Supreme Court Limits Power to Modify Laws in Chandigarh: Independent Schools’ Association vs. Union of India (2022)

Date of the Judgment: 11 May 2022
Citation: 2022 INSC 454
Judges: A.M. Khanwilkar, J., Abhay S. Oka, J., J.B. Pardiwala, J.
Can the government, while extending a law to a Union Territory, make substantial changes to it? The Supreme Court of India recently addressed this question, clarifying the limits of the power to modify laws when extending them to Union Territories. This case involved a challenge to certain modifications made to the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016, when it was applied to the Union Territory of Chandigarh. The three-judge bench, consisting of Justices A.M. Khanwilkar, Abhay S. Oka, and J.B. Pardiwala, delivered the judgment.

Case Background

The case arose from a notification issued by the Chandigarh Administration on April 13, 2018, which extended the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016 (the 2016 Act), to the Union Territory of Chandigarh. This notification, issued under Section 87 of the Punjab Re-organisation Act, 1966, included certain modifications to the 2016 Act. The Independent Schools’ Association, Chandigarh, challenged specific clauses of this notification, arguing that they exceeded the permissible limits of modification under Section 87 of the 1966 Act. The main contention was against clauses (a) and (b) of the third proviso inserted in Section 5 of the 2016 Act and paragraph 8 of the notification.

The appellants, Independent Schools’ Association, Chandigarh, contested the notification, particularly the requirement for unaided educational institutions to upload income, expenditure accounts, and balance sheets on their websites, and the prohibition on charging any kind of cost from parents. They also challenged the enhancement of penalty amounts for violations under the Act.

Timeline

Course of Proceedings

The Independent Schools’ Association initially filed writ petitions before the High Court of Punjab & Haryana at Chandigarh, challenging the notification dated April 13, 2018. The High Court dismissed these petitions, upholding the competence of the authority to issue the notification. The appellants then approached the Supreme Court, limiting their challenge to specific clauses of the notification, namely, clauses (a) and (b) of the proviso inserted in terms of paragraph 6, and paragraph 8 of the notification. The Supreme Court granted leave to appeal and heard the matter.

Legal Framework

The case revolves around Section 87 of the Punjab Re-organisation Act, 1966, which grants the Central Government the power to extend any enactment in force in a State to the Union Territory of Chandigarh, with such restrictions or modifications as it deems fit. The Supreme Court referred to its earlier decision in Lachmi Narain vs. Union of India, 1976 (2) SCC 953, which interpreted the scope of the term “restrictions or modifications”. The court in Lachmi Narain held that such modifications should only be “peripheral or insubstantial” and must not alter the core policy of the original enactment. The Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016, was the substantive law being extended to Chandigarh.

Section 87 of the Punjab Re-organisation Act, 1966 states:
“87. Power to extend enactments to Chandigarh. The Central Government may, by notification in the Official Gazette, extend with such restrictions or modifications as it thinks fit, to the Union territory of Chandigarh any enactment which is in force in a State at the date of the notification.”

Arguments

The appellants argued that the modifications introduced by the notification, specifically the requirement to upload financial statements and the prohibition on charging costs, were substantial changes that went beyond the permissible limits of Section 87 of the 1966 Act. They contended that these changes altered the core policy of the 2016 Act. The respondents, on the other hand, defended the notification, arguing that the modifications were necessary for better administration and were within the scope of Section 87.

The appellants specifically challenged the following modifications:

• Clause (a) of the third proviso inserted in Section 5: This clause mandated that every unaided educational institution must upload its income, expenditure account, and balance sheet on its website. The appellants argued that this was a substantive change as the 2016 Act did not contain any such provision.
• Clause (b) of the third proviso inserted in Section 5: This clause prohibited unaided institutions from charging any kind of cost from parents. The appellants contended that this was an overreach and interfered with the financial autonomy of the institutions.
• Paragraph 8 of the notification: This paragraph enhanced the penalty amounts for violations under the 2016 Act. The appellants argued that this was a matter of legislative policy and could not be altered by an executive order.

The respondents argued that:

• The requirement to upload financial statements was a measure of transparency and accountability.
• The prohibition on charging additional costs was to ensure that parents are not burdened with hidden fees.
• The enhancement of penalties was necessary to ensure effective implementation of the Act.

The innovativeness of the argument of the appellants lies in their emphasis on the limitations of the power to modify laws under Section 87 of the Punjab Re-organisation Act, 1966, highlighting that such modifications must be peripheral and not substantive.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether clause (a) of the third proviso inserted in terms of paragraph 6 of the impugned Government Order/Notification dated 13.04.2018 can be regarded as peripheral or insubstantial change to the provisions of the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016.
2. Whether clause (b) of the third proviso inserted in terms of paragraph 6 of the impugned Government Order/Notification dated 13.04.2018 can be regarded as peripheral or insubstantial change to the provisions of the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016.
3. Whether paragraph 8 of the impugned Government Order/Notification can be regarded as peripheral or insubstantial change to the provisions of the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on Lachmi Narain vs. Union of India, 1976 (2) SCC 953* to interpret the term “restrictions or modifications” under Section 87 of the Punjab Re-organisation Act, 1966, emphasizing that modifications must be peripheral and not substantive.
• The Court interpreted Section 87 of the Punjab Re-organisation Act, 1966* to determine the extent of power to modify laws while extending them to Union Territories.
• The Court considered the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016* as the substantive law being extended to Chandigarh, against which the validity of the modifications was assessed.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that the power to modify laws while extending them to Union Territories is limited. The court emphasized that such modifications must be peripheral and not substantive, to prevent the executive from encroaching upon legislative functions. The court was also concerned with maintaining the core policy of the original enactment. The court found that the requirement to upload financial statements was a substantive change, as it introduced a new obligation not present in the original Act. However, the prohibition on charging additional costs was considered to be consistent with the legislative intent of the 2016 Act, which aimed to regulate fees and prevent exploitation of parents. The court also held that the enhancement of penalties was a matter of legislative policy and could not be altered by an executive order.

Logical Reasoning:

The Court considered alternative interpretations but rejected them because they did not align with the principle of limited modification power under Section 87 of the Punjab Re-organisation Act, 1966. The Court emphasized that the executive’s power to modify laws is not unlimited and must be exercised within the boundaries set by the legislature.

The court held that clause (a) of the third proviso, which mandated the uploading of financial statements, was a substantive change and thus beyond the scope of permissible modification. The court observed, “Reverting to the stipulation specified in clause (a), we have no manner of doubt that the same cannot be considered as peripheral and insubstantial change. For, it is a substantive matter.”

Regarding clause (b), which prohibited charging additional costs, the court found it to be consistent with the legislative intent of the 2016 Act. The court noted, “In our opinion, this is consistent with the legislative intent and mandate of the 2016 Act. In fact, it restates the inbuilt policy, essence and substance of the 2016 Act.”

The court also struck down paragraph 8 of the notification, which enhanced penalty amounts, stating, “Inasmuch as, what should be the quantum of penalty amount or punishment, is a legislative policy. It must be left to the concerned legislature.”

The decision was unanimous, with all three judges concurring on the reasoning and the final order.

Key Takeaways

• The power to modify laws while extending them to Union Territories is limited and must not alter the core policy of the original enactment.
• Executive orders cannot introduce substantive changes to laws under the guise of modification.
• Legislative policy matters, such as penalty amounts, must be determined by the legislature and not by executive orders.
• Educational institutions are required to disclose their fee structure at the beginning of the academic year and cannot charge any additional costs.

This judgment emphasizes the importance of maintaining a balance between executive and legislative powers and ensures that the executive does not overstep its boundaries while extending laws to Union Territories. It also provides clarity on the extent of permissible modifications under Section 87 of the Punjab Re-organisation Act, 1966.

Directions

The Supreme Court expunged the observations made against the writ petitioner in Writ Petition No.7761/2020 in paragraph 34 of the impugned judgment of the High Court.

Development of Law

The ratio decidendi of this case is that the power to modify laws under Section 87 of the Punjab Re-organisation Act, 1966, is limited to peripheral or insubstantial changes and does not extend to substantive changes that alter the core policy of the original enactment. This judgment reinforces the principle established in Lachmi Narain vs. Union of India and clarifies the scope of executive power in modifying laws extended to Union Territories.

Conclusion

The Supreme Court’s judgment in Independent Schools’ Association Chandigarh (Regd.) & Ors. vs. Union of India & Ors. clarifies the limits of the power to modify laws when extending them to Union Territories. The court struck down the requirement for unaided educational institutions to upload financial statements and the enhancement of penalty amounts, emphasizing that these were substantive changes beyond the scope of permissible modification. However, the court upheld the prohibition on charging additional costs, finding it consistent with the legislative intent of the 2016 Act. This decision reinforces the principle that modifications must be peripheral and not substantive, ensuring that executive actions do not encroach upon legislative functions.

Category

Parent Category: Constitutional Law
Child Category: Delegated Legislation
Child Category: Section 87, Punjab Re-organisation Act, 1966
Parent Category: Education Law
Child Category: Fee Regulation

FAQ

Q: What was the main issue in the Independent Schools’ Association case?
A: The main issue was whether the Chandigarh Administration could make substantial changes to the Punjab (Regulations of Fees of Unaided Educational Institutions) Act, 2016, when extending it to the Union Territory of Chandigarh.

Q: What did the Supreme Court decide about the requirement to upload financial statements?
A: The Supreme Court struck down the requirement, stating that it was a substantive change and not a peripheral modification, which is beyond the permissible limits.

Q: Can schools charge any additional costs from parents besides the disclosed fee structure?
A: No, the Supreme Court upheld the prohibition on charging any kind of cost from parents, emphasizing that schools can only charge the disclosed fee structure.

Q: What did the Supreme Court say about enhancing penalty amounts?
A: The Supreme Court held that enhancing penalty amounts is a legislative policy matter and cannot be done through an executive order, thus striking down the enhancement.

Q: What is the significance of this judgment?
A: This judgment clarifies the limits of the power to modify laws when extending them to Union Territories, ensuring that the executive does not overstep its boundaries and maintains the core policy of the original law.