Supreme Court Upholds Fee Regulatory Committee’s Authority in Private Engineering Colleges: Vasavi Engineering College Parents Association vs. State of Telangana (2019)

Introduction

Date of the Judgment: 01 July 2019

Citation: (2019) INSC 702

Judges: Arun Mishra, J., Navin Sinha, J. (authored the judgment)

Can a High Court, in exercise of its powers of judicial review, substitute its own determination of a fee structure for private professional colleges, when a statutory Fee Regulatory Committee has already made a decision? The Supreme Court of India addressed this question in a case concerning the Telangana Admission and Fee Regulatory Committee (TAFRC). The Court examined the extent to which a High Court can interfere with the decisions of expert bodies like the TAFRC, particularly in matters of economic policy and fee regulation. The judgment was authored by Justice Navin Sinha, with Justice Arun Mishra concurring.

Case Background

The case arose from a dispute over the fee structure for B.E. and B.Tech courses in private unaided professional institutions in Telangana for the block period of 2016-17 to 2018-19. The TAFRC, constituted under the Telangana Educational Institutions (Regulation of Admission and Prohibition of Capitation Fee) Act, 1983, initially determined a fee structure. Several respondent institutions challenged this determination in the High Court.

The High Court initially remanded the matter back to the TAFRC, which then revised the fee structure. Dissatisfied with the revised structure, the institutions again approached the High Court. The High Court then proceeded to fix the fee structure to its own satisfaction, disagreeing with the TAFRC’s assessment. The State of Telangana and the TAFRC appealed this decision to the Division Bench of the High Court, which upheld the Single Judge’s decision. Subsequently, the State of Telangana, the TAFRC, and the parents’ association filed appeals before the Supreme Court.

Timeline

Course of Proceedings

The respondent institutions initially challenged the TAFRC’s fee determination before a Single Judge of the High Court, who found defects in the process and remanded the matter back to the TAFRC. After the TAFRC revised the fee structure, the institutions again challenged it before the same Single Judge, who then proceeded to fix the fee structure himself. The State of Telangana and the TAFRC appealed this decision before the Division Bench of the High Court, which upheld the Single Judge’s decision. Aggrieved by the High Court’s decisions, the State of Telangana, the TAFRC, and the parents’ association filed appeals before the Supreme Court.

Legal Framework

The case is governed by the Telangana Educational Institutions (Regulation of Admission and Prohibition of Capitation Fee) Act, 1983 (referred to as “the Act”) and the Telangana Admission and Fee Regulatory Committee (for Professional Courses offered in Private Unaided Professional Institutions) Rules, 2006 (referred to as “the Rules”).

The relevant provisions of the Rules are:

• Rule 3(i): Provides for the constitution of the TAFRC, which has a term of three years.
• Rule 3(ii): Prescribes that the TAFRC is headed by a retired High Court Judge and other members.
• Rule 3(vii): Vests the TAFRC with the power to frame its own procedure in accordance with regulations notified by the Government.
• Rule 4: Deals with fee fixation and provides for examination by the TAFRC of the proposed fee structure submitted by an educational institution.
• Rule 4(ii): Empowers the TAFRC to decide whether the proposed fee structure is justified and does not amount to profiteering or capitation fee.
• Rule 4(iv): Requires the TAFRC to consider factors such as location of the institution, nature of the course, infrastructure costs, administration expenses, reasonable surplus for growth, and revenue foregone due to fee waivers.

The TAFRC framed guidelines under Rule 3(vii) for submission of fee proposals by institutions. These guidelines mandate that institutions submit audited statements of income and expenditure, balance sheets, and details of expenditure on salaries and infrastructure. The guidelines also specify the accounting system to be followed and the factors to be considered for fee fixation.

Arguments

Arguments on behalf of the State of Telangana:

• The TAFRC was constituted under the Rules and framed detailed guidelines for fee proposals.
• The guidelines provide an elaborate procedure for institutions to submit proposals, and the TAFRC considers various factors to arrive at a balanced fee structure.
• The TAFRC is headed by a retired High Court Judge and includes domain experts.
• The High Court should not have interfered with the TAFRC’s recommendations by substituting its own view.
• The TAFRC acted in consultation with the respondent institutions, seeking clarifications from them.
• The High Court did not find that the TAFRC acted contrary to the Act, Rules, or guidelines, yet it interfered with the fee structure.
• The change in methodology by the TAFRC to determine inflation and furtherance cannot be construed as arbitrary.

Arguments on behalf of the Respondent Institutions:

• The three-year block period was over, and actual expenses are available.
• The fee structure approved by the TAFRC would lead to a huge financial deficit for the institutions.
• The fee structure fixed by the High Court would allow the institutions to break even.
• The TAFRC, despite accepting increased audited expenditure, recommended a lower fee structure.
• The claim of the institutions was reasonable, considering the expenses of equivalent government colleges.
• The State was not reimbursing the necessary fee for students whose parents did not have an annual income of Rs. 2 lakh per year.

Arguments on behalf of the Parents’ Association:

• An undertaking to abide by the final decision cannot prevent a challenge to the fee structure determined by the High Court.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was justified in interfering with the fee structure determined by the TAFRC.
2. Whether the High Court could substitute its own fee structure for that of the expert committee.
3. The extent of the High Court’s power of judicial review in matters of fee regulation by expert bodies.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

• Islamic Academy of Education vs. State of Karnataka, (2003) 6 SCC 697 (Supreme Court): This case directed the establishment of committees in each State to regulate fee structures in unaided educational institutions.
• Fertilizer Corporation Kamgar Union (Regd.), Sindri v Union of India, (1981) 1 SCC 568 (Supreme Court): This case discussed the parameters of judicial review and the need for judicial restraint.
• State of (NCT) of Delhi vs. Sanjeev, (2005) 5 SCC 181 (Supreme Court): This case outlined the grounds on which administrative action is subject to judicial review.
• Peerless General Finance and Investment Co. Ltd. vs. Reserve Bank of India, (1992) 2 SCC 343 (Supreme Court): This case emphasized that courts should not interfere with economic policy decisions of expert bodies.
• BALCO Employees’ Union (Regd.) vs. Union of India, (2002) 2 SCC 333 (Supreme Court): This case discussed the need for judicial restraint in economic matters and the role of experts.
• Government of Andhra Pradesh vs. P. Laxmi Devi, (2008) 4 SCC 720 (Supreme Court): This case highlighted the need for judicial restraint in economic and regulatory legislation.
• Tamil Nadu Generation and Distribution Corporation Ltd. vs. CSEPDI-Trishe Consortium, (2017) 4 SCC 318 (Supreme Court): This case reiterated the need for judicial restraint in complex fiscal evaluations.
• T.M.A. Pai Foundation & Ors. vs State of Karnataka & Ors., (2002) 8 SCC 481 (Supreme Court): This case dealt with the rights of minorities and unaided private institutions in the context of education.
• Modern School vs. Union of India, (2004) 5 SCC 583 (Supreme Court): This case discussed the need for schools to follow accounting principles applicable to not-for-profit organizations.
• D.N. Jeevaraj vs. Chief Secretary, Government of Karnataka, (2016) 2 SCC 653 (Supreme Court): This case discussed when a court can take over the decision-making power of a statutory authority.
• Comptroller and Auditor General of India, Gian Prakash, New Delhi and another vs. K.S. Jagannathan and another, (1986) 2 SCC 679 (Supreme Court): This case concerned promotion to the Subordinate Accounts Service.
• Badrinath vs. Government of Tamil Nadu and ors., (2000) 8 SCC 395 (Supreme Court): This case related to a claim for promotion to super-time scale.

Judgment

How each authority was viewed by the Court?

• The Supreme Court relied on Islamic Academy of Education* to emphasize the need for regulatory committees but also clarified that the TAFRC is an expert body whose decisions should not be lightly interfered with.
• The Court cited Fertilizer Corporation Kamgar Union* and State of (NCT) of Delhi vs. Sanjeev* to highlight the limitations of judicial review and the need for restraint, emphasizing that courts should not act as appellate authorities.
• Peerless General Finance*, BALCO Employees’ Union*, Government of Andhra Pradesh vs. P. Laxmi Devi*, and Tamil Nadu Generation and Distribution Corporation Ltd.* were cited to reinforce the principle that courts should not interfere with economic policy decisions of expert bodies unless there is a clear case of illegality or arbitrariness.
• The Court referred to T.M.A. Pai Foundation* and Modern School* to discuss the rights of educational institutions but also clarified that these rights are subject to reasonable regulation to prevent commercialization and profiteering.
• D.N. Jeevaraj* was cited to discuss the exceptional circumstances under which a court can take over the decision-making power of a statutory authority, which were not found to be present in this case.
• The Court distinguished Comptroller and Auditor General of India vs. K.S. Jagannathan* and Badrinath* on facts, clarifying that they were not relevant to the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Expertise of TAFRC: The Court emphasized that the TAFRC is an expert body consisting of domain experts, including a retired High Court Judge and finance professionals, and its recommendations should not be lightly interfered with.
• Limitations of Judicial Review: The Court reiterated that judicial review is limited to the decision-making process and not the merits of the decision. The High Court exceeded its jurisdiction by substituting its own view for that of the TAFRC.
• Need for Judicial Restraint: The Court stressed the need for judicial restraint, particularly in matters of economic policy and fee regulation, where expert bodies are best suited to make decisions.
• Statutory Mandate: The Court noted that the TAFRC was acting within its statutory mandate and had followed the prescribed guidelines and procedures.
• No Finding of Illegality: The Court observed that the High Court did not find any violation of the Act, Rules, or guidelines by the TAFRC, yet it interfered with the fee structure.

Fact:Law Ratio

The Court’s reasoning was primarily based on legal principles, with a lesser emphasis on the specific facts of the case. The legal considerations focused on the scope of judicial review, the role of expert bodies, and the need for judicial restraint in economic matters.

Key Takeaways

✓ The Supreme Court upheld the authority of the TAFRC in determining the fee structure for private unaided professional institutions.

✓ The High Court’s interference with the TAFRC’s decision was deemed an overreach of its judicial review powers.

✓ Courts should exercise restraint in matters of economic policy and fee regulation, particularly when expert bodies are involved.

✓ Judicial review is limited to ensuring adherence to constitutional principles and the decision-making process, not the merits of the decision itself.

✓ The judgment reinforces the importance of expert bodies in regulatory matters and the need for courts to respect their decisions unless there is a clear case of illegality or arbitrariness.

Directions

The Supreme Court directed that the bank guarantees furnished by the respondent institutions, which were kept alive due to an interim order of the High Court, should be activated. The Court also directed that action should be taken in accordance with the law to protect the interest of the students.

Development of Law

The ratio decidendi of this case is that the High Court exceeded its jurisdiction by interfering with the TAFRC’s fee determination and substituting its own view. The Supreme Court reinforced the principle that judicial review is limited to the decision-making process and not the merits of the decision, especially in matters involving expert bodies. This judgment reaffirms the need for judicial restraint in economic policy matters and clarifies the scope of judicial review in such cases. There is no change in the previous position of law, but the judgment clarifies the application of existing principles to fee regulation by expert bodies.

Conclusion

The Supreme Court allowed the appeals, setting aside the High Court’s orders and restoring the TAFRC’s fee determination. The Court held that the High Court had exceeded its jurisdiction in interfering with the expert committee’s decision and substituting its own fee structure. The judgment emphasizes the need for judicial restraint in matters of economic policy and the importance of respecting the decisions of expert bodies.

Category

Parent Category: Education Law

Child Categories: Fee Regulation, Private Institutions, Regulatory Bodies, Telangana Educational Institutions (Regulation of Admission and Prohibition of Capitation Fee) Act, 1983

FAQ

Q: What is the main issue addressed in this Supreme Court judgment?

A: The main issue is whether a High Court can interfere with the fee structure determined by a statutory Fee Regulatory Committee for private professional colleges.

Q: What did the Supreme Court decide about the High Court’s interference?

A: The Supreme Court held that the High Court exceeded its jurisdiction by interfering with the Fee Regulatory Committee’s decision and substituting its own fee structure.

Q: What is the role of the Fee Regulatory Committee?

A: The Fee Regulatory Committee is an expert body that determines the fee structure for private educational institutions, ensuring that fees are justified and do not amount to profiteering or capitation fees.

Q: What does this judgment mean for private educational institutions?

A: This judgment means that private educational institutions must adhere to the fee structure determined by the Fee Regulatory Committee, and they cannot expect the High Court to easily overturn these decisions.

Q: What does this judgment mean for parents and students?

A: This judgment means that the fee structure determined by the expert committee will be upheld, and the fees will be regulated to ensure they are fair and not exploitative.

Q: What is judicial restraint, and why is it important in this case?

A: Judicial restraint means that courts should be cautious when reviewing decisions made by expert bodies and should not interfere unless there is a clear case of illegality or arbitrariness. It is important because courts should not substitute their own judgment for that of experts.