REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

REVIEW PETITION (C) NO. 1368 OF 2004 IN

CIVIL APPEAL NO. 2700 OF 2001

Action Committee, Un-Aided Pvt. Schools & Ors. …Petitioners

Versus

Director of Education, Delhi & Ors. …Respondents

[WITH REVIEW PETITION (C) NO. 1420 OF 2004 IN CIVIL APPEAL  NO. 2704 OF 2001, REVIEW PETITION (C) NO. 1421-1422 OF 2004 IN  CIVIL  APPEAL  NOS.  2705-2706  2004,  REVIEW  PETITION  (C)  NO.  1423 OF 2004 IN CIVIL APPEAL NO. 2703 OF 2001 AND REVIEW  PETITION (C) NO. 1774 OF 2004 IN CIVIL APPEAL NO. 2701 OF 2001]

J U D G M E N T  

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 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.  

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2. The Act contains an interpretion 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 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.   

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.   

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  inspection or otherwise in the working of the school.”

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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) 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:- 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  committee of recognised private schools, and the authority  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  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 known as the Delhi School  

Education Rules, 1973 (for short “the 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.  

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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 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.

(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.

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.

(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, (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 in a post office in the name of

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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 :

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.”

177. Fees realized  by unaided recognized schools  how to be utilized -                  

(1) Income derived by an unaided recognized 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.

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 of the following purposes, namely :-    

a) *** ***;

b) *** ***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 school is run.

(2) the savings referred to in sub-rule (1) shall be arrived at after  providing for the following, namely :-

(a) *** *** ***;

(b) the needed expansion of the school or any  expenditure of a development nature;

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(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;

(d) co-curricular activities of the students;

(e) reasonable reserve fund not being less than  ten per cent, 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 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).

(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.”

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 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  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

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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 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:

“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 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  1997-98 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 caution money thus collected shall  be kept deposited in a scheduled bank in the name  of the concerned schools and 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.

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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  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.”

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:

“…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  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 and various  

Rules issued thereunder as also the background under which the impugned  

order dated 10.09.1997 was issued.  

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A Committee headed by Mr. J. Veera Raghvan, former Secretary in  

the  Ministry  of  Human  Resource  Development  had  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.   

The High Court noticed the recommendations of the Committee for  

the year 1997-98 and the circulars which were issued pursuant thereto.

The High Court also referred to the decision of this Court 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.   

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.

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(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 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  school  to  rectify  it  before resorting to harsh measures.  The question  of  commercialisation  of  education  and  exploitation of parents by individual schools can  be  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. (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 compliance of the provisions of the  Act and the Rules by private recognised unaided  schools could have prevented the present state of  affiars. (vii)  The  authorities/Director  of  Education  has  failed  in  its  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. (ix) On the peculiar facts of these petitions there is  no  per  se  illegality  in  issue  of  the  impugned  circular dated 10th September 1997. (x)  An  independent  statutory  Committee,  by  amendment  of  law,  if  necessary,  deserves  to  be  constituted  to  go  into  factual  matters  and  adjudicate disputes which may arise in future in

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the  matter  of  fixation  of  tuition  fee  and  other  charges. (xi)  The  Government  should  consider  extending  Act and 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 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.   

9. During  the  pendency  of  appeal  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  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.Incp/150/97/1293  -2093  dated  10th  September,  1997  and  had  issued  certain  directions;

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  (Retd.)

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Santosh  Duggal  as  Chairperson  to  decide  the  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 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 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 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:

Direction Nos. 7 and 8 thereof, read as under:

"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 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  separately  maintained Development Fund Account.

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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 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 order dated  

27.04.2004 since reported in (2004) 5 SCC 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.

11. Indisputably,  Unni  Krishnan (supra),  on  the  basis  whereof  the  

judgment  of  the  High Court  rested,  was  overruled  by  a  n  Eleven-Judge  

Bench  of  this  Court  in  T.M.A.  Pai  Foundation  and  Others v.  State  of  

Karnataka and Others [(2002) 8 SCC 481].   

For  clarification  of  T.M.A.  Pai  Foundation (supra),  another  

Constitution Bench was constituted being Islamic Academy of Education &  

Anr. v.  State of Karnataka & Ors. [(2003) 6 SCC 697].  Later on, a larger

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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. Inamdar and Others v.  State of Maharashtra and  

Others, the decision whereof is reported in (2005) 6 SCC 537.   

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. Inamdar (supra).  

13. Review petitions were filed by the petitioners herein 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 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. Inamdar (supra), this matter has been placed before us.

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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 Petitions, urged:

(i) In view of the larger bench decision of this Court in P.A. Inamdar  

(supra), the directions issued by the Director of Education which  

have been upheld by this Court cannot be sustained as the schools  

and 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, the transfer of fund by one  

school  to  another  school  under  the  same  management  being  

permissible  in  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.   

(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’.

(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

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directions could not have been issued by the Director of Education  

which would affect the autonomy of the minority 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 T.M.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  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 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 capitation fee.

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18. Clarifying  T.M.A. Pai Foundation (supra) and  Islamic Academy of  

Education (supra), it was held in P.A. Inamdar (supra):

“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.  Inamdar  and  Ors.  v.  State  of  Maharashtra  and  Ors.,(2004)  8  SCC  139  and  Order  dated  July  29,  2004  in  Pushpagiri Medical Society v. State of Kerala 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 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 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  questions  set  out  hereunder  which, according to us, arise for decision:-

(1) *** ***

(2) *** ***

(3) Whether Islamic Academy could have issued  guidelines  in  the  matter  of  regulating  the  fee  payable  by  the  students  to  the  educational  institutions?

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(4) Can the admission procedure and fee structure  be  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  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 construed with Article  19(1)(g) and  in the light of the Directive Principles of the State  Policy  contained  in  the  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.

109. And yet, before we do so, let us quote and  reproduce  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…”

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 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 or capitation fees.”

20

should be revisited in terms of the Seven-Bench decision of this Court in  

P.A. Inamdar (supra).

20. I may, however, at the outset notice that before the High 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  

restrictions as envisaged under Clause (6) thereof.  Reasonable restriction in  

terms of the aforementioned provision can be laid 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 institution.  Some guidelines had  

been  issued.   Those  guidelines  indisputably  have  been  held  to  be  

unconstitutional  in  T.M.A.  Pai  Foundation (supra)  and  in  P.A.  Inamdar  

(supra), and, thus, I have no hesitation to hold that the directions contained  

in  the  said  order  dated  15.12.1999  cannot  be  upheld.   The  Director  of  

Education  moreover  exercised  its  authority  illegally  and  without  

jurisdiction.  

21

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  basis  of  the  doctrine  which  is  wholly  inapplicable  could  be  

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 India & Ors. v. M/s 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  regard  to  its  origin  to  Roman  Law  as  also  the  concept  thereof.   Conceptually  business  may  be  carried  out  in  respect  of  a  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  properties  capable  of  being  owned  including  intellectual  property,  it  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.”

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

22

regard  to  its  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  Conceptual  Errors”  21(1)  National  Law  

School of India Review 133 (2009)]

Subba Rao, J. moreover in  Krishnan Narula  v.  Jammu & Kashmir  

[AIR 1967 SC 1368] stated, “if the activity of a dealer in ghee is business  

then how does it cease to be business if it is in liquor?

22. The  circular  letter  issued  by  the  Director  of  Education  dated  

15.12.1999 may now be considered.   

23. Sub-section (3) of Section 24 of the Act does not confer 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 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).

23

25. Direction Nos. 7 and 8 issued by the Director of Education in its order  

dated 15.12.1999, which have been noticed by this Court in paragraph 11 of  

the judgment reported 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,  collection  of  such  fee  is  not  

prohibited by a school.  What is 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 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. Inamdar (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 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  the

24

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 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’  should  be  given  a  

restricted meaning, cannot be accepted.  [See  Official Trustee of W.B. 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  “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 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

25

assistance to any other school or educational institution, subject of course to  

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 are under the management of the same society or trust.   

29. I, in view of the statement of law laid down in P.A. Inamdar (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 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:

“50. The right to establish and administer broadly  comprises of the following rights:-

(a) ***

(b) to set up a reasonable fee structure…

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  qualified  staff)  and  the  prevention  of  mal-administration  by  those  in

26

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.

56… The decision on the fee to be charged must  necessarily  be  left  to  the  private  educational  institution that does not seek or is not dependent  upon any funds from the government.

57… There can, however, be a reasonable revenue  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.  Inamdar  

(supra), it can be inferred that private unaided 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, 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 autonomy regime of the unaided schools which are applicable to these  

institutions in terms of the aforementioned Constitution Bench decisions.

27

The institutions, in view of the aforementioned decisions 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.  

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 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  141 of the Constitution of India.  (See  

State of West Bengal v. Ashish Kumar Roy & Ors. [(2005) 10 SCC 110]

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 Court in T.M.A. Pai Foundation (supra)  

as clarified by the decision of this Court in P.A. Inamdar (supra).

28

32. Before parting, however, I may notice that the Government of NCT  

of  Delhi  has  not  amended  the  statutory  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 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.

………………………….J. [S.B. Sinha]

New Delhi; August 07, 2009

29

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

REVIEW PETITION (C) No. 1368/04

In

CIVIL APPEAL No. 2700/01

Action Committee, Un-Aided Pvt. Schools & Ors.      …..Petitioners

          Versus

Director of Education, Delhi  & Ors.      ….

Respondents

with  

R.P.(C) No. 1420/04 in C.A. No. 2704/01, R.P.(C) Nos. 1421-1422/04 in  C.A. Nos. 2705-2706/01, R.P. (C) No. 1423/04 in C.A. No. 2703/01 and

R.P. (C) No. 1774/04 in C.A. No. 2701/01

J U D G M E N T

S.H. KAPADIA, J.

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

30

of   Judgment  dated  27.4.2004  passed  in  Civil  Appeal  No.  2700/01  and  

others.

Facts:

2. On  8.9.1997  a  PIL  was  filed  in  the  Delhi  High  Court  by  Delhi  

Abibhavak  Mahasangh  (Parents’  Association)  being  writ  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 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.  4021/97 in the  

same High Court inter alia praying for setting aside Order dated 10.9.1997  

issued by the Director of Education (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.

31

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, 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, shall be collected in its own name and a proper  receipt shall be granted by the school for every collection  made by it.

* * * 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  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 received from the Administrator.

176.  Collections for specific purposes to be spent for  that  purpose.—Income  derived  from  collections  for  specific purposes shall be spent only for such purpose.

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:

Provided that savings, if any, from the fees collected by  such school may be utilised by its managing committee

32

for  meeting  capital  or  contingent  expenditure  of  the  school, or for one or more of the following educational  purposes, namely—

(a) award of scholarships to students; (b) establishment of any other recognised school; 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 school is  run.

(2)  The  savings  referred  to  in  sub-rule  (1)  shall  be  arrived at after providing for the following, namely—

(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; (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; (d) co-curricular activities of the students; (e) reasonable reserve fund, not being less than ten per  cent, 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  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  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:

33

“(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  a  school  to  the  Society or the Trust,  as the case may be, running that  school 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 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:

“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.  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  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, 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.

34

The committee was also required to examine if there was  any surplus under any head and how the surplus 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 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  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 had transferred the school fund for establishing  the  schools  even  outside  Delhi.  The  utilisation  of  the  funds  was  not  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 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  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.

…

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

35

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 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:-

‘177. Fees realised by unaided recognised schools how  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,  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, namely:-

(a) award of scholarships to student; (b) establishment of any other recognised school, or  (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  providing for the following, namely:-

(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 development nature;

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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  Section  115(4)  of  the  Delhi  Municipal  Corporation  Act,  1957.  The  Safdarjung  Enclave  Educational  Society  was  running  Green  Field  School  recognised under the Act.

…

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  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  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 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 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 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

38

Director of Education would be justified in asking the  school 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  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 other charges as  no  such  power  vests  in  respect  of  unaided  schools  because Section 17(1) & (2) of the Act 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 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  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 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.

…

62. In  Mrs.  Y.  Theclamma  Vs.  Union  of  India  and  others, 1987 (2) SCC 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 alia, provided that no employee shall be suspended  without the approval of the Director of Education would

39

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 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  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 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 minorities.

…

(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 school to rectify it before  resorting  to  harsh  measures.  The  question  of  commercialisation  of  education  and  exploitation  of  parents  by  individual  schools  can  be  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.

…

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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  independent  Committee  deserves  to  be  appointed for  the  period covered by  impugned order  dated  10th  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 increase of tuition fee  and other charges, on facts would be justified or not.  Eliminating  the  element  of  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 dated 11th December,  1997.  We  would,  therefore,  extend  the  aforequoted  order dated 11th December, 1997 till decision of cases  of individual schools by Committee appointed by this  judgment.

68. We,  accordingly,  appoint  a  Committee  comprising  of  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 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 as the Chairperson may deem fit. The  terms  and  conditions  including  fees/honorarium  payable 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 and finalized within 10  days.”

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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 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 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 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 framed thereunder. That,  

Order dated 10.9.1997 was purportedly issued by DoE under Section 24(3).  

That, from the scheme 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.

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That, there was no power under Section 24(3) to 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  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 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, 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. According to the Action  

Committee,  the  High  Court  had  erred  in  holding  that  funds  cannot  be  

transferred from the school to the society as there is no prohibition in the  

1973 Act in relation to such transfers so long as the utilization of the funds

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is for the benefit of the school(s) in accordance with Rule 177.

8. As stated above, the Action Committee filed its special 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  Report  are  quoted  

hereinbelow:  

“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 Structure of the Delhi  Private Schools’ (1997), has listed as many as 50 heads  under which the fee was being collected in the schools in  Delhi. Furthermore, 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  school.  This  has  resulted  in  avoidable  ambiguities  and  distortions  in  the  fee  structure  which  could  become  a  vehicle  for  exploitation  where  the  schools were so inclined.

…

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 (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

44

simultaneously setting up a Depreciation Reserve Fund  for replacing the assets; 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 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;  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,  incurring  recurring  expenditure  on  the  maintenance  of  the office of the parent society and maintenance of cars  for the use of the Society etc.

There was also a visible spurt in expenditure more  particularly  in  1997-98  on  certain  items  such  as  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  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  

Committee dated 31.7.1999 in following terms:

45

“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  and  has  given  a  vague  unsubstantiated  report  without even hearing the schools, in the absence of any  material against 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.”

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:

“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  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  to  regulate  the  quantum  of  fees  charged  by  unaided schools under Section 17(3) of the Delhi  School Education Act, 1973?

(b)  Whether the direction issued on 15-12-1999 by the  Director of Education under Section 24(3) of the  Delhi  School  Education  Act,  1973  stating  inter  alia that  no  fees/funds  collected  from

46

parents/students  shall  be  transferred  from  the  Recognised Unaided School Fund to the society or  trust  or  any  other  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  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, 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 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.

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 by the majority that under clause 8 of the Order  of

47

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  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  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  shall  maintain  the  accounts  on  the  principles  of  accounting applicable to non-business organisation/not- for-profit 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  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,  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 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  are  shown a  sample  letter  of  allotment  issued  by  the  Delhi  Development  Authority  issued  to  some  of  the

48

schools  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 without the prior sanction of the  Directorate  of  Education,  Delhi  Administration  and  shall  follow  the  provisions  of  the  Delhi  School  Education  Act/Rules,  1973  and  other  instructions  issued from time to time.

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  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 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  

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 subject  

matter of the civil appeal.

49

16. Notice was issued on the review petition vide Order dated 10.8.2004.

17. Before dealing with the arguments advanced on behalf 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. Inamdar and Ors.  v.    State of Maharashtra  

and Ors. Reported in (2005) 6 SCC 537.

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 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 the recognized unaided school fund of  

a school to the society or the trust or any other institution.” According to the  

learned 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

50

then  the  Management  would  have  no  grievance  with  the  majority  view.  

Thus, according to the 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”

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.

20. There  is  merit  in  the  argument  advanced  on  behalf  of  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  

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 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

51

the Judgment under Review vide para 21 the difference 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 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  T.M.A. Pai Foundation case (supra)  

and in Islamic Academy (supra) the principles for fixing fee structure have  

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 1973 Rules and therefore 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 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 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

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was not provided for in 1973 Rules. Therefore, the 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.

23. Subject  to the above clarification,  review petitions stand dismissed  

with no order as to costs.

……………………………J.                                      (S.H. Kapadia)

New Delhi; August 7, 2009.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

53

REVIEW PETITION (CIVIL) NO. 1368 OF 2004 IN  

CIVIL APPEAL NO. 2700 OF 2001

Action Committee, Un-Aided Pvt. Schools & Ors.     …. Petitioners

vs.

Director of Education, Delhi & Ors.                           ….Respondents

with RP(C) No. 1420 of 2004 in CA No. 2704 of 2001,  RP(C) Nos.  1421-1422 of 2004 in CA Nos. 2705-2706 of 2001, RP(C) No. 1423  of 2004 in CA No. 2703 of 2001 and RP(C) No. 1774 of 2004 in CA  No. 2701 of 2001

J U D G M E N T

CYRIAC JOSEPH, J.

I had the benefit of reading the separate judgments rendered by  

Hon’ble Mr. Justice S.B. Sinha and Hon’ble Mr. Justice S.H. Kapadia  

in the above Review Petitions.

Though  I  agree  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  T.M.A.  Pai  Foundation as  clarified  by  the  

decision of this Court in the case of  P.A. Inamdar, 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 modification suggested by the learned counsel

54

for the review petitioners in respect of Clause 8 of the order dated  

15.12.1999 issued by the Director of Education has been accepted by  

S.H. Kapadia, J.

Hence, having regard to the limited scope of a review petition  

and  in  view  of  the  submissions  made  by  learned  counsel  for  the  

parties  during arguments,  I  concur  with  the  judgment rendered by  

S.H. Kapadia, J.

…………………………..J.  (Cyriac Joseph)

New Delhi; August 7, 2009.