Supreme Court Upholds Rajasthan School Fee Regulation Act, 2016: Indian School, Jodhpur vs. State of Rajasthan (2021)

Introduction

Date of the Judgment: 3 May 2021

Citation: (2021) INSC 272

Judges: A.M. Khanwilkar, J. and Dinesh Maheshwari, J.

Can the government regulate the fees charged by private unaided schools? The Supreme Court of India recently addressed this crucial question in a significant judgment concerning the Rajasthan Schools (Regulation of Fee) Act, 2016. This case examines the balance between the autonomy of private educational institutions and the state’s role in ensuring fair and affordable education. The judgment clarifies the extent to which state governments can regulate the fees of private unaided schools, especially in the context of preventing profiteering and commercialization.

Case Background

The case involves appeals by several private unaided schools in Rajasthan challenging the validity of the Rajasthan Schools (Regulation of Fee) Act, 2016, and the rules framed under it in 2017. These schools contested the state’s authority to regulate their fee structures, arguing that it infringed upon their fundamental right to carry on the occupation of imparting education under Article 19(1)(g) of the Constitution of India. The schools also challenged orders issued by the State authorities regarding deferment and reduction of school fees during the COVID-19 pandemic.

The core contention of the schools was that the Act and Rules limited their autonomy to determine school fees, giving excessive power to the School Level Fee Committee (SLFC), which included parents and teachers, thus undermining the management’s control. They also argued that the Act allowed for arbitrary fee determination and lacked a mechanism for fee recovery.

Timeline

Legal Framework

The judgment primarily revolves around the interpretation and application of the following legal provisions:

• The Rajasthan Schools (Regulation of Fee) Act, 2016: Specifically, Sections 3, 4, 6 to 11, 15, and 16, which deal with the regulation of fees in schools, the constitution of the School Level Fee Committee (SLFC), and the powers of the Divisional Fee Regulatory Committee (DFRC).
• The Rajasthan Schools (Regulation of Fee) Rules, 2017: Particularly Rules 3, 4, 6 to 8, and 11, which provide additional guidelines for the determination of fees and the functioning of the SLFC.
• Article 19(1)(g) of the Constitution of India: Guarantees the fundamental right to carry on any occupation, trade, or business, which the schools argued included the right to determine their fee structure.
• The Right of Children to Free and Compulsory Education Act, 2009: Referred to in the context of the 25% quota for free education and its impact on the composition of the SLFC.

The core of the dispute lies in the interpretation of these provisions and whether they constitute reasonable restrictions on the rights of private unaided schools under Article 19(1)(g).

Arguments

Arguments of the Appellant Schools:

• The Act of 2016 and the Rules of 2017 violate Article 19(1)(g) of the Constitution by unduly restricting the autonomy of private unaided schools in determining their fee structure.
• The composition of the SLFC, with only one management representative against eight others (parents, teachers, and principal), negates effective control of the management.
• The selection of parent members by lottery, without any eligibility criteria, could lead to unqualified individuals influencing fee decisions.
• The SLFC has the authority to override the school management’s fee proposals, thereby undermining their autonomy.
• The fixed fee structure for three years, without provisions for increases due to inflation or other contingencies, is unreasonable.
• The wide powers given to the DFRC and Revision Committee, including search, seizure, and penalties, are excessive.
• The Act does not guarantee recovery of school fees and treats all schools equally, disregarding the principle that fees should be school-based.
• The factors for fee determination under Section 8 of the Act are vague and subjective.
• The legislative field is already occupied by the Right to Education Act, 2009.
• The schools relied on T.M.A. Pai Foundation vs. State of Karnataka (2002) 8 SCC 481, and Society for Unaided Private Schools of Rajasthan vs. Union of India (2012) 6 SCC 1, to emphasize the autonomy of private unaided schools.

Arguments of the Respondent State of Rajasthan:

• The Act of 2016 is a regulatory law that ensures complete autonomy to the school management, subject to approval by the SLFC.
• The SLFC includes representatives of all stakeholders, ensuring a democratic decision-making process.
• The Act and Rules provide clear guidelines for fee determination, preventing profiteering and commercialization.
• The external regulatory mechanism for fee fixation is consistent with the jurisprudence of the Supreme Court.
• The State relied on Islamic Academy of Education vs. State of Karnataka (2003) 6 SCC 697, P.A. Inamdar vs. State of Maharashtra (2005) 6 SCC 537, Modern School vs. Union of India (2004) 5 SCC 583, Action Committee, Unaided Private Schools vs. Director of Education, Delhi (2009) 10 SCC 1, and Modern Dental College and Research Centre vs. State of Madhya Pradesh (2016) 7 SCC 353, to justify the external regulatory mechanism.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. Whether the provisions of the Rajasthan Schools (Regulation of Fee) Act, 2016 and the Rules framed thereunder violate the rights of private unaided schools under Article 19(1)(g) of the Constitution of India?
2. Whether the State Government has the power to issue directions regarding the reduction of school fees, particularly in the context of the COVID-19 pandemic?

Treatment of the Issue by the Court

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

Authorities

The Supreme 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?

• T.M.A. Pai Foundation* and Society for Unaided Private Schools of Rajasthan*: The Court acknowledged the autonomy of private unaided schools but emphasized that this right is not absolute and is subject to reasonable restrictions.
• Islamic Academy of Education*, P.A. Inamdar*, Modern School*, Action Committee, Unaided Private Schools*, and Modern Dental College and Research Centre*: These cases were used to justify the permissibility of external regulatory mechanisms to prevent profiteering and commercialization in education.
• Association of Private Dental and Medical Colleges*: This case was used to determine the factors to be considered while determining the fee to be charged by a private unaided professional educational institution.
• Peerless General Finance and Investment Co. Ltd.*: This case was used to show that the court has to examine the substance of the provisions of the law to find out whether provisions of the law impose reasonable restrictions in the interest of the general public.
• Section 8 of the Act of 2016 and Rule 10 of the Rules of 2017: The Court found these provisions to be relevant and reasonable for determining school fees.

Reasoning of the Court:

The Supreme Court held that while private unaided schools have the right to determine their fee structure, this right is not absolute and is subject to reasonable regulation by the State. The Court emphasized the need to prevent profiteering and commercialization in education, which is a welfare activity aimed at social transformation.

The Court upheld the validity of the Rajasthan Schools (Regulation of Fee) Act, 2016, and the Rules of 2017, but with certain interpretations. It clarified that the Act and Rules are regulatory in nature and do not violate Article 19(1)(g) of the Constitution if interpreted reasonably. The Court read down certain provisions to ensure that the composition of the SLFC is fair and that the parent members are well-informed.

However, the Court struck down the order dated 28.10.2020 issued by the Director, Secondary Education, which had reduced the school fees, holding that the State Government cannot unilaterally reduce school fees once they are fixed under the Act of 2016. The Court found that the State Government had no authority to modify the fee structure, which had been determined by the school management and approved by the SLFC.

The Court also held that the State Government cannot justify its actions under the Disaster Management Act, 2005, or the Rajasthan Epidemic Diseases Act, 2020, as these Acts do not empower the State to interfere with the contractual matters between private parties, such as the determination of school fees.

The Court also noted that the schools must not engage in profiteering and commercialization, and should be sensitive to the difficulties faced by parents due to the pandemic. It directed the schools to provide a 15% reduction in fees for the academic year 2020-21, taking into account the unutilized facilities during the lockdown.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors, including the need to balance the autonomy of private unaided schools with the state’s responsibility to prevent profiteering and ensure fair access to education. The Court emphasized that education is a welfare activity and not a commercial enterprise, and that regulatory measures are necessary to protect the interests of students and parents.

Fact:Law Ratio

Key Takeaways

• Private unaided schools in Rajasthan must adhere to the Rajasthan Schools (Regulation of Fee) Act, 2016, and the Rules of 2017.
• The State Government cannot unilaterally reduce the school fees fixed under the Act of 2016.
• The SLFC must be constituted with qualified parent members selected through a transparent process.
• Schools must provide a 15% reduction in fees for the academic year 2020-21, considering the unutilized facilities during the lockdown.
• Schools must not debar any student from online or physical classes or withhold their results due to non-payment of fees.

Directions

The Supreme Court issued the following directions:

• The appellants (school management) shall collect the annual school fees for the academic year 2020-21, as fixed for the academic year 2019-20, but with a 15% deduction in lieu of unutilized facilities.
• The payable fees to be collected in six equal monthly installments before 05.08.2021.
• The school management shall consider representations from parents facing difficulty in paying fees sympathetically.
• The State of Rajasthan is directed to ensure that all government outstanding dues towards the unit cost payable to respective unaided schools are settled before the end of July 2021.

Development of Law

The ratio decidendi of this case is that while private unaided schools have the right to determine their fee structure, this right is not absolute and is subject to reasonable regulation by the State to prevent profiteering and commercialization. The judgment also clarifies that the State Government cannot unilaterally reduce school fees once they are fixed under the relevant statute. This decision reinforces the balance between the autonomy of private educational institutions and the state’s role in ensuring affordable and fair access to education.

Conclusion

In conclusion, the Supreme Court upheld the Rajasthan Schools (Regulation of Fee) Act, 2016, while striking down the State’s order reducing school fees. The judgment clarifies the extent of state regulation permissible in private unaided schools and emphasizes the need for a balanced approach that respects both the autonomy of educational institutions and the interests of students and parents. The court’s directions provide a practical framework for resolving fee-related disputes and ensuring that education remains accessible and affordable.