Supreme Court Upholds Fee Regulation: Narayana Medical College vs. State of Andhra Pradesh (2022)

Date of the Judgment: November 7, 2022
Citation: Civil Appeal Nos. of 2022 (@ Special Leave Petition (Civil) Nos. 2969-2970 of 2021)
Judges: M.R. Shah, J. and Sudhanshu Dhulia, J.

Can a State Government unilaterally increase the tuition fees for private medical colleges? The Supreme Court of India recently addressed this crucial question in a case concerning the State of Andhra Pradesh. The court examined whether the government could bypass the recommendations of the Admission and Fee Regulatory Committee (AFRC) when increasing fees for medical courses. This judgment clarifies the importance of regulatory oversight in maintaining affordable education. The bench comprised Justices M.R. Shah and Sudhanshu Dhulia, who delivered a unanimous decision.

Case Background

The dispute arose after the State of Andhra Pradesh, following the Supreme Court’s judgment in P.A. Inamdar vs. State of Maharashtra, established the Andhra Pradesh Admission and Fee Regulatory Committee (AFRC) through the 2006 Rules. These rules mandated that the AFRC would recommend fee structures for private professional institutions. Initially, the government issued a G.O. on 18.06.2011, fixing fees for the academic years 2011-12 to 2013-14 based on the AFRC’s report.

However, for the block period of 2017-2020, the State Government, without waiting for the AFRC’s report, issued another G.O. on 06.09.2017, significantly increasing the tuition fee for MBBS students. This new G.O. raised the fee to an exorbitant Rs. 24 lakhs per annum, nearly seven times the previous fee. This action led to writ petitions being filed in the High Court of Andhra Pradesh, challenging the legality of the fee hike.

The High Court ruled that the fee enhancement was illegal as it was done without the AFRC’s recommendations, as required by the 2006 Rules. The High Court also directed the medical colleges to refund the excess fees collected from students, adjusting for the amounts payable under the 2011 G.O. Aggrieved by this order, the medical colleges appealed to the Supreme Court.

Timeline

Legal Framework

The primary legal framework in this case is the Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-Aided Professional Institutions) Rules, 2006. Rule 4 of the Rules, 2006, specifically deals with fee fixation. According to this rule:

• ✓ The AFRC is required to call for proposed fee structures from each institution.
• ✓ The AFRC must determine if the proposed fees are justified and do not amount to profiteering or capitation fees.
• ✓ The AFRC has the authority to approve or alter the proposed fee for each course.
• ✓ The AFRC must consider factors such as the location of the institution, the nature of the course, infrastructure costs, administrative expenses, and a reasonable surplus for growth.
• ✓ The fee structure determined by the AFRC is valid for three years and applicable to students admitted in that academic year until completion of their course.

Rule 4 of the Rules, 2006 states:

“4. Fee Fixation. – (i) The AFRC shall call for, from each Institution, its proposed fee structure well in advance before the date of issue of notification for admission for the academic year along with all the relevant documents and books of accounts for security,
(ii) The AFRC shall decide whether the fees proposed by the Institution is justified and does not amount to profiteering or charging of capitation fee.
(iii) The AFRC shall be at liberty to approve or alter the proposed fee for each course to be charged by the Institution. Provided that it shall give the Institution an Opportunity of being heard before fixing any fee or fees.
(iv) The AFRC shall take into consideration the following factors while prescribing the fee: (a) the location of the professional institution, (b) the nature of the professional course, (c) the cost of available infrastructure, (d) the expenditure on administration and maintenance, (e) a reasonable surplus required for growth and development of the professional Institution, (f) the revenue foregone on account of waiver of fee, if any, in respect of students belonging to the Schedule Caste, Schedule Tribes and wherever applicable to the Socially and Educationally Backward Classes and other Economically Weaker Sections of the society, to such extent as shall be notified by the Government from time to time. (g) Any other relevant factor. Provided that, no such fees, as may be fixed by the AFRC, shall amount to profiteering or commercialization of education,
(v) The AFRC shall communicate the fee structure as determined by it, to the Government, for notification.
(vi) The fee or scale of fee determined by the AFRC shall be valid for a period of three years.
(vii) The fee so determined shall be applicable to a candidate who is admitted to an institution in that academic year and shall not be altered till the completion of his course in the Institution in which he was originally admitted. No Professional Educational Institution shall collect at a time a fee which is more than one year’s fee from a candidate.”

Arguments

Arguments by the Appellant (Medical Colleges):

• ✓ The medical colleges argued that the State Government could not have enhanced the tuition fee without the recommendations of the AFRC.
• ✓ They conceded that the fee enhancement by the State Government was not in accordance with the Rules, 2006.
• ✓ They submitted that between 2011 and 2017, the costs and expenses of the colleges had increased, and the requirement to pay stipends to students was introduced in 2016. Therefore, the fee fixed in 2011 would cause significant losses.
• ✓ They requested that the court not direct them to refund the excess fee collected under the 2017 G.O., as the colleges were entitled to an enhanced fee.
• ✓ They pointed out that in many cases, students had already adjusted the difference in subsequent fees.

Arguments by the Respondent (Students):

• ✓ The students argued that the private medical colleges, being beneficiaries of the illegal G.O., should not be allowed to retain the illegally recovered amount.
• ✓ They highlighted that the 2017 G.O. led to an exorbitant increase in tuition fees (Rs. 24 lakhs), forcing many students and their parents to take bank loans with high interest rates.
• ✓ They requested the court not to interfere with the High Court’s order, including the refund directive.
• ✓ They also pointed out that a similar G.O. issued by the State of Telangana was set aside by the High Court, which also directed a refund of excess fees.

Arguments by the AFRC:

• ✓ The AFRC stated that it had initiated the process to review and determine the tuition fees for the 2017-2020 block period.
• ✓ It submitted that while the review was pending, the State Government unilaterally increased the tuition fee without waiting for the AFRC’s report.
• ✓ It also stated that the association of the colleges had addressed a letter to the Government seeking revision, which the State Government granted in a clandestine manner.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:

1. Whether the State Government could unilaterally enhance the tuition fee for private medical colleges without the recommendation of the AFRC, as mandated by the Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-Aided Professional Institutions) Rules, 2006.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities and legal provisions:

Cases:

• ✓ P.A. Inamdar and Ors. Vs. State of Maharashtra and Ors.; (2005) 6 SCC 537 – The Supreme Court referred to this case, which led to the framing of the Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-Aided Professional Institutions) Rules, 2006. The court cited this case to emphasize the need for a regulatory mechanism to prevent profiteering in education.

Legal Provisions:

• ✓ Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-Aided Professional Institutions) Rules, 2006: The court heavily relied on Rule 4 of these Rules, which outlines the procedure for fee fixation. The court stated that the State Government was bound by these rules and could not enhance fees without the AFRC’s recommendation.

Judgment

How each authority was viewed by the Court?

• ✓ P.A. Inamdar and Ors. Vs. State of Maharashtra and Ors.; (2005) 6 SCC 537: The Court relied on this authority to underscore the importance of a regulatory framework to prevent profiteering in education and to ensure that fee structures are determined fairly.
• ✓ Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-Aided Professional Institutions) Rules, 2006: The Court emphasized that the State Government was bound by these rules and could not bypass the AFRC in determining fee structures. The Court specifically highlighted Rule 4, which mandates AFRC recommendations for fee fixation.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the need to uphold the regulatory framework established to prevent profiteering in education. The Court emphasized that the State Government was bound by the Rules, 2006, which mandated that the AFRC should determine the fee structure. The Court found the unilateral fee hike by the State Government to be arbitrary and in violation of the law. The Court also noted the exorbitant increase in fees and the financial burden it placed on students, highlighting the need for affordable education. The court also considered the fact that the medical colleges were the beneficiaries of the illegal G.O.

Logical Reasoning:

The court’s reasoning was based on the following points:

• ✓ The State Government was bound by the Rules, 2006, which mandated that the AFRC should determine the fee structure.
• ✓ The unilateral fee hike by the State Government was arbitrary and in violation of the law.
• ✓ The exorbitant increase in fees placed a significant financial burden on students.
• ✓ The medical colleges were the beneficiaries of the illegal G.O. and could not retain the excess amount collected.

The court did not consider any alternative interpretations, as the legal position was clear that the State Government could not bypass the AFRC in determining the fee structure. The court also noted that the medical colleges had conceded that the fee hike was not valid without AFRC’s recommendation.

The Supreme Court quoted the following from the judgment:

“Therefore, the G.O. issued by the State Government enhancing the tuition fee for the private medical colleges on the representations made by the private medical colleges was wholly impermissible and most arbitrary and only with a view to favour and/or oblige the private medical colleges.”

“The education is not the business to earn profit. The tuition fee shall always be affordable.”

“The management cannot be permitted to retain the amount recovered/collected pursuant to the illegal G.O. dated 06.09.2017.”

Key Takeaways

• ✓ State Governments cannot unilaterally increase tuition fees for private professional institutions without the recommendation of the designated regulatory body (in this case, AFRC).
• ✓ Regulatory bodies like the AFRC play a crucial role in ensuring that fee structures are fair, justified, and do not amount to profiteering.
• ✓ Private educational institutions cannot retain excess fees collected based on illegal government orders and must refund such amounts to students.
• ✓ Education is not a business to earn profit, and tuition fees must be affordable.

Potential Future Impact:

• ✓ This judgment reinforces the importance of regulatory oversight in the education sector and sets a precedent for other states to follow.
• ✓ It ensures that private educational institutions cannot exploit students by charging exorbitant fees without proper justification.
• ✓ It provides clarity on the procedure for fee fixation and the role of regulatory bodies in the process.

Directions

The Supreme Court upheld the High Court’s direction to refund the amount of tuition fee collected under G.O. dated 06.09.2017. The medical colleges were directed to refund the balance amount after adjusting the fee payable as per G.O. dated 18.06.2011. Additionally, the Court imposed a cost of Rs. 5 lakhs, with Rs. 2.5 lakhs each to be paid by the appellant(s) and the State of Andhra Pradesh to the Registry of the Supreme Court within six weeks, to be transferred to the National Legal Services Authority (NALSA) and Mediation and Conciliation Project Committee, Supreme Court of India (MCPC) equally.

Development of Law

The ratio decidendi of this case is that State Governments cannot unilaterally enhance tuition fees for private professional institutions without the recommendation of the designated regulatory body. This judgment reinforces the principle that regulatory oversight is essential to prevent profiteering in education and to ensure that fee structures are determined fairly. This case does not change the previous position of law, but rather reinforces the existing legal framework.

Conclusion

The Supreme Court dismissed the appeals filed by Narayana Medical College and other private medical colleges, upholding the High Court’s decision. The Court reaffirmed that the State Government cannot unilaterally increase tuition fees without the recommendation of the AFRC. This judgment underscores the importance of regulatory oversight in maintaining affordable and fair education, ensuring that private institutions do not engage in profiteering. The medical colleges were directed to refund the excess fees collected, and the State Government was penalized for its arbitrary actions.