State Can Provide Independent Mechanism Only To The Extent That School Management’s Decision Does Not Result In Profiteering & Commercialisation: Supreme Court

The Supreme Court Bench of Justices AM Khanwilkar & Dinesh Maheshwari has recently observed that the State can provide an independent mechanism only to regulate that decision of the school Management to the extent that it does not result in profiteering and commercialisation.

“It is also well ­settled that the State Government cannot go against the provisions of the Constitution or any law. The subject of determination of fee structure and whether it entails in profiteering, is already covered by the legislation in the form of the Act of 2016 and the Rules framed thereunder. It is not as if there is no enactment covering that subject or any incidental aspects thereof. The Act of 2016, which in itself is a self ­contained code on the said subject, not only provides for the manner in which the concerned school ought to finalise its fee structure, but also declares that the fee so finalised either by consensus or through adjudication mode shall be binding on all concerned for a period of three academic years. In any case, determination of fees including reduction thereof is the exclusive prerogative of the management of the private unaided school. ”, the Bench remarked.

These observations were made in light of the appeal assailing the order dated October 28, 2020 issued by the Director, Secondary Education as per which the Board issued directions regarding charging school fees from guardians/ students for academic session 2020-21 keeping in view the CoVID pandemic. 

In order to justify the exercise of its power, the State laid four different perspectives. 

• Firstly the State was competent to do so under Section 18 of the Rajasthan Schools (Regulation of Fee) Act , 2016 (“Act of 2016” )
• Secondly being a policy decision, the State could issue an executive direction to mitigate the concern of parents in exercise of power under Article 162 of the Constitution. 
• Thirdly, such power could be exercised by the State Government to mitigate the concerns of the parents and for capacity building of the stakeholders as one of the measures under the Disaster Management Act, 2005 (“Act of 2005”).
• Fourthly, such directions could be issued also in exercise of power under the Disaster Management Act, 2005 (“Act of 2020”)  by the State Authorities.

Observations of the Court

1. With regards to the State’s power to issue the directions u/s 18 of the Act of 2016, the Bench observed that the provision did not bestow power on the State Government to issue general or special directions to any school within the State. It was further observed that the direction had to be consistent with the provisions of the act of 2016 & the rules framed thereunder & could not be in conflict with the mandate of the Act & the Rules. 

The Court further added that, “Additionally, such directions must be necessitated due to expediency for carrying out the purposes of the Act and the Rules or to give effect to the applicable provisions. If the direction issued by the State Government does not qualify these parameters, it must follow that the same has been issued in excess of power bestowed under Section 18 of the Act of 2016.”

Therefore, the Bench observed that the direction given by the State Government was in conflict with the scheme of finalisation of fee structure specified under the Act of 2016 & that the order dated 28.10.2020 being in the nature of direction, breach the pre conditions specified u/s 18 of the Act of 2016.

2. With regards to the State issuing an executive direction in exercise of power under Article 162 of the Constitution
   , the Court observed that the executive power of a State under Article 162 could only extend to the matters upon which the legislature had competency to legislate & was not confined to the matters over which legislations were already in place. 
3. On the aspect of exercise of power by the State Govt to mitigate the parent’s concerns under the purpose of the Act of 2005, the Bench observed that it was unfathomable as to how the State Authorities established under the Act could arrogate into themselves the power to issue directions to private parties on economic aspects of legitimate subsisting contractual matters or transactions between them inter se. 

“It is not enough to say that the same was issued under the directions of the Chief Minister of the State. For, the Chief Minister is only the Chairperson (Ex officio) of the State Disaster Management Authority established under Section 14 of the Act of 2005. Suffice it to observe that there is no provision in the Act of 2005 which concerns or governs the subject of interdicting the school fee structure fixed under the Act of 2016.”, the Court added. 

4. The Court also observed that the reliance placed on the provisions of the State legislation, namely, the Act of 2020 dealing with epidemic diseases would be of no avail to justify the impugned order dated 28.10.2020 issued by the Director, Secondary Education.

“The State Government Indeed, it can regulate or restrict the functioning of offices, Government and private and educational institutions in the State. That, however, would be only in respect of the manner of its use and its timings including to observe standard operating procedures to ensure that epidemic diseases do not transmit or spread on account of activities carried out therein. That power to regulate cannot be invoked to control the tariffs, fees or cost of goods and services and in particular economic aspects of contractual matters between two private parties or so to say school fees of private unaided schools.”, the Bench observed.

Thereafter, the Bench while noting that the impugned order could not be sustained even in reference to executive power under Article 162 of the Constitution observed that the impugned order issued was in respect of matters beyond the power of the State Government ­ to regulate the fee structure for ensuring that the school Management does not indulge in profiteering and commercialisation. 

Case Title: Indian School, Jodhpur & Anr. V. State Of Rajasthan & Ors.| Civil Appeal No. 1724 Of 2021