(3) Whether Islamic Academy could have issued guidelines
in the matter of regulating the fee payable by the students
to the educational institutions?
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS & 653
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
(4) Can the admission procedure and fee structure be A
< + regulated or taken over by the Committees ordered to be
constituted by Islamic Academy?
69. With regard to the ambit of the constitutional guarantee
of protection of educational rights of minorities under B
Article 30, learned counsel submits that both religious and
linguistic minority, as held in Pai Foundation , are to be
determined at the State level. On this understanding of the
concept of 'minority', Article 30 has to be harmoniously
.lo
construed with Article 19(1)(g) and in the light of the
Directive Principles of the State Policy contained in the
c
Articles 38, 41 and 46. Rights of minorities cannot be
placed higher than the general welfare of the students and
their right to take up professional education on the basis
of their merit.
D
·..: 109. And yet, before we do so, let us quote and reproduce
JL
' paragraphs 68, 69 and 70 from Pai Foundation to enable
easy reference thereto as the core of controversy touching
the four questions which we are dealing with seems to have
originated therefrom ... " E
Noticing in extenso paragraphs 68, 69 and 70 of T.M.A.
.(
Pai Foundation (supra), it was held:
)'
"129. In Pai Foundation, it has been very clearly held at
several places that unaided professional institutions should F
be given greater autonomy in determination of admission
procedure and fee structure. State regulation should be
minimal and only with a view to maintain fairness and
transparency in admission procedure and to check
exploitation of the students by charging exorbitant money G
:>( or capitation fees."
As regards, regulation of fee, it was opined:
"139. To set up a reasonable fee structure is also a
H
654 SUPREME COURT REPORTS [2009] 12 S.C.R.
A component of "the right to establish and administer an
institution" within the meaning of Article 30(1) of the +
Constitution, as per the law declared in Pai Foundation.
Every institution is free to devise its own fee structure
subject to the limitation that there can be no profiteering
B and no capitation fee can be charged directly or indirectly,
or in any form (Paras 56 to 58 and 161 [Answer to Q.5(c)]
of Pai Foundation are relevant in this regard)."
It was concluded:
c "146. Non-minority unaided institutions can also be
subjected to similar restrictions which are found
reasonable and in the interest of the student community.
Professional education should be made accessible on the
criterion of merit and on non-exploitative terms to all
D eligible students on a uniform basis. Minorities or non-
minorities, in exercise of their educational rights in the field
of professional education have an obligation and a duty
,.
to maintain requisite standards of professional education
by giving admissions based on merit and making
E education equally accessible to eligible students through
a fair and transparent admission procedure and based on
a reasonable fee structure."
)
19. The short question which arises for consideration is y
as to whether any direction contained in any statute, statutory
F rules as also statutory directions, should be revisited in terms
of the Seven-Bench decision of this Court in P.A. /namdar
(supra).
20. I may, however, at the outset notice that before the High
G Court as also before us the constitutionality of the provisions
of the Act as also the Rules framed thereunder are not in
question. There cannot furthermore be any doubt whatsoever >
that a citizen's fundamental right contained in Article 19(1)(g)
of the Constitution of India would be subject only to reasonable
H restrictions as envisaged under Clause (6) thereof. Reasonable
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 655
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
restriction in terms of the aforementioned provision can be'laid A
'• + down inter alia by reason of a legislative act.
'
21. In Unni Krishnan (supra), it was held that no citizen ·
has any fundamental right to set up an educational if!stitution.
Some guidelines had been issued. Those guidelines .
B
indisputably have been held to be unconstitutional in T.M.A. Pai
Foundation (supra) and in P.A. lnamdar (supra), and, .thus, I
have no hesitation to hold that the directions con.!ain~d in .~he
said order dated 15.12.1999 cannot be upheld._The Director
.>.:
of Education moreover exercised its authority
'
illegally
.
and
. .
C'
without jurisdiction.
The doctrine of res extra commercium being not
applicable in relation to imparting of education by private
unaided institutions or even private aided institutions, it is .
difficult to conceive as to how restrictions relying on or on,the D,
'f
'\
basis of the doctrine which is wholly inapplicable could be
--
I
extended thereto. I, therefore, am of the opinion that the
principle laid down in Unni Krishnan (supra) which has been .
overruled in T.M.A. Pai Foundation (supra) cannot be made
to apply directly or indirectly. It may be noticed that in Union of E
India & Ors. v. Mis Martin Lottery Agencies Ltd. [2009 (7)
SCALE 34], it is stated as under:
<
" "The concept of res extra commercium may in future be
required to be considered afresh having r~g~rd to its origin
F
to Roman Law as also the concept thereof. Conceptually
a
business may be carried out in respect of property which '
is capable of being owned as contrasted to those which
cannot be. Having regard to the changing concept of the
"" right of property, which includes all types of properti~s
capable of being owned including intellectual property, it G
)(
is possible to hold that the restrictions which can be
imposed in carrying on business in relation thereto must
only be reasonable one within the meaning of Clause (6)
of•Article 19 of the Constitution of India."
H
656 SUPREME COURT REPORTS [2009] 12 S.C.R.
A It is also of some interest to note that opinions in the
academic field are being expressed that res extra commercium •'
is an expression wrongly used in the last sixty years by this
Court and other High Courts. No activity can be called "res extra
commercium". It is either permitted or not. Having regard to its
B conceptual roots to Roman law, it would mean only those things
which are not incapable of being ownership and, thus, any
matter which is res extra commercium were things incapable
of ownership be vests in res in commercio. [See Arvind Datar,
"Privilege, Police Power and Res Extra Commercium - Glaring
c Conceptual Errors" 21(1) National Law School of India Review
133 (2009)]
Subba Rao, J. moreover in Krishnan Naru/a v. Jammu &
Kashmir [Al R 1967 SC 1368] stated, "if the activity of a dealer
in ghee is business then how does it cease to be business if it
D is in liquor?
..
22. The circular letter issued by the Director of Education '
......
dated 15.12.1999 may now be considered.
23. Sub-s:~ction (3) of Section 24 of the Act does not confer
E
any power on the Director to issue directions.
24. The order dated 15.12.1999 is not a statutory order.
Such a statutory order also could not have been issued under
"
the directions of the High Court as the very premise on which
F such directions have been issued does not survive any longer
in view of the decision of this Court in T.M.A. Pai Foundation
(supra).
25. Direction Nos. 7 and 8 issued by the Director of
G Education in its order dated 15.12.1999, which have been
noticed by this Court in paragraph 11 of the judgment reported
x
in (2004) 5 SCC 583, are contrary to Clause (c) of the proviso
appended to Rule 177(1) of the Rules. Whereas any fee,
contribution or other charge cannot be collected from any
student by a trust or a society running a recognised school,
H
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 657
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
.+, collection of such fee is not prohibited by a school. What is A
restrainted is that all collections should be made by a school
in its own name and receipt therefor shall be given.
26. All regulations applicable to aided or unaided
recognised institutions, therefore, must be found in the statute
8
and/ or the Rules. The Rules, in my opinion, require to be
revisited by the State in the light of the decision of this Court in
P.A. lnamdar(supra), but herein I am not concerned therewith.
27. Rule 177 of the Rules provides for utilisation of the fees
realised by unaided recognised schools. There is no regulation C
as regards fee. Fee, of course, should not be such which would
amount to profiteering. So far as utilisation of savings from the
fees collected by such school by its managing committee is
concerned, the same can be utilised for the purpose of
"' assistance of any other school or educational institution under D
-., the management of the same society or trust by which the first
mentioned school is run.
28. Submission of Mr. S. Wasim A. Qadri and Mr. Ashok
Agarwal, learned counsel appearing on behalf of the E
respondents that having regard to the fact that the scheme for
, management of the school, as contained in Section 5 of the
"' Act, does not permit utilisation of the fee collected by a
managing committee of the school by another managing
committee of another school and, thus, the word 'management'
F
should be given a restricted meaning, cannot be accepted.
[See Official Trustee of W.8. v. Stephen Court 2006 (14)
SCALE 285]
Clause (c) of the proviso appended to Rule 177(1) of the
Rules itself raises a distinction_ It uses both the words G
"$
"managing committee" and "management". They must be held
to have different meanings.
Clause (c) of the proviso appended to Rule 177(1) refers
to the management of the same society or trust which means H
658 SUPREME COURT REPORTS [2009J 12 S.C.R.
A there may be more than one school which is under the same ...
management. If the word "management" is substituted by the
word the "managing committee", the same would lead to an
anomalous situation. The very fact that grant of assistance to
any other school or educational institution, subject of course to
B the limitations provided for therein being permissible, it, in my
opinion, would not be correct to contend that the managing
committee of a school can under any circumstances render any
financial assistance to the managing committee of the another
school. Such assistance can be rendered if both the schools )
c are under the management of the same society or trust.
29. I, in view of the statement of law laid down in P.A.
lnamdar (supra), am of the opinion that the authorities of all the
schools, particularly, unaided schools, may lay down its own fee
criteria. Imposition of regulation, however, only is permissible
D for the purpose of exercising of control over profiteering and \
not earning of a profit which would include reasonable return
of the investment made. I say so because in T.M.A. Pai
Foundation (supra), this Court itself held:
E "50. The right to establish and administer broadly
comprises of the following rights:-
(a) ***
(b) to set up a reasonable fee structure ...
F
54. The right to establish an educational institution can be
regulated; but such regulatory measures must, in general,
be to ensure the maintenance of proper academic
standards, atmosphere and infrastructure (including
G qualified staff) and the prevention of mal-administration by
those in charge of management. The fixing of a rigid fee )
structure, dictating the formation and composition of a
government body, compulsory nomination of teachers and
staff for appointment or nominating students for admissions
would be unacceptable restrictions.
H
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS & 659
ORS. v. DIRECTOR OF EDUCATION [S.B. SINHA, J.]
56 ... The decision on the fee to be charged must A
necessarily be left to the private educational institution that
does not seek or is not dependent upon any funds from
the government.
57 ... There can, however, be a reasonable revenue 8
surplus, which may be generated by the educational
institution for the purpose of development of education and
expansion of the institution."
On a perusal of T.M.A. Pai Foundation (supra) and P.A.
lnamdar (supra), it can be inferred that private unaided C
institutions are permitted to have a profit but not permitted to
profiteer. They have also been given autonomy subject to
reasonable restrictions in the interest of minority institutions
permissible under Article 30 (1) and in the interest of general
public under Article 19(6) of the Constitution of India. It would, D
in my opinion, be incorrect to lay down any general rule and _
enforce them on a private unaided institutions by way of gap-
filing exercise and discipline or otherwise, despite the fact that
Rule 177 of the Rules occupies the field. Such restrictions
sought to be imposed, for all intent and purport, take away the E
autonomy regime of the unaided schools which are applicable
_,'
to these institutions in terms of the aforementioned Constitution
Bench decisions.
The institutions, in view of the aforementioned decisions F
of the larger bench, admittedly are entitled to earn some profits
and as such any direction contrary thereto or inconsistent
therewith by directing them to maintain books of account on the
principles applicable to non-business organization/not-for-profit
organization. Even otherwise such directions run contrary to the
ordinary accounting principles and/or Income Tax Laws. G
30. Contention of Mr. Chacko so far as extent of right of
the minorities in. establishing their institutions has never been
raised before us in the main matter. The contention which did
not fall for consideration in the main judgment cannot be a H
660 SUPREME COURT REPORTS [2009] 12 S.C.R.
A subject matter of review.
It also goes without saying that the judicial discipline
mandates the Bench comprising of two or three Judges to
follow the Constitution Bench decisions having regard to Article
B 141 of the Constitution of India. (See State of West Bengal v.
Ashish Kumar Roy & Ors. [(2005) 10 SCC 11 O]
31. I, therefore, clarify the judgment that any direction
issued by the High Court, by the rule making authority or any
statutory authority must be in conformity with the decision of this
C Court in T.M.A. Pai Foundation (supra) as clarified by the
decision of this Court in P.A. lnamdar (supra).
32. Before parting, however, I may notice that the
Government of NCT of Delhi has not amended the statutory
D rules on the basis of the recommendations of the Duggal
, Committee. I have only considered herein the validity of the
directions issued by the Director of Education in terms of the
order dated 15.12.1999. While, thus, it will be open to the State
to amend its rules, it goes without saying, the management of
E the schools shall also be at liberty to challenge the validity
thereof if and when such a question arises.
\
33. The decision of this Court to the aforementioned extent
is modified. Review petitions are disposed of accordingly. No
costs.
F
S.H. KAPADIA, J. 1. By these review petitions under
Order XL Rule 2 of the Supreme Court Rules 1966 read with
Article 137 of the Constitution of India the petitioners (Action
Committee Un-Aided Pvt. Schools & Ors.) seeks review of
G Judgment dated 27.4.2004 passed in Civil Appeal No. 2700/
01 and others. f
Facts:
2. On 8.9.1997 a PIL was filed in the Delhi High Court by
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS v. 661
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
· Delhi Abibhavak Mahasangh (Parents' Association) being writ A
petition no. 3723/97 challenging the fee hike in various schools
in Delhi. One of the charges in the writ petition against Unaided
Recognized Schools was transfer of funds by the Schools to
.... the societies/trusts and/or to other schools run by the same
society/trust, which according to the Mahasangh was in violation B
of Delhi School Education Act, 1973 ("1973 Act") and Rules
framed thereunder. Simultaneously, the Action Committee of
Unaided Private Schools also filed civil writ petition no. 4021/
)I
97 in the same High Court inter alia praying for setting aside
Order dated 10.9.1997 issued by the Director of Education c
(DoE). It may be noted that vide Order dated 10.9.1997, DoE
found that in some cases surplus money was transferred to
parent societies and other schools in violation of Rule 177.
Accordingly, DoE directed that fees and funds collected from
the parents be utilized in accordance with rule 177.
D
.,.,, 3. Rules 172, 175, 176 and 177 of the Delhi School
Education Rules, 1973 are quoted hereinbelow:
"172. Trust or society not to collect fees, etc., school to
grant receipts for fees, etc., collected by it.--(1) No fee, E
contribution or other charge shall be collected from any
student by the trust or society running any recognised
... school; whether aided or not.
(2) Every fee, contribution or other charge collected from
any student by a recognised school, whether aided or not, F
shall be collected in its own name and a proper receipt
shall be granted by the school for every collection made
by it.
*** G
175. Accounts of the school how to be maintained.- The
accounts with regard to the School Fund or the
Recognised Unaided School Fund, as the case may be,
shall be so maintained as to exhibit, clearly the income
H
662 SUPREME COURT REPORTS [2009] 12 S.C.R.
A accruing to the school by way of fees, fines, income from
+·
building rent, interest, development fees, collections for
specific purposes, endowments, gifts, donations,
contributions to Pupils' Fund and other miscellaneous
receipts, and also, in the case of aided schools, the aid
B received from the Administrator.
176. Collections for specific purposes to be spent for that
purpose.--lncome derived from collections for specific
purposes shall be spent only for such purpose.
c 177. Fees realised by unaided recognised schools how
to be utilised.--(1) Income derived by an unaided
recognised school by way of fees shall be utilised in the
first instance, for meeting the pay, allowances and other
benefits admissible to the employees of the school:
D
Provided that savings, if any, from the fees collected by r
such school may be utilised by its managing committee
for meeting capital or contingent expenditure of the school,
or for one or more of the following educational purposes,
namely-·
E
(a) award of scholarships to students;
(b) establishment of any other recognised school; or "
(c) assisting any other school or educational institution, not
F
being a college, under the management of the same
society or trust by which the first-mentioned school is run.
(2) The savings referred to in sub-rule (1) shall be arrived
at after providing for the following, namely--
G
(a) pension, gratuity and other specified retirement and
other benefits admissible to the employees of the school;
(b) the needed expansion of the school or any expenditure
of a developmental nature;
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS v. 663
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
(c) the expansion of the school building or for the A
expansion or construction of any building or establishment
of hostel or expansion of hostel accommodation;
(d) co-curricular activities of the students;
(e) reasonable reserve fund, not being less than ten B
percent, of such savings.
(3) Funds collected for specific purposes, like sports, co-
curricular activities, subscriptions for excursions or
"'· subscriptions for magazines, and annual charges, by c
whatever name called, shall be spent solely for the
exclusive benefit of the students of the school concerned
and shall not be included in the savings referred to in sub-
rule (2).
... (4) The collections referred to in sub-rule (3) shall be D
..,
administered in the same manner as the monies standing
to the credit of the Pupils' Fund are administered."
4. Directive dated 10.9.1997 issued in this regard reads
as follows: E
"(f) Fees and funds collected from the parents shall be
. utilized strictly in accordance with rule 177 of the Rules .
No amount whatsoever, shall be transferred from the
Recognised Unaided School Fund of \'! school to the
F
Society or the Trust, as the case may be, running that
sc_hool nor shall any expenditure be incurred which is not
beneficial to the students or the employees of that school."
5. On 30.10.1998, both the petitions referred to
hereinabove were disposed by a common judgment by the G
r Delhi High Court in the case of Delhi Abibhawak Mahasangh
v. Union of India & Ors. reported in 76 (1998) DLT 457.
6. Relevant paragraphs from the judgment of the Delhi
High Court read as follows: H
664 SUPREME COURT REPORTS [2009] 12 S.C.R.
A "20. The background under which the impugned order
were issued as discernable from government files may
now be noticed. It seems that the government received
complaints that number of public schools had arbitrarily
increased fees and other charges without any justification.
B A special committee was constituted to conduct special
inspections mainly to examine the justification of increasing
the fees. The inspection was restricted to few prominent
schools. To carry out the inspection 5 different teams
comprising of officers of Directorate of Education were
c constituted to look into the matter of accounts and to also
examine whether fees charged is commensurate with the
facilities provided to the students and teachers. The
inspection teams were required to examine 5 years
accounts and examine amounts received from students as
fees/other charges under each head including donations,
D
security, building fund, activity fees, laboratory fees, games •
fees, horse riding fees etc. besides transportation/bus
charges and the amounts actually spent under the specified
heads. The committee was also required to examine if
there was any surplus under any head and how the surplus
E money was used. The financial transactions between the
school management and the society were also required
to be checked. The inspection of 16 schools was
conducted. From a perusal of the inspection reports, the
...
government found gross financial mismanagement and
F violation of various provisions of the Act and the Rules and
observed that almost all the schools were charging
exhorbitant admission fee, caution money, tuition fee and
other charges under various heads in violation of Section
18(4)(b) of the Act read with Rule 176. The Government
G also observed that by charging the exhorbitant amounts
schools had generated large amount of surplus funds and
in some of the cases it was found that surplus money had
been transferred to the parent Society in violation of Rule
177. Some of the Managing Committees of the Schools
H had transferred the school fund for establishing the schools
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 665
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
even outside Delhi. The utilisation of the funds was not A
, .....
found to be in the manner prescribed under Rule 177. It
was found that the schools were spending money in
purchasing and maintaining luxury cars etc. which were not
useful and necessary for the benefit of the students. It was
observed that the financial irregularities had been noticed B
in all the schools which were inspected under Section 24(2)
of the Act and the possibility of such irregularities by other
unaided recognised schools could not be ruled out.
Noticing that the Directorate of Education does not have
sufficient infrastructure to carry out special inspections of c
about 800 such schools, the general directions in public
interest were decided to be issued. This is the background
under which the impugned order dated 10th September
1997 was issued.
D
...
'\
- 34. Chapter IV of the Rules deal with school funds. Rule
172, interalia, prohibits Trust or Society running any
recognised school to collect fee contribution or other
charges from any student. Amounts have to be collected E
only by the School and kept in school fund as provided in
Rule 173. Rule 176 provides that income derived from the
.. collection for specific purposes shall be spent only for such
purpose. Rule 177 states as to how the fee collected by
unaided schools is to be utilised. It, inter alia, stipulates F
that funds collected for specific purpose shall be spent
solely for the exclusive benefit of the students. Since
considerable emphasis was laid by the parties on Rule
177 it will be useful to reproduce the same as under:-
· 111. Fees realised by unaided recognised schools how G
r to be utilised-
(1) Income derived by an unaided recognised schools
by way of fees shall be utilised in the first instance
for meeting the pay, allowances and other benefits, H
666 SUPREME COURT REPORTS [2009] 12 S.C.8-
A admissible to the employees of the school.
+- '
Provided that savings, if any from the fees collected by such
school may be utilised, by its managing committee for
meeting capital or contingent expenditure of the school, or
for one or more or the following educational purposes,
B
namely:-
(a) award of scholarships to student;
(b) establishment of any other recognised school, or
c (c) assisting any other school or educational institution, nor
being a college, under management of the same society
for trust by which the first mentioned school is run.
(2) The savings to in sub-rule (1) shall be arrived at after
D providing for the following, namely:-
,r
(a) pension, gratuity and other specified retirement and
other benefits admissible to the employees of the school: -
(b) the needed expansion of the school or any expenditure
E of a development nature;
(c) the expansion of the school building or for the
expansion or construction of any building or establishment ...
of hostel or expansion of hostel accommodation.
F
(d) co-curricular activities of the students.
(e) reasonable reserve fund, not being less than ten percent
of such savings.
G (3) Funds collected for specific purposes, like sports,
cocurricular activities, subscriptions for excursions or
subscription for magazine, and annual charges, by
whatever name called, shall be spent solely for the
exclusive benefit of the students of the concerned school
H and shall not be included in the savings referred to in sub
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 667
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
rule (2). A
~ .....
(4) The collections referred to in sub-rule (3) shall be
administered in the same manner as the monies standing
to the credit of the Pupils Fund are administered.'
B
36. In M.C.O. vs. Children Book Trust, 1992 (3) SCC 390
the Apex court has held that Rule 177 requires the utilisation
of the income only for the purpose mentioned in that Rule.
"' The Rules do not contemplate transfer of fund from School c
to Society. Such transfer of funds are in disregard.of the
Rules. Such transfers cannot, by any process of reasoning,
... be held as voluntary contributions received by the Society.
The school being a separate entity premises occupied by
the school will belong to it and not to the Society. The D
., Supreme Court has noticed with approval the observations
. I
made by this court in Safdarjung Enclave Educational
Society Vs. Delhi Municipal Corporation, AIR 1989 Delhi
266, to the effect that the Society was being run purely on
commercial lines for purposes of·profit and it is the receipt
E
of income generated from the Society. in the form of
, building fund and donations etc. which are forced on
.. students and their guardians and the same were not
voluntary contributions. In our view, these observations
would not be diluted merely because the same were made
in the context of exemption for payment of house tax under F
Section 115(4) of the Delhi Municipal Corporation Act,
1957. The Safdarjung Enclave Educational Society was
running Green Field School recognised under the Act.
G
54. Assuming power to regulate fee etc. can be inferred
from Section 24, a bare perusal of Section shows that it
does not confer any general power on Director of
Education. Reading of sub-section (3) and (4) of Section
H
•
668 SUPREME COURT REPORTS [2009] 12 S.C.R.
A 24 shows that only specific directions in respect of a
particular school in which a defect or deficiency may be
found at the time of inspection or otherwise, can alone be
issued. On failure to comply with any directions given under
sub-section (3), the Director of Education, as
B contemplated by sub-section (4), can take suitable action
including withdrawal of recognition etc. It was contended
that assuming Section 24 could be applied, the 16 schools
on inspection of which alleged defects and deficiencies
were found then action against only those schools, after
c following the procedure laid down in the Act and the Rules,
could alone be taken. We may also note another Rule
which shows that if any school indulges in
D
commercialisation of education, the Director of Education
is not powerless to take appropriate action. Rule 50 in
Chapter IV provide for condition for recognition of private
schools. Under the said rule a recognised school has to
-
continue to follow the conditions specified in the Rules. Sub ' '
rule (iv) of Rule 50 provides that the school is not run for •
profit to any individual, group or association of individuals
or any other person. If the Director of Education finds that
E the school is being run for profit, such a school would be
violating a condition of recognition and thus it can be
asked to rectify it failing which to face the consequences
which may be withdrawal of recognition as a result of not
continuing to fulfill the condition of recognition. The Director
F of Education would be justified in asking the scilool to
explain facts which according to Director of Education may
show that the school is being run for profit. The school is
obliged to explain facts to the satisfaction of Director of
Education. If it is unable to do so, the Director of Education
G can ask the school to reduce the fee and other charges
which according to the Director show that the school is
indulging in the profit motives. In our view, it would not be
open to the school to say that the Director of Education
has no power to direct the school to reduce the fee and
H other charges as no such power vests in respect of
•
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 669
DIRECTOR OF EDUCATION [S.H. KAPADIA. J.]
unaided schools because Section 17(1) & (2) of the Act A
applies only to aided schools. The direction to reduce the
fee and charges is to avoid straightaway taking the
extreme step of withdrawal of recognition or taking over
the school. It is an opportunity given to the school so that
the Director of Education may not resort to withdrawal of 8
recognition or steps for taking over of the management are
not taken. It only amounts to granting an additional
opportunity to the school so that on compliance the extreme
action of withdrawal of recognition or taking over of
management etc. may be avoided. But for the findings and C
recommendations of Raghvan report which makes the
present case as quite peculiar and to which we will advert
- a little later, we find force in the submission that Section
24 and Rule 50 are applicable to specific schools which
may be found to be violating these provisions. Despite this D
- conclusion, we feel that the problem here is peculiar which
necessitated issue of general order which per se cannot
be held to be illegal in facts and circumstances of these
cases.
E
;'
62. In Mrs. Y. Thec/amma Vs. Union of India and others,
• 1987 (2) sec 516, the question that came up for
consideration before the Supreme Court was whether
Section 8(4) of the Delhi School Education Act which, inter F
·alia, provided that no employee shall be suspended
without the approval of the Director of Education would be
applicable to the minority institutions or not. The case of
the minority institutions was that it encroached upon their
right under Article 30(1) of the Constitution. Relying upon G
the decision in the case of Frank Anthony Public School
the Supreme Court held that the endeavor of the court in
all cases has been to strike a balance between the
Constitutional obligation to protect what is secured to the ~
employees under Article 30(1) and the social necessity to
H
670 SUPREME COURT REPORTS [2009] 12 S.C.R.
A protect the members of the staff against arbitrariness and + -
victimisation. It was accordingly held that Section 8(4)
cannot be said to have encroached upon the right of the
minorities under Article 30(1).
66. In view of the aforesaid discussion our conclusions may
B be summarised as under:-
(i) It is the obligation of the Administrator and. or Director
of Education to prevent commercialisation and exploitation
in private unaided schools including schools run by
c minorities.
(iii) No permission from Director of Education is necessary
before or after fixing tuition fee. In case, however, such
-
D fixing is found to be irrational and arbitrary there are ample
powers under the Act and Rules to issue directions to
school to rectify it before resorting to harsh measures. The
question of commercialisation of education and
exploitation of parents by individual schools can be
-
E authoritatively determined on thorough examination of
accounts and other records of each school.
(iv) The Act and the Rules prohibit transfer of funds from
the school to the society or from one school to another.
F
67. Having bestowed our thoughtful consideration to the
submission of counsel for the parties and afore- noticed
detail facts and circumstances, we are of the view that an
G independent Committee deserves to be appointed for the
period covered by impugned order dated 1oth September,
1997 up to start of academic session in the year 1999, to
look into the cases of the individual schools and determine,
on examination of record and accounts etc. Whether
H increase of tuition fee and other charges, on facts would
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 671
DIRECTOR OF EDUCATION [S:H. KAPADIA, J.]
,
..._ be justified or not. Eliminating the element of A
commercialisation and in light of this decision the
Committee would determine fee and other charges
payable by students of individual schools. We do not think
that it would be desirable at present to permit any further
increase than what has already been permitted by order B
dated 11th December, 1997. We would, therefore, extend
the aforequoted order dated 11th December, 1997 till
decision of cases of individual schools by Committee
;x appointed by this judgment.
68. We, accordingly, appoint a Committee comprising of
c
Ms. Justice Santosh Duggal, a retired Judge of this court
as Chairperson with power to nominate two persons - one
with the knowledge of Accounts and Second from field of
education in consultation with Chief Secretary of NCT of
D
,.,\ Delhi to decide matters of fee and other charges leviable
by individual schools in terms of this decision. We request
the Committee to decide the claims of individual schools
as expeditiously as possible after granting an opportunity
to the Schools. Director of Education and a representative
of the Parent Teachers Association and such other person E
., as the Chairperson may deem fit. The terms and
., conditions including fees/honorarium payabl~ and other
facilities to be provided by the State Government to the
Chairperson and other members of the Committee would
be discussed by the Chief Secretary with the Chairperson F
and finalized within 1O days."
As can be seen from the said judgment, the High Court
directed that an independent Committee deserves to be
appointed for the period covered by the impugned Order dated G
;-- 10.9.1997 issued by DoE to look into the cases of individual
Schools and decide whether increase of tuition fees and other
charges would be justified or not. Accordingly, a Committee
comprising of Justice Santosh Duggal, a retired Judge of the
Delhi High Court was appointed as a Chairperson to look into H
672 SUPREME COURT REPORTS [2009] 12 S.C.R.
A the fee structure levied by individual schools. ,... ,
7. Being aggrieved by the decision of the High Court to
appoint Duggal Committee, the Action Committee, came to
this Court by way of Special Leave Petition No. 19157/98 (Civil
Appeal No. 2700/01). In the civil appeal, the Action Committee
B
challenged the power of the High Court to appoint a Committee,
which, according to the appellant was beyond the scope and
the provisions of Delhi School Education Act, 1973. It was
further pleaded that Order dated 10.9.1997 issued by DoE had
ignored the statutory provisions of the 1973 Act and the Rules
c framed thereunder. That, Order dated 10.9.1997 was
puleortedly issued by DoE under Section 24(3). That, from the
sc · eme of Section 24, it was clear that the directions to be
issued by DoE had to be specific to the school which had been .....
inspected. That, there was no power under Section 24(3) to
D regulate the fee structure of an Unaided Recognised School. /
According to the Action Committee, the impugned Order dated
10.9.1997 issued by DoE empowered him only to carry out
School specific inspection and not to regulate the fee structure
of an unaided recognized school under Section 24(3) of the
E 1973 Act. According to the Action Committee, the Delhi High
Court had erred in upholding the said Order dated 10.9.1997. .
Insofar as the transfer of funds from the school to the society ,.
was concerned, the Action Committee submitted that under the
1973 Act, the school was not a specific juristic entity separate
F from the society; that under Rule 50, one of the conditions of
recognition is that the school must be run by a society
registered under the Societies Registration Act, 1860 and that
the Managing Committee of the School is subject to the control
and supervision of the trust or society running the school and,
G therefore, the school and the society running the school were
one and the same entity. Therefore, according to the Action
Committee, transfer of funds from school to the society or vice
versa was the internal mechanism of the school which had no
bearing with the question as to whether the funds were misused.
H According to the Action Committee, the High Court had erred
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS v. 673
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
in holding that funds cannot be transferred from the school to A
the society as there is no prohibition in the 1973 Act in relation
to such transfers so long as the utilization of the funds is for the
benefit of the school(s) in accordance with Rule 177.
8. As stated above, the Action Committee filed its special B
leave petition in this Court on 28.11.1998.
9. On 31.7.1999, Duggal Committee submitted its Report.
Some of the findings and conclusions mentioned in the said
.JI.. Report are quoted hereinbelow:
c
"7.18. The Committee observed that in addition to the
tuition fee, schools were also charging fees under various
. other heads as well. The Report of the J. Veeraraghvan
Committee on 'Fee StrG:::ture of the Delhi Private Schools'
(1997), has listed as many as 50 heads under which the D
:\ fee was being collected in the schools in Delhi.
Furth~rmore, there is also no uniformity, among schools
in regard to the nomenclature used for different types of
levies under 'other charges'. In addition to this, items
charged under the same head also differ from school to E
school. This has resulted in avoidable ambiguities and
-J
distortions in the fee structure which could become a
... vehicle for exploitation where the schools were so inclined .
F
4. There is a pronounced tendency since 1996-97, on the
part of the schools, to generally under-state surplus/over-
state the deficit. This was often sought to be achieved by
resorting to over-provisioning under certain heads of
expenditure such as gratuity, property tax etc.; diverting G
-t· (even prior to determining the surplus) a part of the school
revenue receipts to various funds usually created with the
specific intention of temporarily parking the money in them;
charging of depreciation without simultaneously setting up
a Depreciation Reserve Fund for replacing the assets; H
674 SUPREME COURT REPORTS [2009] 12 S.C.R.
A depreciating assets not owned by the school and
simultaneously transferring equivalent amounts to the
parent society; not including the income accrued from
certain activities under the head 'fee' in the Income and
Expenditure Account and simultaneously not crediting
B these receipts to the 'Recognised Unaided School Fund',
but concurrently charging the expenditure incurred on the
related activities, to the Income and Expenditure Account;
non capitalization of expenditure of capital nature and
instead charging it to the Income and Expenditure Account;
c incurring expenditure on items and for purposes not strictly
falling within the scope of Delhi School Act and Rules,
1973 (Rule 177); transferring the money to the parent
society under various pretexts such as payment of lease
rent, contribution to Education Development Expenditure,
D incurring recurring expenditure on the maintenance of the
office of the parent society and maintenance of cars for •
I
the use of the Society etc.
There was also a visible spurt in expenditure more
particularly in 1997-98 on certain items such as
E professional fees, maintenance and other overhead
charges of the school. [Paras 6.2, 6.3 and 6.4]"
..
10. To complete the chronology of the relevant events, it .
may be stated that although the special leave petition came to
F be filed by the Action Committee inter alia challenging order
of DoE dated 10.9.1997 and the judgment of the Delhi High
Court appointing that Committee, by way of an affidavit filed
on 21.2.2001 in the pending civil appeal in this Court, the Action
Committee inter alia also challenged the Report of the Duggal
G Committee dated 31.7.1999 in following terms:
"That as per the orders of the High Court, the terms of
reference of the committee were specific, however, the
committee has converted itself into a general committee
to analyse the problem of un-aided public schools in Delhi
H and has given a vague unsubstantiated report without even
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 675
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
.... hearing the schools, in the absence of any material against A
the schools. Right from the first para of the report, it looks
that the committee has proceeded with the closed and
biased mind against the culture of the un-aided private
schools."
B
11. At this stage, it may be stated that in terms of the
Report of the Duggal Committee, the DoE issued an order on
15.12.1999. This was also during the pendency of the civil
appeal filed by the Action Committee. Clause 8 of the
Directions dated 15.12.1999 reads as follows:
c
"Fees/funds collected from the parents/students shall be
utilized strictly in accordance with rules 176 and, 177 of the
Delhi School Education Rules, 1973. No amount
whatsoever shall be transferred from the recognized
unaided school fund of a school to the society or the trust D
'\ or any other institution."
12. When the matter reached final hearing, three points
were argued. The said three points are quoted hereinbelow:
"(a) Whether the Director of Education has the authority E
to regulate the quantum of fees charged b unaided
..
'(
schools under Section 17(3) of the Delhi School
Education Act, 1973?
(b) Whether the direction issued on 15-12-1999 by the F
Director of Education under Section 24(3) of the
Delhi School Education Act, 1973 stating inter alia
that no fees/funds collected from parents/students
shall be transferred from the Recognised Unaided
School Fund to the society or trust or any other G
t· institution, is in conflict with Rule 177 of the Delhi
School Education Rules, 1973?
(c) Whether managements of recognised unaided
schools are entitled to set up a Development Fund
H
676 SUPREME COURT REPORTS [2009] 12 S.C.R.
A Account under the provisions of the Delhi School
Education Act, 1973?"
13. In the review petitions, we are mainly concerned with
the first two points. It may be noted that the judgment under
review was delivered by this Court on 27.4.2004. At that time,
8
the judgments of this Court in T.M.A. Pai Foundation v. State
of Karnataka reported in (2002) 8 SCC 481 and Islamic
Academy of Education v. State of Karnataka reported in
(2003) 6 SCC 697 held the field. Therefore, this Court was
required to decide the question of reasonable fee structure and
C the autonomy of the institution, transparency and accountability
in the context of the judgments in T.M.A. Pai Foundation case
(supra) and Islamic Academy of Education case (supra). The
majority view in the present case finds place in paras 17, 18,
21 and 23.
D
14. Analyzing Rules 172, 175, 176 and 177, this Court held
that application of income was not accrual of income. The
majority view was that there was a difference between
appropriation of income and transfer of funds. It was further held
E by the majority that under clause 8 of the Order of DoE dated
15.12.1999 the management was restrained from transferring
funds to the Society or the Trust(s) or any other institution,
whereas rule 177(1) refers to appropriation of income from
revenue account for meeting capital expenditure of the school
F and, therefore, there was no conflict between rule 177 and
clause 8 of the Order issued by DoE on 15.12.1999. Vide para
27, this Court gave further directions to the Director of
Education in following terms:
"27. In addition to the directions given by the Director of
G Education vide Order No. DE.15/Act/Duggal.Com/203/99/
23989-24938 dated 15-12-1999, we give further
directions as mentioned hereinbelow:
(a) Every recognised unaided school covered by the Act
H shall maintain the accounts on the principles of accounting
ACTION COMMITTEE, UN-AIDED PVT. SCHOOLS v. 677
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
applicable to non-business organisation/not- for-profit A
_,'
~
organisation.
In this connection, we inter alia direct every such school
to prepare their financial statement consisting of Balance
Sheet, Profit & Loss Account, and Receipt & Payment B
Account.
(b) Every school is required to file a statement of fees every
year before the ensuing academic session under Section
17(3) of the said Act with the Director. Such statement will
indicate estimated income of the school derived from fees, c
estimated current operational expenses towards salaries
and allowances payable to employees in terms of Rule
177(1 ). Such estimate will also indicate provision for
donation, gratuity, reserve fund and other items under Rule
177(2) and savings thereafter, if any, in terms of the proviso D
) to Rule 177(1).
(c) It shall be the duty of the Director of Education to
ascertain whether terms of allotment of land by the
Government to the schools have been complied with. We
E
are shown a sample letter of allotment issued by the Delhi
Development Authority issued to some of the schools
1.
... which are recognised unaided schools. We reproduce
herein clauses 16 and 17 of the sample letter of allotment: ·
16. The school shall not increase the rates of tuition fee F
without the prior sanction of the Directorate of
Education, Delhi Administration and shall follow the
provisions of the Delhi School Education AcURules,
1973 and other instructions issued from time to
time. G
17. The Delhi Public School Society shall ensure that
percentage of freeship from the tuition fee, as laid
down under the rules by the Delhi Administration,
is from time to time strictly complied with. They will
H
678 SUPREME COURT REPORTS [2009] 12 S.C.R.
A ensure admission to the student belonging to
weaker sections to the extent of 25% and grant
freeship to them'."
15. On 5.7.2004 the present review petitions came to be
filed basically challenging the majority view holding the DoE has
B
the power to regulate the fee structure of private unaided
schools including utilization of fees under rule 177(1 )(b) and (c).
According to the review petitioners, in the matter of fee fixation
since there are statutory rules governing the field, no directions
c could have been issued by this Court contrary thereto.
According to the review petitioners, the directions issued by
DoE dated 15.12.1999 were neither the subject matter of the
writ petition before the Delhi High Court nor were the subject
matter of the special leave petition. According to the review
petitioners, the Order of DoE dated 15.12.1999 was not the
D subject matter of the civil appeal.
,
16. Notice was issued on the review petition vide Order
'
dated 10.8.2004.
17. Before dealing with the arguments advanced on behalf
E
of the review petitioners, it may be stated that entire law inter
alia on the question of fee structure came to be decided once
again by the Constitution Bench of this Court in the case of P.A.
lnamdar and Ors. v. State of Maharashtra and Ors. Reported
..•
in (2005) 6 sec 537.
F
18. S/Shri Soli J. Sorabjee and Salman Khurshid, learned
senior counsel appearing on behalf of the Action Committee
and other review petitioners, submitted that clause 8 of the
Order issued by DoE dated 15.12.1999 is causing
G administrative difficulties which needs to be clarified. This Court
vide majority judgment has held that clause 8 is in consonance
with rule 177 of Delhi School Education Rules, 1973. Rule 177
has been quoted hereinabove. Under clause 8, DoE has
stipulated that "no amount whatsoever shall be transferred from
H the recognized unaided school fund of a school to the society
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS v. 679
DIRECTOR OF EDUCATION [S.H. KAPADIA, J.]
or the trust or any other institution." According tb the learned A
..;.
senior counsel, a rider needs to be introduced in clause 8,
namely, "except under the management of the same society or
trust". Thus, according to the learned counsel, if the suggested
rider is added in clause 8 then the Management would have
no grievance with the majority view. Thus, according to the B
learned counsel, clause 8 should be read as follows:
"No amount whatsoever shall be transferred from the
recognized unaided school fund of a school to the society
)<.
or the trust or any other institution except under the
management of the same society or trust"
c
19. According to the learned counsel, if the suggested rider
is added to clause 8 then it would subserve the object underlying
the 1973 Act.
D
.,( 20. There is merit in the argument advanced on behalf of
j
the Action Committee/Management. The 1973 Act and the
Rules framed thereunder cannot come in the way of the
Management to establish more schools. So long as there is a
reasonable fee structure in existence and so long as there is
E
transfer of funds from one institution to the other under the same
management, there cannot be any objection from the
... Department of Education .
...
21. In the Review Petitions it is alleged that clause 8 of
the Order of DoE dated 15.12.1999 was never challenged and F
yet the Court has gone into the validity thereof. There is no merit
in this argument. It was argued on behalf of the Management
before us that clause 8 of Order of DoE dated 15.12.1999 goes
beyond Rule 177 and, therefore, this Court has discussed in
the Judgment under Review vide para 21 the difference G
between accrual and application of income.
22. In the Review Petitions it is further pleaded that where
the 1973 Act and the Rules thereunder operates, regulation of
education would be governed thereby and therefore the Court
H
680 SUPREME COURT REPORTS [2009] 12 S.C.R.
A cannot impose any other or further restrictions by travelling _.,.
beyond the scope, object and purport thereof. In this context it
may be noted that in TM.A. Pai Foundation case (supra) and
in Islamic Academy (supra) the principles for fixing fee
structure have been illustrated. However, they were not
B exhaustive. They did not deal with determination of surplus and
appropriation of savings. In fact in the majority view of the
present matter, this Court has found that the above topics are
not dealt with by the 1973 Rules and therefore clause 8 was
found not to be beyond Rule 177 or in conflict thereto as
C alleged. The Additional Directions given in the Judgment of the
Majority vide para 27 do not go beyond Rule 177 but they are
a part of gap-filling exercise and discipline to be followed by
the management. For example: every school shall prepare
balance sheet and profit and loss account. Such conditions do
D not supplant Rule 177. If reasonable fee structure is the test
then transparency and accountability are equally important. In
fact, as can be seen from Reports of Duggal Committee and
the earlier Committee, excessive fees stood charged in some
cases despite the 1973 Rules because proper Accounting
Discipline was not provided for in 1973 Rules. Therefore, the
E Further Directions given are merely gap-fillers. Ultimately, Rule
177 seeks transparency and accountability and the Further
Directions (in para 27) merely brings about that transparency.
Lastly, it may be noted that the matter has come up to the Apex
Court from PIL. Hence there is no merit in the above plea.
F
23. Subject to the above clarification, review petitions stand
dismissed with no order as to costs.
CYRIAC JOSEPH, J. 1. I had the benefit of reading the
G separate judgments rendered by Hon'ble Mr. Justice S.B. Sinha
and Hon'ble Mr. Justice S.H. Kapadia in the above Review
Petitions.
2. Though I agree with the view of S.B. Sinha, J. that any
direction issued by the High Court or by the rule making
H
ACTION COMMITIEE, UN-AIDED PVT. SCHOOLS v. 681
DIRECTOR OF EDUCATION [CYRIAC JOSEPH, J.]
authority or any statutory authori,ty must be in conformity with A
the decision of this Court in the case of. T.M.A. Pai Foundation
as clarified by the decision of this, Court in the case of P.A.
lnamdar, in my view, the judgment of S.H. Kapadia, J. does
not question or contradict such a legal proposition. On the
contrary, it is in recognition of the above legal proposition that B
modification suggested by the learned counsel for the review
petitioners in respect of Clause 8 of the order dated
15.12.1999 issued by the DirE~ctor of Education has been
accepted by S.H. Kapadia, J.
3. Hence, having_ regard to the limited scope of a review
c
petition and in view of the sulbmissions made by learned
counsel for the parties during arguments, I concur with the
judgment rendered by S.H. Kapadia, J.
ORDE:R D
In view of the majority judgment, the review petitions stand
dismissed.
K.K.T. Review Petitions dismissed.
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