Bluebells School International v. Directorate of Education

3. Procedure for Increase in Tuition Fees

I. For Schools running either on Private Land or on

DDA/L&DO allotted land NOT having condition to seek prior sanction of Director (Education) before any fee hike. a. After complying with the instructions strictly mentioned at Para (1), if any school still feels it necessary to hike the tuition fee, it shall present its case along with detailed financial statements indicating income and expenditure of each account before the managing committee of the school including DE’s Nominees. b. The school before placing the proposal of increase in tution fee, shall ensure the compliance of section 18(4), Rule 172, 173, 174, 175, 176 and 177 and other relevant provisions of Delhi School Education Act and Rules, 1973 and guidelines issued by the department from time to time, various judicial pronouncements, and ratio laid down by Hon’ble Supreme Court in Modern School Case[4] and Delhi High Court in the matter of Delhi Abhibhavak Mahasangh Vs DoE[5] (WPC 7777/2009) as well. ****** e. The managing committee including DE’s nominees shall evaluate the proposal of the school for increase in fee taking into consideration the availability of funds/reserves/cash in hand/bank balances/surplus. In case, DE’s nominee disagrees with the proposal of increase in tuition fee or agrees to a lesser increase in tuition fee against the proposal on the basis of the relevant provisions of Delhi School Education Act and Rules, 1973, instructions/guidelines issued from time to time and judicial pronouncement in this regard, he/she shall record his/her dissent note in writing citing the provisions and other reasons justifying lesser increase in fee or no increase in fee as the case may be, in the minutes of the meeting and only then sign the minutes of the meeting. DE’s Nominee of the school shall forward the minutes of the meeting to Dy. Director of District concerned for information and record in all cases. DE’s Nominee shall submit to the DDE concerned a statement of Managing Committee meeting(s) attended by him. f. The managing committee of the school shall file the full statement of fee under Section 17(3) of DSEAR, 1973 to the DDE concerned in the proforma as circulated by the department vide order dated 03/07/2017. ***** j. No other head of fee like annual fee, development fee, earmarked levies shall be increased by the school for implementation of 7th Pay Commission’s Recommendations, as a corollary to increase in tuition fee.” Modern School v. U.O.I., (2004) 5 SCC 583 Delhi Abhibhavak Mahasangh v GNCTD, 2011 SCC OnLine Del 3394

11. On 30 November 2017, the School submitted a copy of its fee structure, in compliance with the requirement of implementation of the recommendations of the 7th CPC. The fee structure had been approved by the School’s Managing Committee, which included nominees of the DoE. It was also stated that the nominees of the DoE did not raise any objection to the proposed fee structure, which was unanimously approved. As a school which was not subject to any “land clause”, the petitioner, asserts that the writ petition was only required to intimate the DoE of its fee structure under Section 17(3) of the DSE Act, which was thus done.

12. On 13 April 2018, the DoE issued another Order, withdrawing the Order dated 17 October 2017 in respect of schools operating on land to which the “land clause” applied. The Order dated 13 April 2018 did not, therefore, apply to the petitioner, in respect of which the earlier Order dated 17 October 2017 continued to operate.

13. Parents of some of the students in the petitioner-School addressed a complaint dated 15 May 2018 to the School, alleging that the School had illegally increased its fee and demanded arrears without prior approval of the DoE, as required by the Order dated 13 April 2018 issued by the DoE. In the circumstances, the complaint sought, from the School, either an order from the DoE authorising increasing of fees and collection of arrears pursuant to the requirement of implementation of the 7th CPC recommendations or a rollback of the fee hike, discontinuation of collection of arrears and refund of the arrears already collected. The complaint was forwarded by the Deputy DoE to the School on the same day, i.e. 15 May 2018, seeking a response within three days.

14. The School, in its response dated 17 May 2018, pointed out that it was not subject to any “land clause” and had only increased its tuition fee, with arrears payable in three instalments, and that the increase in fee was in accordance with the DoE Order dated 17 October 2017.

15. The DoE issued Order dated 25 May 2018, ordering the School to immediately revert back the enhanced fees for the academic session 2018-2019 and charge fees in accordance with the quantum which was being charged during 2017-2018, as (i) no approval had been granted by the DoE for any increase in fees by the School pursuant to the 7th CPC and (ii) it appeared, prima facie, that the increase in fees by the School was on the higher side, and had to be examined in detail by the DoE.

16. The School responded on 13 June 2018, submitting that the revised fees charged by it during 2017-2018 were in accordance with the DoE Order dated 17 October 2017 and that, insofar as the 2018- 2019 academic year was concerned, the Managing Committee of the school, in its meeting dated 13 March 2018, made a modest enhancement of fee by 10% to meet the financial liabilities in the 2018-2019 academic year towards increment, DA, consequential statutory liabilities and inflation. It was further pointed out that the proposed fee schedule for 2018-2019 was immediately forwarded to the DoE and that the parents were duly informed on 4 April 2018. As a school which was not situated on land to which any “land clause” applied, it was submitted that there was no requirement for the School to obtain prior approval of the DoE before increasing its fees to meet the financial implications of implementation of the 7th CPC recommendations.

17. Subsequently, vide letter dated 11 June 2018, the DoE sought certain documents from the school, which were provided on 15 June

2018. Thereafter, the School was informed vide letter dated 11 July 2018 of the DoE that a committee had been constituted to inspect the School, and that the inspection would be conducted on 17 July 2018. The inspection was duly conducted and all documents as sought were provided by the School to the Committee. No report of the inspection was ever supplied to the school.

18. The DoE, thereafter, required the school to provide for the documents, vide its letter dated 23 July 2018. Some of the said documents were provided on 26 July 2018, and the remaining were provided on 1 August 2018, along with the representation dated 30 July 2018.

19. On 1 August 2018, the following Order came to be passed by the DOE: “ORDER WHEREAS, Blue Bells School International, Kailash, New Delhi is a Private Recognized School functioning under Directorate of Education, GNCT of Delhi and is required to function in accordance with the provisions as contained under Delhi School Education Act, 1973 and Rules made there under and also to follow the lawful instruction as issued by Directorate of Education from time to time. AND WHEREAS, a complaint was received, from the office of the Dy. Chief Minister, Delhi, filed by parents of the students studying in Blue Bells School International, Kailash, New Delhi, especially in relation to the unauthorized fee hike and arrears on account of CPC recommendations demanded by the school. AND WHEREAS, the said complaint was forwarded to the school for their comments. On perusal of documents submitted & the reasons given by the school, regarding their fee hike under Section 17(3), it was observed that an opportunity of being heard may be awarded to the School. Accordingly, Principal of the said school was heard on 17.07.18 at the time of inspection of the said school. AND WHEREAS, certain points have emerged during the analysis of the submission made by the school viz. the Manager of the school stated that the school is on DDA Land without imposing the condition for taking prior approval of Director of Education before hike in fees. AND WHEREAS, the Chairman/Manager of the School was directed to furnish/produce some relevant documents/information to justify their claim for fee hike. The Inspection Committee has given sufficient opportunity keeping in view of “Natural Justice” vide letter No. DDE/SE/2018-2019/1675 dated 11/07/2018 and further vide letter No. DDE/SE/2018-2019/224 dated 23/07/2018, but all in vain. AND WHEREAS, the Director Education has already issued the guidelines for implementation of 7th CPC recommendations in Private Unaided Recognized School of Delhi, vide order No. DE15(318)/PSB/20161978[6] dated 17.10.2017 irrespective of school land status. In pursuance of the said order a Committee under the Chairpersonship of Dy. Director of Education (South-East) consisting of DDE (Zone-25), ADE(SE) and Account Officer (SE) has examined the fee statement of the school under Section 17(3) of DSEA, 1973 and observed as under-

1. As per clause 14 of order no.F.DE /15(56)/Act/2009/778 dated 11.02.2009, development fee, not exceeding 15% of the total annual tuition fees may be charged for supplementing the resources for purchase, upgradation and replacement of furniture, fixture and equipment. However, as per audited financial statements for FY 2014-15, 2015-16 and 2016-17 and its comparative analysis, it is noted that the school is utilizing the development fee for in contravention of aforesaid clause 14. The details of mis-utilization of development fund are as follows: (Figures in Rs.) Particulars 2014 -15 15- 2016-17 Repairs of Furniture and fixtures 5,45, 1,[5] 4,[4] 3,20,944 Building Repairs and Maintenan ce 16,38,039 73, 60, 13,05,77 Watch and Wards 10,15,196 - - Electrical Goods and Repairs 3,73, 1,[9] 8,0 1,38,161 Computer s Upkeep and 13,71,179 1,[9] 1,[3] 20,45,84 Conservan cy charges 32,95,365 - - Botanical and Science park activities 6,84, - - General Repairs and 1,28, - 3,27,266 Multipurp ose Hall Repair and replaceme nt - - 1,40,545 Language Lab Equipmen ts - - 1,24,033 Academic Extension project expenses 3,28, - - Playgroun d expenses 18,79 - - Genset Repairs 1,93, - 2,49,519 Library Books 1,36, 16, 1,36,755 Sports Material 13,39 1,[7] 5,[3] 97,511 Total 97,42,956 80, 96, 48,86,35

2. As per Rule 180 of DSER, 1973 school is, inter-alia, required to submit copy of receipts and payments account duly audited by chartered accountant. However, school has failed to submit receipts and payments account for FY 2014-15, 2015-16 and 2016-17.

3. It is noted that during FY 2016-17 school has purchased double desks and single desks amounting to Rs.23,43,634 and Rs.20,56,553/- respectively. The details of opening balance of double desks and single desks are not disclosed in the financial statements and it appears these are merged in the block of furniture and fixtures of the school. Further, there were no disposal/sale of furniture and fixtures during the year. As per school submission, as on 15.07.2018 there are 1930 students only. Considering the student’s strength of the school and the amount involved in purchase of desks, it is clear that school has not followed due propriety while utilizing school funds.

4. It is noted that the school is collecting transport fee from the students, but not shown in the financial statements of the school till FY 2015-16. As per Rule 175 of DSER, 1973 read with section 18(3) of DSEA, 1973 school is required to maintain its accounts so as to exhibit clearly the income accruing to school by way of fee, etc., and therefore, school is in contravention of aforesaid provisions of DSEA & R, 1973 and has been hiding its transport fee collections and related expenditures.

5. On comparison of audited financial statements for FY 2015-16 and 2016-17, differences in opening balance as on 01.04.2016 have been noted. The detail of differences are as follows: Particulars Balance as on 31.03.201 Balance as on 01.04.201 General Fund - 25,60,181.00 32,80,886. Depreciation Reserve Fund 5,17,05,[3] 60.00 5,53,51,57 4.00 Vehicle Replacement Fund - 8,05,000.0 Current Liabilities for services 1,956.00 6,081.00 Fixed assets – Gross value 7,01,40,[5]

59.00 7,90,46,66

1.00 Investments 1,30,39,[6]

38.00 1,41,24,74

8.00 Advances to staff 78,263.00 1,03,713.0 Advance to contractor 70,194.00 72,271.00 TDS Receivable 3,58,491. 4,20,117.0 Bank Balances 42,78,598.00 43,01,460. Interest on bank FDRs 11,87,249.00 12,75,429. Deposits (other than bank) 5,91,416. 6,96,416.0

6. School has proposed for expenditure on higher side in its statement of fee filed under 17(3). a) Expenditure on fixtures in 2016-17 is nil, estimated expenditure in 2017-18 is Rs.320944/- but proposed expenditure for 2018-19 is Rs.48,38,500/-. b) Expenditure on purchase of computers in 2016-17 was Rs. 28,73,000/-, in 2017-18 is Rs.50,00,000/- and proposed expenditure for 2018-19 is Rs.10,00,000/-. Computer is a capital asset and lasts for many years. So much expenditure incurred every year not appears to be correct. c) Expenditure on Teaching Aid during 2016-17 was Rs.1,70,582/- whereas proposed expenditure during 2018- 19 is Rs.38,00,000/- and Rs.1,80,000/- for upgradation of Teaching Aid Equipments. d) Overhead expenditure incurred during 2016-17 is Rs.3,48,76,134/- whereas proposed expenditure during 2018-19 is Rs.5,48,03,790/- which is an increase of 41.33% and as such the same doesn’t not appear to be correct.

7. The total funds available for the year 2017-18 amounts to Rs.20,16,52,361/- out of which cash outflow in the year 2017-18 is estimated to be Rs.17,61,95,435. This results in surplus of funds amounting to Rs.2,54,56,926/-. The details are as follows: Particulars Amount (Rs.) Cash and Bank balances as on 31.03.17 as per audited Financial Statements. 86,29,460 Add: Investments as on Financial Statements 1,41,87,811 Less: Fixed Deposits for CBSE Reserve Fund 7,63,858 Available Funds 2,20,53,413 Add: Fees for 2016-17 as per audited Financial Statements (we have assumed that the amount received in 2016-17 will at least accrue in 2017- 18). 17,80,12,041 Add: Other income for 2016- 17 as per audited Financial Statements (we have assumed that the amount received in 2016-17 will at least accrue in 15,86,907 2017-18) Estimated availability of funds for 2017-18 20,16,52,361 Less: Provisional expenses for the session 2017-18 as per receipts and payments account submitted by school vide its letter dated 15.06.2018 17,61,95,435 Net Surplus 2,54,56,926 In view of the above examination, it is evident that the school is having sufficient funds to meet the financial implications for the financial year 2017-18 after meeting its expenditure. After taking into consideration all the facts and circumstances of the case, the school authority is hereby directed not to increase fee under any head of fee for session 2017-18. NOW THEREFORE, I, Juhi Aggarawl, Deputy Director of Education in exercise of power conferred upon Director of Education under Section 17(3) and further delegated to the under signed vide order No. DE. 15(318)/PSB/2016/1974[2] dated 13/10/2017 of Director (Education) and keeping in view of the interest of the parents of school, the Manager/HOS Blue Bells school International, Kailash, New Delhi is hereby directed under Section 24(3) of DSEAR, 1973 to comply with the following directions: i. Not to increase any fee in pursuance to the proposed fee hike for the session 2017-18 on any account including CPC and if the fees is already increased, the same shall be refunded to the parents or adjusted in the fee of subsequent months. ii. To communicate through its website, notice board and circular about rejection of fee increase proposed by the School. iii. The fee should be utilized as per letter and spirit of Rule 177 of the DSEAR, 1973 and the judgment of the Hon’ble Supreme Court in the case of Modern School Vs Union of India (2004). iv. To utilise the fee collected from students should be in accordance with the provisions of Rule 177 of the DSER, 1973 and orders and directions issued by this Directorate from time to time.”

20. The present writ petition seeks a writ of certiorari, quashing the aforesaid order dated 1 August 2018. Rival Submissions

21. I have heard Mr. Kamal Gupta, learned Counsel for the petitioner and Mr. Santosh Tripathi, learned Standing Counsel for the GNCTD/DoE, as well as Mr. Khagesh P. Jha, who was permitted to intervene on behalf of some of the parents, at length.

22. Mr. Gupta submits that the issue in controversy is covered by the decisions of this Court in Ramjas School v. D.O.E.[6] and Mahavir Senior Model School v. D.O.E.[7]

23. In particular, Mr. Gupta advances the following submissions:

(i) The impugned order has been passed in clear violation of the principles of natural justice. No Show Cause Notice was ever issued to the School by the DoE, enumerating the proposed disallowances, and no opportunity to respond was, therefore, extended. In the circumstances, as the School was unaware of any adverse order in the offing, it could not even seek a Show Cause Notice or any opportunity of hearing.

(ii) In its counter-affidavits to the present writ petition, the

DoE has sought to contend that the law did not require it to extend any opportunity of personal hearing before passing the impugned order. This is contrary to the decisions in Ramjas School and Mahabir Senior Model School.

(iii) There is no allegation, against the petitioner, of commercialisation of education or of profiteering. In the absence of any such specific allegation, the DoE lacked the jurisdiction to interfere with the manner in which the petitioner had fixed its fee for the coming year. Any such intervention would infract Article 19(1)(g) of the Constitution of India.

(iii) Every school was entitled to maintain a reasonable surplus, and the existence of a surplus did not indicate profiteering or commercialisation.

(iv) The DoE did not possess the jurisdiction to examine the sufficiency of the surplus available with the school or assess whether, in view of the surplus, the school was justified in increasing its fees or not.

(v) Rule 190(6)8

190. Inspection and supervision of schools. – ***** inspection of the School had not been provided to it. In the present case, the notice informing the School that it would be inspected was issued on 11 July 2018. The inspection took place on 17 July 2018. Thereafter, on 23 July 2018, the DoE wrote to the School, directing the School to forward information/documents, enumerated under 12 heads, for preparation of the inspection report. There was no further communication with the School prior to the issuance of the impugned order dated 1 August 2018, which, purportedly on the basis of the documents related to the School, arrived at the conclusion that it had a net surplus of ₹ 2,54,56,926/–, which was sufficient to meet the financial implications for the academic year 2017-2018. This procedure was clearly contrary to Rule 190 of the DSE Rules. Besides, Mr. Gupta has also sought to submit that there are factual inaccuracies or errors in the manner in which the impugned order calculates the surplus available with the School. However, I do not deem it necessary to examine that aspect, for reasons which would presently become apparent.

24. In the context of the above submissions, Mr. Gupta places reliance on the following passages from the judgment of this Court in Mahavir Senior Model School: “11. The present case brings forth a classic tussle between (6) Every person, other than the Director, inspecting a school, shall, within 15 days from the completion of the inspection, submitted to the Director, the report as to the results of the inspection, and shall simultaneously send a copy of the report to the school concerned. autonomy of private schools in fixation of fees and the extent of governmental control thereon, an issue which routinely engages this Court. DoE asserted that notwithstanding the status of “private unaided school”, no fee can be fixed without their prior permission. The schools on the other hand, contended that they enjoy freedom in management of their affairs, which includes fixation of the fees. In that light, what lays for consideration before this Court is whether in passing the impugned order, the DoE has acted in excess of its jurisdiction vested under DSEA and DSER or any other extant rules/regulations, thereby impinging upon the autonomy of petitioner Schools in determination of their fee structure for the Academic Year 2018-2019. ***** Whether the proposed hike in fee by the schools amounts to profiteering or commercialisation

17. Even though there is no provision found under the DSEA that requires unaided schools to seek prior permission from DoE before fee hike, yet, DoE exercises regulatory control emanating from Sections 17(3) and 18(3) and (4) of DSEA and the DSER. However, while regulating the fee structure, DoE does not act as an appellate body. It is not vested with the power to analyse the correctness of discretion exercised by the school, but is entitled to ensure that the school does not indulge in commercialisation of education. The bounds of regulatory jurisdiction are limited and restricted, as expounded by the judicial precedents noted hereinafter. ***** Understanding the impugned order: Unpacking the legal issues at stake

23. This brings us to the grounds of challenge to the impugned order. Schools have alleged breach of the principles of natural justice due to denial of opportunity to respond to the allegations. This principle of audi alteram partem is the cornerstone of procedural fairness and is vital to ensure a just and equitable outcome in any legal process. It has been contended that the impugned order was issued without prior notice of proposed disallowances. There is no convincing response to this contention. The court is of the view that purported inconsistencies mentioned in the impugned order should have been revealed to the schools before passing of the impugned order, giving them adequate opportunity to respond. Adherence to this principle would make the decision-making process fair, transparent and would preclude bias or prejudice from influencing the outcome of a case. Thus, DoE must ensure that the schools are provided all relevant material and information, including the basis for any objections or concerns raised by the regulatory authorities, while scrtunising the statement if fee. This would allow the schools to present their stand in a meaningful way. That said, in the opinion of the court, instead of remanding the matter back to DoE at this juncture, it would be appropriate to evaluate the validity of the impugned order on its own merits. *****

29. Next, comes the issue of whether accumulation of surplus funds amounts to profiteering. Firstly, this allegation has been made for the first time before the court in response to the petition. Secondly, DoE's accusation of “commercialisation of education” is premised on mere presence of “sufficient funds to carry on the operation of the school”. Thus, vital questions that emerge for consideration are: (a) whether mere availability of a surplus disqualifies the schools from increasing their fees; and (b) whether DoE has the power to determine the adequacy of funds available with the schools in absence of finding of profiteering. The answers to both of these questions must be given in the negative for reasons set out below.

30. DoE's power to scrutinise the accounts and other records of private unaided schools finds its source in Section 17(3) of the DSEA (examined hereinabove) r/w Rule 180(3) of the DSER. Under Rule 180(3), accounts and other records maintained by an unaided private school shall be subject to examination by the auditors and inspecting officers authorised by the Director. The Act and Rules specify, in no uncertain terms, that DoE has the authority to seek and examine the accounts of schools. This regulatory power must however, be exercised within the precincts of the law explained in the aforenoted judicial precedents. Schools are entitled to maintain a reasonable surplus for expansion of the system and development of education. Increase in fee to generate funds for expansion and betterment of educational/infrastructural facilities, as is the case with the Senior School, is permissible in law. It is important for private unaided schools to maintain a surplus for the purpose of further development and honing of their educational facilities and services. The accumulation of surplus funds is essential for the long-term sustainability and growth of the school which enables them to invest in better infrastructure, equipment, and resources. Private unaided schools may need to invest in building or improving infrastructure, such as construction of new classrooms, libraries, laboratories, sports facilities or technology upgrades, such as new computers, tablets and software. These increments are generally sourced from the surplus funds and enable the school to stay up-to-date with the latest technologies and provide quality education to its students. Thus, the process of fixation of fee for any given academic year entails consideration of a multitude of factors such as salaries and remunerations to be paid to teaching and non-teaching staff, cost of running the establishment, investments, infrastructure as well as future plans for expansion and development of the institution. Since the unaided schools are entirely dependent on the fee collected by them, they would obviously like to earmark funds for specific purposes and therefore, planning and maintaining a surplus per se cannot be construed as commercialisation of education. It is only if such funds are being used purely for commercial gain, rather than for improvement and development of the school, can it be construed as a form of commercialisation of education.

31. In the present case, DoE has recomputed surplus available with schools and held that the same is sufficient to meet their needs and thus, denied them the right to increase the fee. This approach adopted by the DoE, in the opinion of the court, is incorrect and impermissible. Determination of what constitutes a “reasonable” surplus would depend on various factors such as the size of the school, the level of infrastructure and facilities provided, salaries of the staff and the overall financial position of the school. In their statement of fee, Senior School has incorporated a detailed chart of estimated expenses expected to be incurred in the Academic Session 2018-2019 as also the income generated by them. Therefore, there is transparency in their financial operations and they can be held accountable for utilisation of funds. They have mentioned that the management intends to restructure and revitalise the school plant at an estimated cost of Rs 12 crores, and have even entered into a contract with an architect for said purpose. Since the court would not like to sit in appeal over this issue, it has refrained from examining the veracity of the figures mentioned therein, yet considerable merit is found in Mr Gupta's submission that Senior School, operative since 1983, would require funds for reconstruction and allied activities. DoE must remember that unaided schools possess autonomy in their administration, including, autonomy to envision and plan for its growth and expansion; they cannot impose their own subjective opinion of what is sufficient amount for schools to have in order to meet their aims and objectives. In the instant case, the audited balance sheets and material provided by the schools have been reworked without a valid explanation. The audited balance sheets of private unaided schools are important documents that reflect their financial position and performance. These documents provide a clear and transparent picture of school's economic status and help in assessing whether the school has sufficient resources to meet its expenses and whether a fee hike is justified. DoE cannot act as an appellate body and reject the said financial documents, in absence of any evidence to show that the accounts were not prepared in accordance with applicable accounting standards or were rejected by the tax authorities. Pertinently, an objection qua format of return and documents submitted by the schools was raised by DoE; however, in response to said query, the schools had clarified that they are following the prescribed format. In the impugned order, there is no adverse remark on this issue. Therefore, the DoE has undertaken the exercise of reworking the balance sheets without disclosure of justifiable reasons, or a finding of profiteering or commercialisation of education. This exercise reflects DoE's subjective opinion, without any objective criteria, making the entire exercise arbitrary and unreasonable. The right of unaided schools to determine fee to be charged from students cannot be faltered purely only on account of presence of reasonable surplus in their books of account. DoE could have examined the veracity of surplus figures presented by the schools, but in order to deny enhancement of fee, they must, on credible basis, determine that the school has indulged in commercialisation of education, profiteering or levying of capitation fee. The School Managing Committee had carefully undertaken the exercise of deciding the budget for academic year concerned and sans a finding of profiteering or commercialisation of education, the DoE has acted in excess of its powers and impinged upon the autonomy of schools, protected by law, in rejecting Senior School's proposed fee hike.” (Emphasis supplied) Mr. Gupta points out that, though the decision in Mahavir Senior Model School is under challenge in LPA, no interim orders have been passed therein.

25. Mr. Gupta also places reliance on para 117 and of the judgment of the Supreme Court in Indian School v. State of Rajasthan[9]:

26. The expression “capitation fee”, submits Mr. Gupta, now stands defined in clause (b) of Section 2 of the Right of Children to Free and Compulsory Education Act, 2009 (“the RTE Act”) as “any kind of donation or contribution or payment other than the fee notified by the school”. Simultaneously, Section 13(1) of the RTE Act proscribes all schools from, while admitting a child, collecting any capitation fee or subjecting the child or his or her parents or guardian to any screening procedure”. There is no such allegation against the School; ergo, it cannot be alleged that the School is charging capitation fee.

27. Thus, submits Mr. Gupta, the impugned Order dated 1 August 2018 is liable to be set aside as having been issued in excess of the jurisdiction vested in the DoE, in violation of the principles of natural justice and in violation of Rule 190 of the DSE Rules. Submissions of Mr. Tripathi and Mr. Jha

28. Mr. Tripathi sought to contend that the decision in Ramjas School is distinguishable on facts as, in the present case, the impugned Order emanates from a complaint received by parents. He places reliance on Section 18(4)10 of the DSE Act, apropos the specific finding, in the impugned Order, that the School was utilising development fee, collected by it, for purposes other than those for which development fee could be utilised.

29. Supplementing the submissions of Mr. Tripathi, Mr. Jha submits that there was no allegation against Ramjas School, akin to the allegations of misutilisation of development fee, non-reflection of transport fee collected from students in the financial statements of the school to the 2015-2016 Financial Year, which amounted to contravention of Rule 17511 of the DSE Rules read with Section 18(3) of the DSE Act and differences in the opening balance as on 1 April 2016, reflected from the audited financial statements of the School for the Financial Years 2015-2016 and 2016-2017, specifically levelled against the petitioner-School in the impugned Order dated 1 April

2018. He also submits that there was no compliance, by the School with the preconditions for increasing the fee mid-section, as contained in the DoE order dated 17 October 2017. Nor, submits Mr. Jha, was (4) (a) Income derived by unaided schools by way of fees shall be utilised only for such educational purposes as may be prescribed; and (b) charges and payments realised and all other contributions, endowments and gifts received by the school shall be utilised only for the specific purpose for which they were realised or received.

175. Accounts of the school to be maintained. – The accounts with regard to the School Fund or the Recognised Unaided School Fund, as the case may be, shall be so maintain as to Ex. clearly the income accruing to the school by way of fees, fines, income from building, rent, interest, development fee is, there compliance with General Instruction 1(b) in the DoE Order dated 17 October 2017 which required all schools to, first of all, explore the possibility of utilising existing reserves to meet any shortfall in payment of salaries and allowances, as a consequence of increase in the salaries and allowances of employees.

30. Mr. Jha submits that “commercialisation” and “capitation fee” are not incantations which have specifically to be alleged in so many words and that, if the allegations in the impugned Order amount to commercialisation of education or charging of capitation fee, that would suffice to justify the Order. He submits that the “surplus” reflected in the impugned Order is surplus generated out of unlawfully collected amounts.

31. Mr. Jha, therefore, echoes the submission of Mr. Tripathi that the present case cannot be analogised to Ramjas School or Mahavir Senior Model School. Submissions of Mr. Kamal Gupta in rejoinder

32. Mr. Gupta, in rejoinder, reiterates that, in the absence of any specific finding of commercialisation of education or of charging of capitation fee, the DoE is not entitled to subject the manner in which the school works out the fees to be charged by it to its own subjective assessment. An increase of fee by a recognised unaided school, he submits, can be interdicted by the DoE only if there is profiteering or collections for specific purposes, endowments, gifts, donations, contributions to Pupils’ Fund and other miscellaneous receipts, and also, in the case of aided schools, the aid received from the Administrator. commercialisation of education. The DoE cannot interfere with the decision to increase fees on a mere finding of adequate surplus, absent any allegation of profiteering.

33. Apropos the discrepancies alleged in the impugned order, Mr. Gupta submits that such discrepancies are alleged in every such order, and cannot constitute the basis for the DoE to interfere with the decision of the school to increase its fees so as to meet the additional financial outlay resulting as a consequence of the requirement of having to implement the 7th

34. Mr. Gupta draws my attention to paras 85 and 86 of the decision in Ramjas School, which read thus:

86. The concluding “directions” follow.”

35. Mr. Gupta further submits that there is not even an allegation that the school is commercialising education. In this context, he invites attention to para 156 of the concurring judgment of S.B. Sinha, J., in Islamic Academy of Education v. State of Karnataka12, rendered by a Constitution Bench of the Supreme Court, in which it was opined, apropos the surplus which could be maintained by unaided schools, that “reasonable surplus should ordinarily vary from 6% to 15%, as such surplus would be utilized for expansion of the system and development of education”. Applying this principle, as the returns from the fee charged by the petitioner-School during one year was ₹ 18 crores, ₹ 2.[7] crores, as 15% of the fees, would constitute a reasonable surplus whereas, as per the impugned Order, the surplus in the funds of the petitioner-School was only ₹ 2.55 crores. Even on facts, therefore, it could not be alleged that the petitioner was maintaining any surplus in excess of what was required by it to run its affairs.

36. From the decision in Ramjas School, Mr. Gupta emphasises the following passages:

79. The DoE has filed, with its counter-affidavit, a tabular statement, setting out the remarks, of the DoE, regarding the particulars of various heads of expenses of the petitioner. Note 6, in the said tabular statement, alleges that the accumulation, by the petitioner, of “reserve of development fund … by collecting development fee more than its requirement for purchase, upgradation and replacements of furniture and fixtures and equipment” was “nothing but the profiteering done by the school over the years”. In the entire record before us, there is no other reference, to the petitioner indulging in “profiteering”. The aforequoted reference to “profiteering”, too, figures in the remarks, filed by the DoE before this Court, regarding the various heads of expenses of the petitioner, and not in the impugned Order, dated 18th July, 2017, or the Order, dated 26th December, 2016, which it purported to uphold. There is no allegation, in either of the said Orders, to the effect that the petitioner indulged in charging of capitation fee, or in profiteering. *****

85. Adverting, now, to the impugned Order, dated 18th July, 2017 itself, it is possible to compartmentalise the Order into three distinct sections. The impugned Order commences by noting the fact of issuance of the earlier Order, dated 26th the representation, by the petitioner-School, thereagainst, and grant of personal hearing to the petitioner-School. It proceeds, thereafter, to “analyse” the submissions made by the petitioner. This analysis is divided into three sections, the first of which is titled “Financial discrepancies”, the second “other discrepancies”, and the third, though untitled, dealing with the alleged “surplus fund” available with the petitioner-School. The first section sets out three “financial discrepancies”, which merely requires the petitioner to comply with the recommendations, made in that regard, and record its assurance, that it would do so. The second section, dealing with “other discrepancies”, too, records the submission, of the petitioner, that the discrepancies would be rectified, and contemplates compliance therewith, at the time of next fee increase proposal. The controversy, before this Court, is concerned, essentially, with the third section of the impugned Order, which alleges that the petitioner had, with it, “a surplus fund of Rs. 1,18,42,701/-”, and provides a tabular statement in that regard. Having observed thus, the impugned Order proceeds to record a finding that “the school (was) having sufficient funds even after meeting all the budgeted expenditure for the financial year 2016-17”. Thereafter, the impugned Order proceeds to issue certain directions, to the petitioner, to maintain separate funds for earmarked levies, avoid diversion thereof, and to maintain a separate development fund, before concluding thus: “And whereas, these recommendations along with relevant materials were put before The Director of Education for consideration and who after considering all the material on record has found that the school is having sufficient surplus funds to meet the financial implications for the financial year 2016-17 and the representation dated 03.02.2017 and subsequent submissions made thereafter in this regard find no merit in respect of sanction for increase in fee and hereby rejected on the basis of the above-mentioned Accordingly, it is hereby conveyed that the representations for fee hike of Ramjas School, Sector-IV, R.K. Puram, New Delhi-110022, has been rejected by the Director of Education.”

37. Mr. Gupta also cites the following passages from Mahavir Senior Model School: “Re: findings of surplus and availability of sufficient funds

26. The fundamental rationale for rejection of petitioners' request is the existence of surplus and adequacy of funds at the schools' disposal. This is discernible from the following extract of the impugned order: “After detailed examination of all the material-on-record and considering the clarification submitted by the school, it was finally evaluated/concluded that: The total funds available for the year 2018-2019 amounting to INR 9,67,96,579 and INR 6,49,46,324 out of which cash outflow in the year 2018-2019 is estimated to be INR 7,48,15,500 and INR 78,03,236 in respect of Mahavir Senior Model School and Mahavir Junior Model School respectively. This results in net surplus of INR 2,19,81,079 and INR 5,71,43,088 for Mahavir Senior Model School and Mahavir Junior Model School respectively. ***** Per the estimated expenses for Financial Year 2018- 2019 submitted by Mahavir Senior Model School along with statement of fees under Section 17(3) of DSEA, 1973, the school had estimated the total expenditure during Financial Year 2018-2019 of INR 9,44,60,500 (including capital expenditure of INR 12,05,000 against development fee). This budgeted expense of Financial Year 2018-2019 has been adjusted with the amount of capital expenditure (to be incurred against development fund), provision of retirement benefits (considered separately in table above), and depreciation (noncash expense), and net expense of INR 7,48,15,500 has been considered in table above. Further in respect of Mahavir Junior Model School, against the total expenditure of INR 1,14,21,270 reported in the provisional financial statements for Financial Year 2017-2018, net amount of INR 78,03,236 has been considered after the adjustment of provision of retirement benefits (considered separately in table above), provision for reserve fund (considered separately in table above) and depreciation (noncash expense), as budgeted expenses for Financial Year 2018-2019 were not separately submitted by the school. In view of the above examination of the statement of fee for Academic Session 2018-2019 and subsequent submissions and representations of the school, it is evident that the school has sufficient funds for meeting all the budgeted expenditure for the Financial Year 2018-2019.

(ii) The directions issued by the Directorate of

Education vide Circular No. 1978 dated 16 Apr 2010 states ‘All schools must, first of all, explore and exhaust the possibility of utilising the existing fund/reserves to meet any shortfall in payment of salary and allowances, as a consequence of increase in the salary and allowance of the employees. A part of the reserve fund which has not been utilised for years together may also be used to meet the shortfall before proposing a fee increase’. The school has sufficient funds to carry on the operation of the school for the Academic Session 2018-2019 on the basis of existing fees structure[….]”

27. DoE has examined the adequacy of funds mentioned in the schools' statements of fee by categorising them under several heads, and then concluded that there was a surplus of Rs 5,71,43,088 with the Junior School and Rs 2,19,81,079 with the Senior School. On the basis of these accumulated reserves, DoE has rejected the enhanced fee structure. Petitioner Schools have contested the basis of DoE's calculations and both parties have submitted comparative charts of available funds. However, court need not inspect the arithmetic workings supporting the figures, which is purely factual in nature, and would confine its scrutiny to the conclusions set forth in the impugned order to determine if the same fall within the scope of DoE's jurisdiction. *****

30. DoE's power to scrutinise the accounts and other records of private unaided schools finds its source in Section 17(3) of the DSEA (examined hereinabove) r/w Rule 180(3) of the DSER. Under Rule 180(3), accounts and other records maintained by an unaided private school shall be subject to examination by the auditors and inspecting officers authorised by the Director. The Act and Rules specify, in no uncertain terms, that DoE has the authority to seek and examine the accounts of schools. This regulatory power must however, be exercised within the precincts of the law explained in the aforenoted judicial precedents. Schools are entitled to maintain a reasonable surplus for expansion of the system and development of education. Increase in fee to generate funds for expansion and betterment of educational/infrastructural facilities, as is the case with the Senior School, is permissible in law. It is important for private unaided schools to maintain a surplus for the purpose of further development and honing of their educational facilities and services. The accumulation of surplus funds is essential for the long-term sustainability and growth of the school which enables them to invest in better infrastructure, equipment, and resources. Private unaided schools may need to invest in building or improving infrastructure, such as construction of new classrooms, libraries, laboratories, sports facilities or technology upgrades, such as new computers, tablets and software. These increments are generally sourced from the surplus funds and enable the school to stay up-to-date with the latest technologies and provide quality education to its students. Thus, the process of fixation of fee for any given academic year entails consideration of a multitude of factors such as salaries and remunerations to be paid to teaching and non-teaching staff, cost of running the establishment, investments, infrastructure as well as future plans for expansion and development of the institution. Since the unaided schools are entirely dependent on the fee collected by them, they would obviously like to earmark funds for specific purposes and therefore, planning and maintaining a surplus per se cannot be construed as commercialisation of education. It is only if such funds are being used purely for commercial gain, rather than for improvement and development of the school, can it be construed as a form of commercialisation of education.”

38. Mr. Gupta also points out that, in both these matters, i.e. Ramjas School and Mahavir Senior Model School, the Court took a conscious decision not to remand the matter to the DoE. He would exhort this Court to do likewise, in the present case. Mr Jha, in surrejoinder

39. Mr. Jha, in surrejoinder, cites the following para from the judgment of the Supreme Court in Modern Dental College & Research Centre v. State of M.P.15 and from the judgment of the Division Bench of this Court in St. Mark Senior Secondary Public School v. DOE16: From Modern Dental College “15. Dealing with the challenge to the provisions relating to fixation of fees viz. Sections 4(1), 4(8) and 9 of the Act in question, the High Court recognised the right of these educational institutions, as found in T.M.A. Pai Foundation, that decision on the fee to be charged is to be left to private educational institutions. Notwithstanding, the same judgment gives power to the State to regulate the exercise of power of the educational institution to ensure that there is no “profiteering” and Sections 4 and 9 of the 2007 Act were aimed at achieving that purpose only. In substance, these provisions empower the Committee to satisfy itself that the fee proposed by a private professional educational institution did not amount to profiteering or commercialisation of education and was based on the factors mentioned in Section 9(1) of the 2007 Act. The Court noted that these factors which were mentioned in Section 9(1) were the relevant factors for fixation of fee as they ensured fixation of such fee which would take into consideration the nature of professional courses, the cost of land and building, the available infrastructure, teaching, non-teaching staff and equipment, the expenditure on administration and maintenance, as well as a reasonable surplus required for growth and development of the professional institutions. This was precisely the mandate of T.M.A. Pai Foundation. *****

40. It becomes necessary to point out that while treating the managing of educational institution as an “occupation”, the Court was categorical that this activity could not be treated as “business” or “profession”. This right to carry on the occupation that education is, the same is not put on a par with other occupations or business activities or even other professions. It is a category apart which was carved out by this Court in T.M.A. Pai Foundation. There was a specific purpose for not doing so. Education is treated as a noble “occupation” on “no profit no loss” basis. Thus, those who establish and are managing the educational institutions are not expected to indulge in profiteering or commercialising this noble activity. Keeping this objective in mind, the Court did not give complete freedom to the educational institutions in respect of right to admit the students and also with regard to fixation of fee. As far as admission of students is concerned, the Court was categorical that such admissions have to be on the basis of merit when it comes to higher education, particularly in professional institutions. *****

48. The matter was then considered by a larger Bench of seven Judges in P.A. Inamdar v. State of Maharashtra17. It was held that the two committees for monitoring admission procedure and determining fee structure as per the judgment in Islamic Academy of Education were permissible as regulatory measures aimed at protecting the student community as a whole as also the minority themselves in maintaining required standards of professional education on non-exploitative terms. This did not violate Article 30(1) or Article 19(1)(g). It was observed that: “145. … Unless the admission procedure and fixation of fees is regulated and controlled at the initial stage, the evil of unfair practice of granting admission on available seats guided by the paying capacity of the candidates would be impossible to curb.” (emphasis supplied) On this ground, suggestion of the institutions to achieve the purpose for which committees had been set up by post-audit checks after the institutions adopted their own admission procedure and fee structure, was rejected. The committees were, thus, allowed to continue for regulating the admissions and the fee structure until a suitable legislation or regulations were framed by the States. It was left to the Central Government and the State Governments to come out with a detailed well-thought out legislation setting up a suitable mechanism for regulating admission procedure and fee structure. Para 68 in T.M.A. Pai Foundation case was explained by stating that observations permitting the management to reserve certain seats was meant for poorer and backward sections as per local needs. It did not mean to ignore the merit. It was also held that CET could be held, otherwise merit becomes casualty. There is, thus, no bar to CET being held by a State agency when the law so provides. *****

71. We may again remind ourselves that though right to establish and manage educational institution is treated as a right to carry on “occupation”, which is the fundamental right under Article 19(1)(g), the Court in T.M.A. Pai Foundation had also cautioned such educational institution not to indulge in profiteering or commercialisation. That judgment also completely bars these educational institutions from charging capitation fee. This is considered by the appellants themselves that commercialisation and exploitation is not permissible and the educational institutions are supposed to run on “no profit, no loss basis”. No doubt, it was also recognised that the cost of education may vary from institution to institution and in this respect many variable factors may have to be taken into account while fixing the fee. It is also recognised that the educational institutions may charge the fee that would take care of various expenses incurred by these educational institutions plus provision for the expansion of education for future generation. At the same time, unreasonable demand cannot be made from the present students and their parents. For this purpose, only a “reasonable surplus” can be generated. *****

75. To put it in a nutshell, though the fee can be fixed by the educational institutions and it may vary from institution to institution depending upon the quality of education provided by each of such institutions, commercialisation is not permissible. In order to see that the educational institutions are not indulging in commercialisation and exploitation, the Government is equipped with necessary powers to take regulatory measures and to ensure that these educational institutions keep playing vital and pivotal role to spread education and not to make money. So much so, the Court was categorical in holding that when it comes to the notice of the Government that a particular institution was charging fee or other charges which are excessive, it has a right to issue directions to such an institution to reduce the same. *****

80. The judgment in P.A. Inamdar, though sought to review the judgment in Islamic Academy of Education, left the mechanism of having the Committees undisturbed. In para 129 of the judgment in P.A. Inamdar, this Court observed that the State regulation should be minimal and only to maintain fairness in admission procedure and to check exploitation by charging exorbitant money or capitation fees. In para 140, it has been held that the charging of capital fee by unaided minority and nonminority institutions for professional courses is just not permissible. Similarly, profiteering is also not permissible. This Court went on to observe that (SCC p. 605, para 140) it cannot shut its eyes to the hard realities of commercialisation of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends. In respect of Question 3 framed thereunder, which was with respect to the government regulation in the case of private institutions, this Court, in para 141 of the judgment, answered that every institution is free to devise its own fee structure, but the same can be regulated in the interest of preventing profiteering and no capitation fee can be charged. In para 145, the suggestion for post-audit or checks is rejected if the institutions adopt their own admission procedure and fee structure since this Court was of the view that fixation of fees should be regulated and controlled at the initial stage itself.

81. It is in the aforesaid context that we have to determine the question as to whether the provisions relating to fixation of fee are violative of Article 19(1)(g) of the Constitution or they are regulatory in nature, which is permissible in view of clause (6) of Article 19 of the Constitution, keeping in mind that the Government has the power to regulate the fixation of fee in the interest of preventing profiteering and further that fixation of fee has to be regulated and controlled at the initial stage itself. When we scan through Section 9 of the 2007 Act from the aforesaid angle, we find that the parameters which are laid down therein that have to be kept in mind while fixing the fee are in fact the ones which have been enunciated in the judgments of this Court referred to above. It is also significant to note that the Committee which is set up for this purpose, namely, Admission and Fee Regulatory Committee, is discharging only a regulatory function. The fee which a particular educational institution seeks to charge from its students has to be suggested by the said educational institution itself. The Committee is empowered with a purpose to satisfy itself that the fee proposed by the educational institution did not amount to profiteering or commercialisation of education and was based on intelligible factors mentioned in Section 9(1) of the 2007 Act. In our view, therefore, it is only a regulatory measure and does not take away the powers of the educational institution to fix their own fee. We, thus, find that the analysis of these provisions by the High Court in the impugned judgment [Assn. of Private Dental and Medical Colleges v. State of M.P.18 ], contained in para 42, is perfectly in order, wherein it is observed as under:

82. Provisions relating to admission of students through government test to be conducted by the State and the provisions relating to fixation of fee by setting up a committee to oversee that institutions are not charging a fee which amounts to capitation or profiteering are reasonable restrictions and do not suffer from any constitutional vice. The provisions of the Act and the Rules are, therefore, in tune with the sentiments and directions contained in P.A. Inamdar. *****

87. Regulatory mechanism, or what is called regulatory economics, is the order of the day. In the last 60-70 years, economic policy of this country has travelled from laissez faire to mixed economy to the present era of liberal economy with regulatory regime. With the advent of mixed economy, there was mushrooming of the public sector and some of the key industries like aviation, insurance, railways, electricity/power, telecommunication, etc. were monopolised by the State. Licence/permit raj prevailed during this period with strict control of the Government even in respect of those industries where private sectors were allowed to operate. However, Indian economy experienced major policy changes in early 90s on LPG Model i.e. liberalisation, privatisation and globalisation. With the onset of reforms to liberalise the Indian economy, in July 1991, a new chapter has dawned for India. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy.” From St Mark Sr Sec Public School

40. The issue in controversy is, to my reckoning, directly covered by the judgment of this Bench in Ramjas School and the judgment of the coordinate Single Bench in Mahavir Senior Model School, despite Mr. Tripathi’s and Mr. Jha’s valiant attempts to convince this Court otherwise.

41. This would become apparent at a plain reading of the relevant text from the impugned orders in Ramjas School, in Mahavir Senior Model School and the present petition thus: Impugned order in Ramjas School: Financial discrepancies:- S. N o. Detail of discrepancy Submissions of the school Remarks

1. As per DOE Order No. DE.15/Act/Duggal.com/203/99/ 23033-23980, dated 15/12/1999, Caution money collected from the students, shall be kept deposited in a scheduled bank and shall be returned to the student at the time of his/her leaving the school, along with bank interest thereon. The school is however not following the above guideline. Instead, the interest earned on the caution money deposit is transferred to Student Welfare fund. In future the caution money will be refunded to the students along with the interest, as per the guidelines of DOE The school has ensured to comply the same in future.

2. As per the DOE order No. DE/15/150/Act/2010/4854-69, dated 09/09/2010, in case of exstudents who have not been It is noted that in future, we will follow the procedure as per The school has ensured to comply the refunded the caution money, the schools shall inform them at their last shown address in writing to collect the said amount within 30 days. After the expiry of 30 days, the unrefunded caution money belonging to ex-students, shall be reflected as the income for the next financial year and it shall not be shown as liability. The school is however, not following the above guideline. The unrefunded caution money of ex-students is kept in Caution money account & reflected as a liability up to three years. Thereafter, the lapsed caution money is transferred to Student Welfare fund but it is never treated as income. DOE guidelines. same in future.

3. Building and Land are not appearing in the assets of the books of accounts of the school and school has informed that the same is appearing in foundation book, whereas related expenses are booked but income is not booked in the books of school. The building is appearing in the consolidated Financial Statements of the Ramjas Foundation. Before applying for next fee increase, proposal certified statement of incomes of current year is to be added to amount recoverable. Other discrepancies

1. Original Receipt against the fee collection are not preserved and are destroyed after closing/completion of audit except the receipts for caution money, admission fee and registration fee. Once the audit is completed, fee pay-in-slips as we have all records in the fee register and bank statements

2. Fixed Assets registers are not properly maintained and also not reconciled with the finance record. In many cases assets identification number and their location are not mentioned. Fixed Assets register are properly maintained and identification numbers are duly mentioned. There are no supporting to substantiat e this claim of school. Complianc e shall be verified at the time of next fee increase proposal of the school, if any.

3. Purchase procedure through tendering and their limitation if any has not been found to be formulated by the management. We are properly following the purchase procedure through tenders only and will further strengthen the system in future. Complianc next fee increase if any.

4. Experience mentioned in application form of appointment are not supported by documentary evidence and school management are also not asking for the same. The concerned institutions are contacted, for verification and in future, the correspondence will be documented. Complianc next fee increase if any.

5. School makes contracts on plain paper instead of judicial stamp paper. From FY 2016- 17 onwards, all contracts will be made on judicial stamp papers Accepted by school. And whereas, after going through the representations dated 30.01.2017 and submissions made by the school during the hearing held on 12.05.2017 as well as financial statements/budget of the school available with this Directorate, it emerges that:- The school is having a surplus fund of ₹ 1,18,42,701/- as per the following details:- Particulars Amount (Rs.) Cash and bank balances as on 31.03.2016 as per audited Financial Statements 37,33,902 Investment as on 31.03.2016 as per 12,12,42,543 Total 12,49,76,445 Less: Development Fund as per audited 4,63,02,138 Less: Depreciation Reserve Fund as per 1,05,11,284 Less: Provision for Gratuity* 3,48,36,745 Less: Provision for Leave Encashment* 98,62,301 Available Funds 2,34,63,977 Fees for 2015-16 as per financial statement (we have assumed that the amount received in 2015-16 will at least accrue in 2016-17) 8,40,95,053 Other income for 2015-16 as per financial statement 9,27,671 Estimated availability of funds for 2016- 10,84,86,701 Less: Budget expenses for the session 2016-17 as submitted by school management (revenue) 9,66,44,000 Net Surplus 1,18,42,701 *The school is hereby directed to make earmarked equivalent investments against provision for Retirement Benefits with LIC (or any other agency) within 90 days of the receipt of this order, so as to protect the statutory liabilities. And provisions for gratuity and leave encashment should be based on actuarial valuation. And whereas, in view of the above examination, it is evident that the school is having sufficient surplus funds even after meeting all the budgeted expenditure for the financial year 2016-

17. And whereas, as per clause 22 of Order No.F.DE./15 (56)/Act/2009/778 dated 11/02/2009, user charges should be collected on no profit and no loss basis and should be used only for the purpose for which these are collected. Accordingly, the school is advised to maintain separate fund in respect of each earmarked levies charged from students in accordance with the DSEA & R, 197 and orders, circulars, etc, issued there under. If there are large surpluses under any earmarked levy collected from the students, the same shall be considered or-adjusted for determining the earmarked levy to be charged in the next academic session. And whereas, as, per clause No. 14 of Order No.F.DE./15(56)/ACT/2009/778 dated 11.02.2009, 'Development Fee, not exceeding 15% of the total annual tuition fee may be charged for supplementing the resources for purchase, up-gradation and replacement of furniture, fixture and equipment. Development Fee, if required to be charged, shall be treated as capital receipt and shall be collected only if the school is maintaining a depreciation reserved fund, equivalent to the deprecation charged in the revenue accounts and the collection under this head along with and income generated from the Investment made out of this fund, will be kept in a separately maintained development fund account. Accordingly, school is advised to maintain separate development fund and utilized the same strictly in accordance with the DSEA & R, 1973 and orders, circulars, etc., issued there under. And whereas, these recommendations alongwith relevant materials were put before Director of Education for consideration and who after considering all the material on the record has found that the school is having sufficient surplus funds to meet the financial implications for the financial year 2016-17 and the representation dated 03.02.2017 and subsequent submissions made thereafter in this regard find no merit in respect of sanction for increase in fee and hereby rejected on the basis of above mentioned Impugned Order in Mahavir Senior Model School- And whereas, all the submissions made by the school are taken on record and analyzed in accordance with the provisions of Delhi School Education Act and Rules, 1973 and directions Issued thereunder.

1. As per the Order no 15072-15871 dated 23- 03-1999 “All preprimary schools being run by the registered society/trust in Delhi as Branches of the recognized schools by The junior school was established in the year 1991 but this objection has been taken by the office of the directorate for the first time. The applicant school Based on representation and submissions made by the school and explanations provided during the personal the appropriate authority in or outside the school premises shall be deemed as one institution for all Purposes.”Further As per details available 92 out of 106 (i.e. 86.7%) students admitted in Mahavir Senior model school are from the Mahavir Junior Model School, However, financial information including fee structure of Mahavir Junior Model School was not included in the “statement of fees U/s 173 of DSEA 1973” submitted to Directorate. Further, Separate Sets of Books of accounts and financial statements are prepared by the school instead of combined financial statements. though now has prepared a combined fund statement of both Mahavir Senior Model School and Mahavir Junior Model School showing correct figures of fund available as against the figures arrived by the respondent. Further, during personalhearing, the school management explained that the condition for seeking prior approval of Directorate before increasing fee is mentioned in the land allotment of Mahavir Junior Model School and not in the land allotment letter of Mahavir Senior Model School. Thus, prior approval of Directorate for increasing fee of senior school would not be applicable hearing, the fund position of the school has been updated and enclosed in the laterpart of this order. After going through clause 15 of land allotment letter issued by DDA dated 02- 11-1987 in respect of Model School, which states "The school shall not Increase the rates of tuition fees without prior sanction of the Director of the Education Delhi Adrin and shall follow the provisions of Delhi school Model School, education Act/Rules, 1973 and other instructions issued from time to time”. It was noted that the junior school has been increasing fee without seeking prior approval of the Directorate. Accordingly, Model School is hereby directed refund/adjust to the increased fee collected from students during FY 2016-2017 (year since when proposals were required to be submitted by the schools having the condition in their land allotment letter for seeking prior approval before increasing fee) and thereafter. Further, Mahavir Junior Model School is directed not to increase any fee/charge without prior approval of the Directorate.. As per Clause 2 of Public Notice dated 04.05.1997 "The school shall not charge building fund from the students as it is sole responsibility of the society who has established the school to raise such funds from their own sources of donation from the other associations because the immovable property of the school becomes the sole property of the society. Further, Rule 177 of the DSEA& R 1973 mentions that the school is not allowed to make additions to the building if it does not have enough surplus. However, the school has planned for the construction of Mahavir Senior Model School from the tuition fees, for which the school has paid INR 4,53,000 to “Architects and site survey” during FY 2016- 17 and 2017-18. The school has also proposed INR 12,79,04,645 for construction of the school building. School should prepare and submit statement showing computation of savings as per rule 177 It is clarified that the school has never charged the building fund from the students. It is pointed out that in case of Mahavir Model Senior School the building was constructed by the society namely Mahavira foundation in the year 1980 to 1983 and was handed over to the managing committee of Model School to run the school by the name and title of Mahavir Senior of Model School. The school started functioning from the academic session of

1983. It is further pointed out that the society and the school are one as the same entity. The property constructed by the society from the funds generated by it remains the property of the society and its reflected in the books of accounts as such as on the asset side. On the other hand, if Based on the explanation the and submissions by the school, the school is directed to ensure compliance of Rule 177 of DSER, 1973 before incurring any capital expenditure on the building/infrastru cture else the society should bear the cost of construction of building. of DSEA&R 1973 to the directorate, in case of no savings as per Rule 177 the should not incur any capital expenditure in building. some portion/block or facilities are created by the school under rule 177 sub clause 2 (b) & (C) of the Delhi school education Rules 1973 from the incidental savings and the same is reflected and shown as an asset in the Balance sheet of the school under the head Building or library, laboratory facilities or Conference Hall or by any other name because the same has been created to provide facilities to the students so they are able to get the necessary support in their education pursuits by way of infrastructure. The society as well as the management of the Applicant school, have been contemplating to renovate and upgrade the building which was constructed in the year 1982 and make a modern building which will be fully compliant with the present rules and regulations of authorities and commensurate with the requirements if the present times. The school has submitted the computation of the saving from FY 1986 to 2018.. As per clause 18 of Order No.

F.DE/15(56) Act/2009/778 dated 11/2/2009, “The caution money thus collected It may be noted out here that: -There is no specific fixed deposit or explanation of the school that it will stop collecting shall be kept deposited in a scheduled bank in the name of the concerned school and shall be returned to the student at the time of his/her leaving the school along with the bank interest thereon irrespective of whether or not he/she requests for refund”. However, the school has not deposited the caution money in scheduled bank. The school should follow directions in this regard issued different orders of the directorate from time to time. savings deposit in the scheduled bank against the head of caution money. -The school is maintaining ledger accounts of caution money and a register for this purpose with details of each student -All the sums of money of the school are parked in the savings/fixed deposits a/c in scheduled bank and the caution money is included in the deposits made by the school in such account. -The school has refunded the amount due to each student at the time of his/her leaving and has kept a chart ready with the information of amount returned to each students -Thus, the requirement of caution deposited money to be in scheduled bank is being fully complied with by the applicant school. All the caution money and other funds are deposited in scheduled bank and are in the name of the school by way of fixed deposits. It is clear from the above extract that in LPA 291/2017 in the matter of St. Marks Sr. Sec School, the Hon’ble High Court vide judgment dated

11.05 2018 has held that it is not required and refund/adjust total caution money to existing students during FY 2019-2020, compliance shall be validated in subsequent year. to have a separate fixed deposit account for each and every Fund. personal hearing, the school explained that it will stop collecting caution money from students from FY 2019-2020. Also, the collected from existing students against will be adjusted in FY 2019- 2020.. As per Order No.

F.DE- 15/ACT-I/WPC- 4109/Part/13/7905-7913 dated 16 April 2016 "The Director hereby specify that the format of return and documents to be submitted by schools under rule 180 read with Appendix-II of the Delhi School Education Rules, 1973 shall be as per format specified by the Institute of Chartered Accountants of India, established under Chartered Accountants Act, 1949 (38 of 1949) in Guidance Note onAccounting by Schools (2005) or as amended from time to time by this Institute.” Further, para 58(i) of the Guidance Note States “A school should charge depreciation according to the written down value method at rates recommended in Appendix I to the Guidance note.” So far the requirement of returns in a particular format is concerned, the same has always been complied with by the school. As far as the rates of depreciation are concerned, the school is following the rates as prescribed under the relevant provisions of the Income Tax Act. There is a very marginal difference between rates prescribed by the Income Tax Act and the rates recommended in Appendix-1 to the guidance note. personal hearing the explained that the school in its audited financial statements for FY 2017-18 has charged depreciation at the rates prescribed under Guidance note 21. explanation provided by the school that it has charged depreciation at the rates prescribed in the Guidance Note, compliance shall be validated in subsequent year.. Assets Purchased against Development fund: As per order No. The school building was constructed in the year 1994-1995 The contention of the school is notin accordance F.DE./15 (56)/Act 2009/778 dated- 2/11/2009 “Development fee, not exceeding 15% of the total annual tuition fee may be charged for supplementing the resources for purchase upgradation and replacement of furniture, fixtures and equipment. Development fee, if required to be charged, shall be treated as capital receipt and shall be collected only if the school is maintaining a Depreciation Reserve Fund, equivalent to the depreciation charged in revenue accounts and the collection under this head along with and income generated from the investment made out of this fund, will be kept in a separately maintained Development Fund Account. However, the school has purchased all the assets out of development fund except school bus (Tata DL-1PC-3702), which includes the following assets that does not qualify to be purchased from the development fund. Accordingly, the school has not complied with the directions above. Sr. N o. Particul ars Amount (Gross Block) 1 School Building 1,23,01,

4. Vehicles 18,39,67 from savings of the school from the year 1983 to the year 1994-1995 and interest earned on savings and not from development fund. Please note that boundary wall expense involves a small amount of INR 76,695/- and was spent on repairs of boundary walls the boundary was already constructed in the year 1982-83 when the school building was constructed. It appears that this amount was inadvertently and wrongly capitalised and therefore appears in Balance sheet, which can now be rectified by writing it off from the books of account. The library books are the essential part of the school. Library books being a capital asset cannot be purchased from the tuition fee or from the annual charges as per order dated 15.12.1999. There is no contradiction in utilizing development fund towards purchase of library books. Library books are also not building therefore cannot be provided and therefore cannot be provided by the society. Thus, library books can only be purchased from withprovisions of a well settled issue of development fund and its interpretation by the Hon'ble Supreme Court of India. Capital expenditure other than purchase, up-gradation replacement of furniture, fixture and equipment cannot be made from fund. Thus, the to comply with the directions issued by the Director with regard to correct utilisation of fund. and has to be treated as capital assets and capital expenditure. The school vehicle have been purchased from time to time and depreciated and written-off after their useful life is over. The vehicles can only be purchased from development fund and nowhere else as provided in the provisions of order dated 15.12.1999 whereby it has been specified how to use that is to supplement resources for purchase, upgradation and replacement of furniture, fixture and equipment. Furniture, fixture and equipment have not been defined and have been construed to include a large number of assets, which will be required by the school from time to time and the framers of law have kept the list un-exhaustive so that new assets can be added as per the requirements of the school as per the needs of the times and purchases from development fund.. It was observed that Library books, Science equipment's teaching Aids, Newspaper and magazine, Educational Video and Audio CD have been charged to standard cost of Establishment. These are Library books, Science equipment’s, teaching Aids, Newspaper and magazine, Educational Audio, and Audio CD are essential part of curricular activities The school in its response to this observation and observation no. 5 above mentioned that library books were/should be purchased from not part of the establishment cost and thus been excluded from the computation of tuition fee, but considered part of Annual charges of the school and thus have been charged to the establishment. Please note that the items listed above are all in the nature of curricular activities, except library books. All these items are consumables and have a useful life of one year and therefore there is every justification that they should be charged against the tuition fees. The library books, as explained in earlier point are of capital nature and thus have to be charged from the development fees. The provision with regard to annual charges makes it amply clear that annual charges will cover all revenue expenditure overheads and expenses on playground, sports equipment, cultural and other coas distinct from the of the school. Thus, the above items are part of the curricular activities of the school. fund, the school has also charged library books againsttuitionfee. Thus, there is inconsistency in accounting of library books in the accounting records of the schools. By the very name, Science Equipment and teaching aids appear as capital expenditure and must not be charged as revenue expense from tuition fee.Also, newspapers and magazines are not directly related to curricular school. The school did not submit details and nature of educational video and audio CDs regarding their usage for activities. Though the above does not have any impact on the fund position of the school as the same could have been apportioned against annual charges/develop ment fund, the to comply with Clause 19 of Order No.

11 Feb 2009 which states “The tuition fee shall be so determined as to cover the establishment including provisions for DA, bonus, etc., and all terminal benefits as also the expenditure of revenue nature concerning the activities.” Thus, expense only of revenue nature resting to establishment expenses and activities should be charged against tuition fee and other expenses should be allocated towards Annual Charges in accordance with clause 21 of the aforesaid order, which states “No annual charges shall be levied unless they are determined by the Managing Committee to cover all revenue expenditure, not included in the tuition fee and ‘overheads’ and expenses on playgrounds, sports equipment, cultural and other coactivities as distinct from the school.”. As per the information submitted, the school is collecting around 5 lakhs in a financial year as development fee from the students. However the school has shown

5.32 crores as opening balance as on 1 April 2017, which seems to be inconsistent with the amount collected. The school is required to provide the reconciliation of the collected, utilized and balance derived as on 31st March 2017 along with the subsequent submission of "statement of fees U/s 17(3) of DSEA 1973" The school has furnished reconciliation of the collected, utilised and balance derived as on 31 March 2017. The reconciliation statement clearly establishes that there is no inconsistency between the opening balance shown as

5.32 crores as on 01.04.2017 with the amount collected. Considered.. High Pupil teacher ratio at Mahavir Junior Model School as derived below: Particulars Number No. of selection (all classes )(A) Teacher staff (B) Number of students enrolled (C) Pupil: Teacher Ratio (D)= (C/B) 47:1 As per the details provided by the school there are 5 teachers against 6 sections It is clarified that Model school has some teachers on contractual basis. It so happened that on December 31st 2017, the contract of some of the teachers expired and therefore they left. This was a temporary phase for only about two months in the months of January and February. From April 1, 2018 the full complement of staff is there. Even in the intervening period of Jan & Feb 2018, we had parent volunteers, teachers, resource person and trained coaches from Sports Guru. explanation and documents submitted by the school and taken on record, while the school made temporary arrangement for a couple of months, the school must ensure that such situation does not occur on a regular/frequent basis and adequate teaching staff is hired to ensure that quality of education is not compromised. After detailed examination of all the material on record and considering the clarification submitted by the school, it was finally evaluated/concluded that: The total funds available for the year 2018-2019 amounting to INR 9,67,96,579 and INR 6,49,46,324 out of which cash outflow in the year 2018-2019 is estimated to be INR 7,48,15,500 and INR 78,03,235 in respect of Mahavir Senior Model School and Mahavir Junior Model School respectively. This results in net surplus of INR 2,19,81,079 and INR 5,71,43,088 for Mahavir Senior Model School and Mahavir Junior Model School respectively. The details are as follows: Particulars Amount (INR) Mahavir Senior Model School (A) Mahavir Junior Model School (B) Total(C=A +B) Cash and Bank Balance as on 31 March 2018 (as per provisional financial statements of FY 2017-

18) 2,88,20,887 64,73,475 3,52,94,362 Investments (Fixed deposits and deposit with LIC) as on 31 March 2018 (as per provisional financial 18) 12,72,09,287 2,15,09,764 14,87,19,05 Total Liquid Funds available with the school as on 31 Mar 15,60,30,173 2,79,83,239 18,40,13,41 Add: Estimated Fees and other incomes for FY 2018-19 based on statement of FY 2017- 18 of the school (Refer# ) 8,71,75,117 1,75,11,126 10,46,86,24 Add: Amount recoverable from Mahavira Foundation (Society) (as per statement of FY 2017- 18 of the school)(Refer*) - 3,52,45,744 3,52,45,744 Gross Estimated available funds for FY 2018-19 24,32,05,290 8,07,40,109 32,39,45,40 Less: FDR Against Specific Funds/Under Lien(Refer^ ) 1,59,26,780 15,170 1,59,41,950 Less: Development 5,59,84,513 1,13,09,266 6,72,93,779 Fund balance as on 31 Mar 2018 (as per 18) Less: Caution Money balance as on 31 Mar 2018 (as per provisional financial statements of FY 2017-2018) 10,81,491 9,56,000 20,37,491 Less: Depreciation Reserve Fund (Refer~) - - - Less: Salary Reserve (Refer**) 1,41,50,000 16,50,000 1,58,00,000 Less: Staff Requirement Benefits-Gratuity & Leave Encashment (Refer^^) 5,92,65,927 18,63,349 6,11,29,276 Net Estimated available funds for FY 2018-2019 9,67,96,579 6,49,46,324 16,17,42,90 Less: Budgeted Expenses for FY-2018- 2019 (Refer ## ) 7,48,15,500 78,03,236 8,26,18,736 Estimated Surplus as on 31 Mar 2019 2,19,81,079 5,71,43,088 7,91,24,168 # Fee and income as per provisional financial statements of FY 2017-2018 submitted by the school has been considered with the assumption that the amount of income during FY 2017- 2018 will at least accrue during FY 2018-2019. However, interest income from LIC & Income Tax have not been included in figures above, being non-recurring incomes, while interest on bank account &deposits against depreciation reserve have been included, being available with the school for utilization. * As per the Directorate’s Order No. DE 15/Act/Duggal.com/203/99/23033-23980 dated 15 Dec 1999, the management is restrained from transferring any amount from the recognized unaided school fund to society or trust or any other institution. The Supreme Court also through its judgement on a review petition in 2009 restricted transfer of funds to the society. The provisional financial statements of Mahavir Junior Modes School for FY 2017-2018 reflected a receivable balance of NR 3,52,45,744 from Mahavira Foundation (Parent Society), which the school explained is a deposit with the Society against which interest is earned by the school. This amount of INR 3,52, 45,744 is hereby added to the fund position of the school, considering same as funds available with the school and with the direction to the school to recover this amount from the Society. ^ Though the school represented that it has a combined liability towards refund of fees to students as determined by Justice Anil Dev Singh Committee together with interest thereon of INR 3.42 crores. However, the matter is sub-judice in the Hon'ble High Court of Delhi, against which the school has deposited fixed deposit with bank of INR 1.[5] crores under lien with the Hon’ble High Court of Delhi. Accordingly, only the amount of INR 1.[5] crores kept under lien of The Hon’ble High Court of Delhi has been considered. In addition, the Senior school has specific earmarked funds totalling to INR 9,26,780 and the junior school has specific funds of INR 15,170 which have also been considered. Accordingly based on submissions by the school, the amount of INR 1,59,41,950 has been adjusted while deriving the fund position of the school. ~On evaluation of depreciation reserve, it was noted that the school had charged depreciation on fixed assets and had transferred the same to depreciation reserve on liabilities side of the Balance Sheet of the school. Also, the school is charging development fund from students for purchase, up-gradation and replacement of furniture, fixture and equipment. Though Development, fund maintained by the school (both Senior and Junior) as per provisional financial statement for FY 2017-2018 has been adjusted for deriving the fund position of the school, depreciation reserve (that is to be created equivalent to the depreciation charged in the revenue accounts as per clause 14 of Order No.

F.DE./15 (56)/Act/2009/778 dated 11 Feb 2009) is more of an accounting head for appropriate accounting treatment of depreciation in the books of account of the school in accordance with Guidance Note 21 issued by the Institute of Chartered Accountants of India. Thus, there is no financial impact of depreciation reserve on the fund position of the school. Accordingly, it is not considered in table above. **The school has sufficient funds to create a salary reserve fund in the form of Fixed Deposit in the joint account in the name of Manager of the school and Deputy Director of Education (District concerned) equivalent to 3 months salary of staff. Accordingly, amount of INR 1.58 crores (INR 1,41,50,000 for senior school and INR 16,50,000 for junior school, which is approximate to 3 months salary expense of the schools) has been considered while deriving the fund position of the school with the direction to the school to submit fixed deposit with a scheduled bank equivalent to the amount mentioned above in the joint names of the Manager of the school and Deputy Director of Education. ^^Mahavir Senior Model School submitted actuarial valuation reports in respect of its liability as on 31 Mar 2018 towards gratuity and leave encashment totalling to INR 5,92,65,927. Further the school budgeted an additional amount of INR 1,71,72,000 towards retirement benefits during FY 2018-2019. In respect of the junior school, actuarial valuation of the liability towards retirement benefits has not yet been obtained. However, the junior school has recorded provision towards retirement benefit as on 31 Mar 2018 of INR 47,51,312 and has budgeted an additional amount of INR 28,86,479 towards retirement benefits during FY 2018-2019. Against the provisions created by the schools, only INR 1,81,25,883 and INR 18,63,349 have been secured by Senior School and Junior School respectively towards the liability for staff retirement benefits in ‘plan-assets’ as defined under Accounting Standard-15 i.e. group gratuity scheme of LIC. Thus, based on the available details, amount of liability determined by the actuary in respect of Mahavir Senior Model School has been considered, as the amount budgeted by the school for FY 2018-2019 towards retirement benefits of INR 1.71 crores appears excessive. In respect of Mahavir Junior Model School, in absence of actuarial valuation of liability towards retirement benefits, the amount deposited with LIC has been considered. Accordingly, Mahavir Junior Model School is directed to get its liability towards retirement benefits measured by an actuary match the provision towards the same in its books of account and financial statements and deposit an amount equivalent to the amount determined by the actuary within 30 days from the date of this order. Mahavir Senior Model School is directed to deposit the remaining balance of INR 4,11,40,044 towards group gratuity and leave encashment schemes with LIC (or other insurer) to protect the statutory liabilities towards staff of the school ## Per the estimated expenses for FY 2018-2019 submitted by Mahavir Senior Model School along with statement of Fees u/s 17(3) of DSEA, 1973, the school had estimated the total expenditure during FY 2018-2019 of INR 9,44,60,500 (including capital expenditure of INR 12,05,000 against development fee). This budgeted expense of FY 2018-2019 has been adjusted with the amount of capital expenditure (to be incurred against development fund) provision of retirement benefits (considered separately in table above) and depreciation (non- cash expense) and net expense of INR 7,48,15,500 has been considered in table above Further, in respect of Mahavir Junior Model school, against the total expenditure of INR 1,14,21,270 reported in the provisional financial statements for FY 2017-2018, net amount of INR 78,03,236 has been considered after the adjustment of provision of retirement benefits (considered separately in table above), provision for reserve fund (considered separately in table above) and depreciation (non-cash expense), as budgeted expenses for FY 2018-2019 were not separately submitted by the school. In view of the above examination of the statement of fee for academic session 2018-2019 and subsequent submissions and representations of the school, it is evident that the school has sufficient funds for meeting all the budgeted expenditure for the financial year 2018-2019. ii. The directions issued by the Directorate of Education vide circular no. 1978 dated 16 Apr 2010 states “All schools must, first of all, explore and exhaust the possibility of utilising the existing funds/ reserves to meet any shortfall in payment of salary and allowances, as a consequence of increase in the salary and allowance of the employees. A part of the reserve fund which has not been utilised for years together may also be used to meet the shortfall before proposing a fee increase.” The school has sufficient funds to carry on the operation of the school for the academic session 2018-2019 on the basis of existing fees structure.”

42. In each of these cases, it is apparent that the order contains various allegations of impropriety against the concerned school. Ultimately, however, in each case, the decision that has been taken is to prohibit the school from increasing its fees without the prior permission of the DoE. Also, in each case, the said decision is immediately preceded by the finding that the surplus in the accounts of the school is sufficient to meet the additional financial outlay following as a consequence of the requirement of the implementation of the 7th

43. The issue before the Court is whether the DoE possessed the jurisdiction to prohibit the school from increasing its fees and, if the fees already stood increased, to direct the school to refund the fees charged in excess of what the DoE considered to be the optimum fees that the school could charge.

44. The issue is no longer res integra. This Court has, in Ramjas School and Mahavir Senior Model School, examined the issue in depth and has, after referring to various earlier judicial pronouncements on the subject, arrived at the categorical conclusion that the power of the DoE to regulate the affairs of an unaided recognized school does not extend to regulating the manner in which the school fixes its fees. So long as the school is not engaged in the commercialization of education by charging of capitation fee or profiteering, the DoE does not possess the jurisdiction to regulate the fees which the school can charge.

45. Ramjas School considered the decisions of the Supreme Court in T.M.A. Pai Foundation, Islamic Academy of Education, Modern School, P.A. Inamdar and Cochin University of Science & Technology v. Thomas P. John20. The relevant extracts from these decisions, which chart the course of judicial thought on the issue may be provided thus: From T.M.A Pai

61. ….. It is in the interest of the general public that more good quality schools are established; autonomy and non-regulation of the school administration in the right of appointment, admission of the students and the fee to be charged will ensure that more such institutions are established. The fear that if a private school is allowed to charge fees commensurate with the fees affordable, the degrees would be “purchasable” is an unfounded one since the standards of education can be and are controllable through the regulations relating to recognition, affiliation and common final examinations. *****

66. In the case of private unaided educational institutions, the authority granting recognition or affiliation can certainly lay down conditions for the grant of recognition or affiliation; these conditions must pertain broadly to academic and educational matters and welfare of students and teachers − but how the private unaided institutions are to run is a matter of administration to be taken care of by the management of those institutions.” From Islamic Academy of Education

14. At the outset, before analysing the provisions of the 1973 Act, we may state that it is now well settled by a catena of decisions of this Court that in the matter of determination of the fee structure unaided educational institutions exercise a great autonomy as they, like any other citizen carrying on an occupation, are entitled to a reasonable surplus for development of education and expansion of the institution. Such institutions, it has been held, have to plan their investment and expenditure so as to generate profit. What is, however, prohibited is commercialisation of education. Hence, we have to strike a balance between autonomy of such institutions and measures to be taken to prevent commercialisation of education. However, in none of the earlier cases, this Court has defined the concept of reasonable surplus, profit, income and yield, which are the terms used in the various provisions of the 1973 Act.

15. As far back as 1957, it has been held by this Court in the case of State of Bombay v. R.M.D. Chamarbaugwala22 that education is per se an activity that is charitable in nature. Imparting of education is a State function. The State, however, having regard to its financial constraints is not always in a position to perform its duties. The function of imparting education has been to a large extent taken over by the citizens themselves. In the case of Unni Krishnan, J.P. v. State of A.P.23 looking to the above ground realities, this Court formulated a self-financing mechanism/scheme under which institutions were entitled to admit 50% students of their choice as they were self-financed institutions, whereas rest of the seats were to be filled in by the State. For admission of students, a common entrance test was to be held. Provisions for free seats and payment seats were made therein. The State and various statutory authorities including the Medical Council of India, University Grants Commission, etc. were directed to make and/or amend regulations so as to bring them on a par with the said Scheme. In the case of T.M.A. Pai Foundation the said scheme formulated by this Court in the case of Unni Krishnan was held to be an unreasonable restriction within the meaning of Article 19(6) of the Constitution as it resulted in revenue shortfalls making it difficult for the educational institutions. Consequently, all orders and directions issued by the State in furtherance of the directions in Unni Krishnan case were held to be unconstitutional. This Court observed in the said judgment that the right to establish and administer an institution included the right to admit students; right to set up a reasonable fee structure; right to constitute a governing body, right to appoint staff and right to take disciplinary action. T.M.A. Pai Foundation case for the first time brought into existence the concept of education as an “occupation”, a term used in Article 19(1)(g) of the Constitution. It was held by majority that Articles 19(1)(g) and 26 confer rights on all citizens and religious denominations respectively to establish and maintain educational institutions. In addition, Article 30(1) gives the right to religious and linguistic minorities to establish and administer educational institution of their choice. However, the right to establish an institution under Article 19(1)(g) is subject to reasonable restriction AIR 1957 SC 699 in terms of clause (6) thereof. Similarly, the right conferred on minorities, religious or linguistic, to establish and administer educational institution of their own choice under Article 30(1) is held to be subject to reasonable regulations which inter alia may be framed having regard to public interest and national interest. In the said judgment, it was observed (vide para 56) that economic forces have a role to play in the matter of fee fixation. The institutions should be permitted to make reasonable profits after providing for investment and expenditure. However, capitation fee and profiteering were held to be forbidden. Subject to the above two prohibitory parameters, this Court in T.M.A. Pai Foundation case held that fees to be charged by the unaided educational institutions cannot be regulated. Therefore, the issue before us is as to what constitutes reasonable surplus in the context of the provisions of the 1973 Act. This issue was not there before this Court in T.M.A. Pai Foundation case. From P.A Inamdar

46. Mahavir Senior Model Secondary School adopts the same view. The following passages from the decision merit reproduction: “17. Even though there is no provision found under the DSEA that requires unaided schools to seek prior permission from DoE before fee hike, yet, DoE exercises regulatory control emanating from Sections 17(3) and 18(3) and (4) of DSEA and the DSER. However, while regulating the fee structure, DoE does not act as an appellate body. It is not vested with the power to analyse the correctness of discretion exercised by the school, but is entitled to ensure that the school does not indulge in commercialisation of education. The bounds of regulatory jurisdiction are limited and restricted, as expounded by the judicial precedents noted hereinafter. *****

22. The judgments discussed above have extensively elucidated the interplay between self-governance of private unaided educational institutions in their management and administration and the extent of governmental supervision that is permissible. However, this discussion would be deficient without reference to the verdict in Modern School case [Modern School v. Union of India, (2004) 5 SCC 583] which discusses the width and scope of DoE's jurisdiction in regulating the amount of fees charged by unaided schools. Therein, the Supreme Court emphasised that unaided schools have the right to a reasonable surplus for the growth and advancement of the institution and DoE has the authority to regulate the fees and other charges to prevent commercialisation of education. If a private unaided school is not involved in the commercialisation of education, it should be allowed to decide its fee structure, and its autonomy under the DSEA should be respected and upheld. *****

23. This brings us to the grounds of challenge to the impugned order. Schools have alleged breach of the principles of natural justice due to denial of opportunity to respond to the allegations. This principle of audi alteram partem is the cornerstone of procedural fairness and is vital to ensure a just and equitable outcome in any legal process. It has been contended that the impugned order was issued without prior notice of proposed disallowances. There is no convincing response to this contention. The court is of the view that purported inconsistencies mentioned in the impugned order should have been revealed to the schools before passing of the impugned order, giving them adequate opportunity to respond. Adherence to this principle would make the decision-making process fair, transparent and would preclude bias or prejudice from influencing the outcome of a case. Thus, DoE must ensure that the schools are provided all relevant material and information, including the basis for any objections or concerns raised by the regulatory authorities, while scrtunising the statement if fee. This would allow the schools to present their stand in a meaningful way. That said, in the opinion of the court, instead of remanding the matter back to DoE at this juncture, it would be appropriate to evaluate the validity of the impugned order on its own merits. *****

27. DoE has examined the adequacy of funds mentioned in the schools' statements of fee by categorising them under several heads, and then concluded that there was a surplus of Rs 5,71,43,088 with the Junior School and Rs 2,19,81,079 with the Senior School. On the basis of these accumulated reserves, DoE has rejected the enhanced fee structure. Petitioner Schools have contested the basis of DoE's calculations and both parties have submitted comparative charts of available funds. However, court need not inspect the arithmetic workings supporting the figures, which is purely factual in nature, and would confine its scrutiny to the conclusions set forth in the impugned order to determine if the same fall within the scope of DoE's jurisdiction. *****

31. In the present case, DoE has recomputed surplus available with schools and held that the same is sufficient to meet their needs and thus, denied them the right to increase the fee. This approach adopted by the DoE, in the opinion of the court, is incorrect and impermissible. Determination of what constitutes a “reasonable” surplus would depend on various factors such as the size of the school, the level of infrastructure and facilities provided, salaries of the staff and the overall financial position of the school. In their statement of fee, Senior School has incorporated a detailed chart of estimated expenses expected to be incurred in the Academic Session 2018-2019 as also the income generated by them. Therefore, there is transparency in their financial operations and they can be held accountable for utilisation of funds. They have mentioned that the management intends to restructure and revitalise the school plant at an estimated cost of Rs 12 crores, and have even entered into a contract with an architect for said purpose. Since the court would not like to sit in appeal over this issue, it has refrained from examining the veracity of the figures mentioned therein, yet considerable merit is found in Mr Gupta's submission that Senior School, operative since 1983, would require funds for reconstruction and allied activities. DoE must remember that unaided schools possess autonomy in their administration, including, autonomy to envision and plan for its growth and expansion; they cannot impose their own subjective opinion of what is sufficient amount for schools to have in order to meet their aims and objectives. In the instant case, the audited balance sheets and material provided by the schools have been reworked without a valid explanation. The audited balance sheets of private unaided schools are important documents that reflect their financial position and performance. These documents provide a clear and transparent picture of school's economic status and help in assessing whether the school has sufficient resources to meet its expenses and whether a fee hike is justified. DoE cannot act as an appellate body and reject the said financial documents, in absence of any evidence to show that the accounts were not prepared in accordance with applicable accounting standards or were rejected by the tax authorities. Pertinently, an objection qua format of return and documents submitted by the schools was raised by DoE; however, in response to said query, the schools had clarified that they are following the prescribed format. In the impugned order, there is no adverse remark on this issue. Therefore, the DoE has undertaken the exercise of reworking the balance sheets without disclosure of justifiable reasons, or a finding of profiteering or commercialisation of education. This exercise reflects DoE's subjective opinion, without any objective criteria, making the entire exercise arbitrary and unreasonable. The right of unaided schools to determine fee to be charged from students cannot be faltered purely only on account of presence of reasonable surplus in their books of account. DoE could have examined the veracity of surplus figures presented by the schools, but in order to deny enhancement of fee, they must, on credible basis, determine that the school has indulged in commercialisation of education, profiteering or levying of capitation fee. The School Managing Committee had carefully undertaken the exercise of deciding the budget for academic year concerned and sans a finding of profiteering or commercialisation of education, the DoE has acted in excess of its powers and impinged upon the autonomy of schools, protected by law, in rejecting Senior School's proposed fee hike.”

47. Apropos unaided schools which are situated on land without any attendant “land clause” in the Lease Deed or other document by which the land was allotted to the school, the above decisions uniformly hold that the DoE does not possess the jurisdiction to regulate the fees of the school or arrive at its own subjective decision that the surplus in the accounts of the school is sufficient to meet the additional liabilities which it has to bear. Absent any finding of charging of capitation fees or profiteering as would amount to commercialization of education, the DoE cannot restrain the school from increasing its fees.

48. Unaided schools, it must be borne in mind, survive on the fees that they receive from parents. It would be facile to expect quality education to be imparted by unaided schools if one has to be tightfisted when it comes to the fees that they can legitimately charge from parents.

49. The definitions of “capitation fees” and “profiteering” already stand defined by statute or precedent. S.B. Sinha, J., in his concurring judgment in Islamic Academy of Education adopted, with approval, the definition of “profiteering”, as contained in Black's Law Dictionary, as “taking advantage of unusual or exceptional circumstances to make excessive profits”. “Capitation fees”, for its part, is defined in Section 2(e) of the RTE Act as “any kind of donation or contribution or payment other than the fee notified by the school”.

50. There is no allegation, in the impugned order in the present case, that the petitioner is engaged in charging of capitation fees or in profiteering.

51. Mr. Jha sought to contend that, even if the words “capitation fee” or “profiteering” are not specifically used in the impugned order, if the allegations in the impugned order set out the ingredients of capitation fee or profiteering, that would suffice to justify its issuance.

52. I am unable to agree with this submission. The Supreme Court has repeated, not once but times without number, that the scope of interference, by the DOE, with the fixation of fees by an unaided recognized school is restricted to a case in which the school engages in charging of capitation fee or in profiteering. These words cannot, therefore, be regarded as mere incantations. They are specific expressions, which have specific legal connotations. If the DoE is of the view that an educational institution is charging capitation fee or is indulging in profiteering, it has to specifically so allege. The absent any such allegation, in those very words, the DoE would not possess the jurisdiction to interfere with fixation of fees by the school concerned.

53. That apart, in the present case, it is clear that there is no allegation either of charging of capitation fee or of profiteering. There is no allegation that the school was charging fees in excess of fees notified by it. Exaction of capitation fee, in its essence, amounts almost to corrupt practice. It involves a school, or an educational institution, notifying the fees that it would charge in a manner, which would be made known to public and, under the table so to speak, taking excess amounts from the students or their parents or guardians. There is no such allegation against the petitioner.

54. Nor is there any allegation that the petitioner was engaging in profiteering. Indeed, insofar as the profit earned by the petitioner is concerned, the impugned order merely alleges that the petitioner was in possession of sufficient surplus to tide over the additional financial burden that the 7th CPC had cast on it. There is no allegation that the petitioner was taking advantage of any exceptional circumstances to earn excessive profits.

55. There is, therefore, neither any overt nor any covert, allegation, in the present case, of charging of capitation fee or of profiteering against the petitioner.

56. The decisions that have been cited supra clearly indicate that the concept of “commercialization of education” is circumscribed by the consideration of capitation fee and profiteering. If, therefore, there is no material to indicate that the school is charging capitation fee or that the school is indulging in profiteering, it cannot be said that the school is commercializing education.

57. The case, therefore, falls within the peripheries of the law laid down by the Supreme Court in the decisions cited hereinabove and incapsulated by this Court in its judgments in Ramjas School and Mahavir Senior Model School.

58. There is also substance in the contention of Mr. Kamal Gupta that the impugned Order has been passed in violation of the principles of natural justice which, as per the judgments in Ramjas School and Mahavir Senior Model School, were required to be scrupulously followed before passing the impugned Order. The petitioner was neither put to notice regarding the allegations contained in paras 1 to 7 of the impugned Order, nor given any opportunity to satisfy the DoE that it was, in fact, required to increase its fees as it had proposed to meet its additional financial outlay. As I have already held, the DoE could not, even otherwise, have rejected the petitioner’s proposed fee hike on the ground that, in its view, the petitioner was in possession of sufficient surplus to meet its needs.

59. It was also sought to be pointed out, by Mr. Jha, that the impugned order contains other allegations against the petitioner such as non-entry of transport allowance in its accounts, discrepancy between its opening and closing balances, utilization of development fee for the purposes other than those notified by the DoE. These are not considerations on the basis of which the DoE could have restrained the petitioner from raising its fees. As Mr. Kamal Gupta correctly pointed out, such allegations are present in nearly every order. A perusal of the order under challenge in Ramjas School and Mahavir Senior Model School, reveals that, in those cases, too, various financial discrepancies were alleged before coming down to the meat of the matter, which was the purported “sufficiency” of the surplus in the schools’ accounts to meet additional financial burden cast on it by the requirement of complying with the 7th

60. Needless to say, given the limited remit of this Court in the present case, I am not entering into the particulars or the merits or demerits of the allegations contained in paras 1 to 7 of the impugned order. The DoE shall be at liberty to proceed in accordance with law with respect to the said allegations subject, of course, to ensuring that no decision adverse to the petitioner would be taken without following the requirement of the statute, rules and regulations and applicable guidelines and adhering to the principles of natural justice and fair play. Conclusion

61. In view of the above, the impugned order, to the extent it proscribes increase of fees by the petitioner-school, cannot sustain on facts or in law. The impugned order dated 1 August 2018 is, therefore, quashed and set aside to the said extent, with no order as to costs. W.P.(C) 6419/2019

62. The facts of this case are largely identical in so far as the legal position is concerned with the facts of W.P.(C) 8794/2018. The impugned order in this case reads thus: “OFFICE OF THE DEPUTY DIRECTOR OF EDUCATION DISTT. NORTH, Lucknow Road, Timarpur, Delhi -110054 No. DDE(N)/Pr. Br./2019/188-192 Dated: 20/04/19 ORDER WHEREAS, Lilawati Vidya Mandir Sr. Sec. School, Shakti Nagar, Delhi-110007 is an Unaided Recognized School running under jurisdiction of District North of Directorate of Education, GNCT of Delhi, and is bound to comply with the provisions as contained under Delhi School Education Act, 1973 and Delhi School Education Rules, 1973 made there under and also to follow the lawful Instruction as issued by Directorate of Education from time to time. AND WHEREAS, Each and every school is required to furnish full statement of fee under Section 17(3) of DSEAR, 1973 and vide order no. DE.15(318)/PSB/2016/1974[2] Dated 13-10-2017, Director of Education in exercise of her powers conferred by sub section (g) of section 2 of DSEAR, 1973 authorized "the Dy. Director of Education (District) to exercise the powers and perform the functions of the Director of Education GNCT of Delhi within the meaning, extent and scope of Section 17(3) of DSEAR, 1973, subject to the limitations and conditions as imposed under the provisions of the aforesaid section in respect of regulating the fee collected or to be collected by the Private Unaided Recognised school from the parents by scrutinizing the full statement of fee filed by the school under sub section (3) of Section 17 of the Act and pass necessary directions to the schools with regard to reduce/modify or refund the excess fee, in case of excess fee charged by the school," as well as in compliance to order of the Hon'ble Supreme Court in the case of Modern School in 2004. AND WHEREAS, a complaint was filed by parents on 27/04/2017 that the School had increased the tuition fee of the said session. AND WHEREAS, the said parents have also filed a writ petition no. 10804/2017 to Hon’ble High Court of Delhi dated 20/11/2017. Accordingly, it was decided to do the scrutiny of full fee statement of fee filed by the school under section 17(3) of DSEAR, 1973 for the year 2017-18. AND WHEREAS, accordingly the Manager/HOS of Lilawati Vidya Mandir Sr. Sec. School, Shakti Nagar, Delhi, school was directed to produce on financial documents pertaining to the year 2017-18 vide office order dated 02-08-2018, 06-08-2018 and 23- 02-2019. AND WHEREAS, keeping in view of the natural justice, the Chairman/Manager of the School was provided an opportunity of personal hearing and accordingly was directed vide order No.198/VII to attend the office of Deputy Director Education, at 4:00 p.m. on 20/02/2019 and also, to furnish/produce documents/information and clarifications on various issues noted 23/02/2019 and the School failed to attend the office of Deputy Director Education, at 4:00 p.m. on 23/02/2019 and also, has not submitted any documents and clarifications on the issues noted. AND WHEREAS, the School failed to submit the documents/ clarification on the ibid issues noted and therefore, a Show cause notice was issued on 23/03/2019 and subsequently, a reminder vide no. 305 dated 03/04/2019 was also issued, asking the school authorities to submit the clarifications for not submitting the required documentary proofs in support of their stand. In its reply to the reminder, the school finally submitted a reply vide letter NO. 5594/LVM dated 15-04-2019 with some records and clarifications. AND WHEREAS, the submissions of the School have been evaluated that the documents and clarifications submitted by the school is incomplete. Point wise analysis of School’s reply has been given under:

1. Copy of Actuarial valuation report for Gratuity and leave encashment, if any, taken by the School for FY 2012-13, 2013- 14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19; Provision for gratuity and leave encashment has been made as per central government service rules and investment against the fund has been earmarked. The investments in form of FDRs against gratuity amounting Rs.1,56,25,852. School has not submitted actuarial report for gratuity and leave encashment. It seems that the provisions for the same have been made on management estimate basis. Further, School has not been maintaining investments against such provisions with LIC (or any other

2. If any investments have been made against the aforesaid provisions with LIC (or any other agency)? agency).

3. Copy of Audited Financial Statements for the FY 2017-18 (complete set) along with auditor’s report; Copy of audited balance sheet for FY 2017-18 is enclosed. Taken on record

4. Copy of budgeted receipts and payment account for FY 2018- 19 filed with the department at the time of submission of return filed under rule 180 of DSER, 1973; Copy of budget estimates for FY 2017-18 is enclosed.

5. Please provide reasonable justification for increase/decrease in proposed expenditure for session 2018-19 vis-à-vis actual expenditure for session 2017-18. Justification for increase and decrease of expenditures is enclosed.

6. Please provide reasonable increase/decrease in proposed income for session 2018-19 vis- à-vis actual expenditure for session 2017-18.

7. Please bring the copy of RC and invoice of car, buses maintained/purchased by the School during FY 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19. Copy of registration certificate of school vehicle is enclosed. It is not clear from the submission of the School that how many buses and cars are available with the School. School is directed to submit the complete required details.

8. Please bring the copy of FDRs as on today. Also share the details of FDRs like maintained against which fund. List of FDRs enclosed along with corresponding use. Accepted. Part (B)

1. Please define the process of payment of salaries. Whether payments are being made to staff through cash mode or through banking; Mode of payment of salaries is through bank transfer in respective account of staff members.

2. Whether School is making payments to vendors in excess of Rs. 20,000 in cash during the year. If yes, what is the quantum of such transactions; Payment exceeding Rs.20000 in cash has not been made during the year.

3. In the Income and Expenditure account, amount is debited in No clarification or the name of ‘Contribution to Pupil Fund and Staff Benevolence fund A/c. The purpose and nature of such expenditure need to be submitted. The details of such transaction are as follows:

1. FY 2012-13 20,00,000

2. FY 2013-14 20,00,000

3. FY 2014-15 25,00,000

4. FY 2015-16 5,00,000

5. FY 2016-17 5,00,000 Total 75,00,000 submitted. School is directed to submit proper details with explanation.

4. During FY 2012-13, School has purchased car amounting Rs. 18,01,694. School is to submit the detail of car purchased such as copy of RC, copy of invoice, user of such car, expenses incurred for maintenance of such car in FY 2012-13, 2013- 14, 2014-15, 2015-16, 2016-17, 2017-18 and 2018-19. School has submitted RCs of 2 cars and 1 bus It is not clear from the submission of the school that how many buses and cars are available with the School. Copy of invoice of car purchased not provided. It is not clear who is using the said car.

5. School has donated Rs.37,100 in FY 2013-14. The purpose of such donations along with copy of receipts is to be provided. It is to explain by School why this expenditure is to be considered as eligible expenditure for educational purposes. No response. The school has failed to submit any explanation for this expenditure.

6. During FY 2015-16 and 2016- 17, school funds have been utilized for building amounting Rs.13,78,982 and Rs.5,29,850. School is to explain why this expenditure is not recovered from the Society as the construction of building is the responsibility of the society. No response The school has failed to submit any explanation for this expenditure. As per clause 2 of public notice dated May 04, “School should not to charge Building Fund and Development Charges when the building is complete or otherwise, as it is the responsibility of society who has established the School to raise such funds from their own resources or donations from other associations because immovable property of the School becomes the property of the Society. Thus, it is clear that building is the responsibility of the Society and therefore, this amount should be recovered from the Society.”

7. School has incurred expenditure for installation of Solar plant in FY 2015-16 and 2016-17. The total amount expended is Rs.73,08,894. School is to justify the reason for such huge expenditure No clear response by the School. It has submitted the copy of 4 invoices only. School need to submit what cost saving it earned after such installation.

8. It is noted that the expenditures incurred by the School are generally inconsistent as either there was substantial increase or substantial decrease. School need to provide complete justification with proper documents for such increase or decrease in various expenditures mentioned in Table-C below: School has not provided any the expenditures asked for such as why there are inconsistent movement in the expenses of the School. It has submitted the copies of bills. No justification for movement in expenditures has been provided. Table-C (Figures in Rs.)

3 Ministerial staff salary 26,13, 20,89, -20% 30,71, 47% 29,70, -3% 29,60,0 0% 4 Computer Education 40,28, 40,74, 1% 41,87, 3% 37,68, -10% 46,48,[5] 23%

9 Wages payments to workers/cont ract staff 10,40, 24,47, 135% 32,92, 35% 51,14, 55% 77,03,[6] 51% 10 Sanitation and Conservancy 11,82, 273, 19,71, 67% 28,85, 46% 25,43, -12% 23,68,[8] -7% 11 Electricity Expenses 11,76, 13,92, 18% 15,96, 15% 21,06, 32% 7,81,11 -63% 12 Vehicle Running and Maintenance 6,38,0 6,71,[9] 5% 6,35,[5] -5% 5,59,[2] -12% 6,32,64 13%

14 Whitewash expenses 9,80,[5] 8,03,[2] -18% 19,97, 149% 28,69, 44% 25,83,[1] -10% 15 Canteen Day Expenses - - 0% - 0% 26,65, 0% 38,97,[6] 46% Total 6,64,[7] 3,813 7,40,[2] 8,811 8,43,[6] 7,326 9,23,[1] 8,900 9,85,68, AND WHEREAS, the statement of accounts submitted by the school and other material correspondence available on record have been carefully evaluated and detailed findings are as under: Financial Irregularities:

1. As per clause 2 of public notice dated May 04, 1997 "School should not to charge Building Fund and Development Charges when the building is complete or otherwise, as it is the responsibility of society who has established the School to raise such funds from their own resources or donations from other associations because Immovable property of the School becomes the property of the society. Therefore, the students should not be burdened by way of collecting Building Fund or Development Charges” Moreover, as per Rule 177 of DSER, 1973 Income derived by an unaided recognized Schools by way of fees shall be utilised at the first instance, for meeting the pay, allowances and other benefits admissible to the employees of the School. Provided that savings, if any from the fees collected by such School may be utilised by its management committee for meeting capital or contingent expenditure of the School, or for one or more of the following educational purposes, namely award of scholarships to students, establishment of any other recognised School, or assisting any other School or educational Institution, not being a college, under the management of the same society or trust by which the first mentioned School is run. And, the savings referred to above shall be arrived at after providing for the following: i. Pension, gratuity and other specified retirement and other benefits admissible to the employees of the School; ii. The needed expansion of the School or any expenditure of a developmental nature; iii. The expansion of the School building or for the expansion or construction of any building or establishment of hostel or expansion of hostel accommodation; iv. Co-curricular activities of the students; v. Reasonable reserve fund, not being less than ten percent, of such savings. Therefore, construction of building is the responsibility of the Society and shall not be charged from the school's fund. Therefore, School funds utilised for building amounting Rs. 78,86,032 during FY 2016-17 is in contravention of public notice dated 04.05.1997 and Rule 177 of DSER, 1973. This amount has been considered as part of fund available with the School with the direction to school to recover this amount from the society. Further, School funds have also been utilised for building amounting Rs. 5,50,65,084 In FY 2017-18 in contravention of aforesaid provisions. This amount is to be recovered from the Society by School.

2. As per Para 99 of Guidance note on "Accounting by school" issued by ICAI, relating to restricted fund, "Where the fund is meant for meeting capital expenditure, upon Incurrence of the expenditure, the relevant asset account is debited which is depreciated as per the recommendations contained in this Guidance Note. Thereafter, the concerned restricted fund account is treated as deferred Income, to the extent of the cost of the asset, and is transferred to the credit of the income and expenditure account in proportion to the depreciation charged every year”. Taking cognisance from the above para, School should have considered the Development fund utilisation account as deferred income to the extent of cost of assets purchased out of Development fund and have transferred the amount to the credit of Income & Expenditure account in proportion to the depreciation charged from this deferred Income account. However, it is noted that School has not created ‘Development Fund Utilization Account’ for the assets purchased out of the Development fund and thus, has not transferred any amount from this utilisation account to the credit of Income and Expenditure account in proportion of depreciation charged during the year. Thus, the School has not followed aforesaid para 99 of the Guidance Note-21: Accounting by Schools as Issued by ICAI and may be instructed to follow the same.

3. The school has made provisions for gratuity and leave encashment on management estimation basis and not on actuarial valuation basis, as required by Accounting Standard (AS) 15 Issued by ICAI. There could be an Impact on the financials of the school, had the provisions been done actuarial valuation basis. In the absence of the actuarial valuation report, the same could not be quantified. After detailed examination of all the material on record and considering the clarification submitted by the School, it was finally evaluated/concluded that:

I. The total funds available for the FY 2017-18 amounting to

Rs.23,72,57,471 out of which cash outflow in the FY 2017-18 is estimated to be Rs.14,86,71,332. This results in net surplus of Rs. 8,85,86,139. The details are as follows: Particulars Amount Remarks Cash and Bank balances as on 31.03.17 as per audited 1,09,23,435 Add: Investments as on 14,71,11,538 Add: Amount recoverable from society for building construction 19,08,832 Less: Arrears for 7th CPC as per audited balance 1,16,87,834 sheet for FY 2016-17 Less: Investment against DDA 35,000 Less: Caution Money balance as on 31.03.2017 23,75,750 Less: Investments against Provision for Gratuity and Leave Encashment as on 31.03.2017 3,71,87,586 Note 1 Less: Development Fund 1,44,82,845 Note 2 Available Funds 9,41,74,790 Add: Fees for FY 2016-17 as per audited Financial Statements (we have assumed that the amount received in FY 2016-17 will at least accrue in FY 2017-18) 14,21,07,563 Add: Other income for FY 2016-17 as per audited Financial Statements (we have assumed that the amount received in FY 2016-17 will at least accrue in FY 2017-18) 9,75,118 Estimated availability of funds for 2017-18 23,72,57,471 Less: Actual Expenses for the session 2017-18 as per audited financial statements submitted by school vide its letter dated 15.04.2019 (including capital expenditure) 14,86,71,332 Note 3 Estimated Surplus 8,85,86,139 Note 1: The provisions for gratuity and leave encashment has not been maintained as per the report of the actuary. However, since the School has sufficient funds available with it, the actual amount invested as per audited financial statements for the FY 2016-17 against these provisions have been considered. Further, the School is directed to get the actuarial valuation of gratuity and leave encashment and invest the aforesaid amount with LIC (or any other agency) within 90 days from the date of order. Note 2: The Supreme Court in the matter of Modern School held that development fees for supplementing the resources for purchase, upgradation and replacements of furniture and fixtures and equipment can by charged from students by the recognized unaided schools not exceeding 15% of the total annual tuition fee. Further, the Directorate's circular no. 1978 dated 16 Apr 2010 states “All schools must, first of all, explore and exhaust the possibility of utilising the existing funds/ reserves to meet any shortfall in payment of salary and allowances, as a consequence of increase in the salary and allowance of the employees. A part of the reserve fund which has not been utilised for years together may also be used to meet the shortfall before proposing a fee increase.” Over a number of years, the school has accumulated development fund and has reflected the closing balance of Rs.7,13,17,041 in its audited financial statements of FY 2016-2017. Accordingly, the accumulated reserve of development fund created by the school by collecting development fee more than its requirement for purchase, upgradation and replacements of furniture and fixtures and equipment has been considered as free reserve available with the school for meeting the financial implication. However, development fund equivalent to amount collected in FY 2016- 2017 amounting Rs. 1,44,82,845 from students has not been considered as fund available with school. Note 3: The total expenditure budgeted/proposed by the School for FY 2017-18 was Rs. 15,38,30,000 which includes capital expenditure of Rs. 1,51,30,000. Further, as per audited financial statements for FY 2017-18 the actual total expenditure before depreciation and additions to building comes to Rs. 14,86,71,332. Since, FY 2017-18 has already been passed therefore actual expenditure has been considered in the above table. The details of outflow against actual expenditure are as follows: (Figures in Rs.) Particulars 2017-18 Salaries 9,54,26,227 School education expenses 1,47,99,501 Admin and General 1,20,57,086 Repairs and Maintenance 2,01,10,894 Other expenses 7,397 Total revenue expenditure 14,24,01,105 Less: Depreciation (1,13,45,214) Sub-total (A) 13,10,55,891 Capital Expenses 7,26,80,525 Less: Addition in Building (5,50,65,084) Sub-total (B) 1,76,15,441 Total Expenditure (A+ B) 14,86,71,332 In view of the above examination, it is evident that the school is having sufficient funds to meet the final implications for the financial year 2017-18 after meeting its expenditure and there was no need to increase the fee for the year 2017-18. After taking into consideration all the facts and circumstances of the case, the school authority is hereby directed to comply with the following directions under intimation to the undersigned.

1. Not to charge any increased fee in pursuance to the full fee statement filed under section 17(3) of DSEAR, 1973 by school for the academic session 2017-18 and if, the fee is already increased and charged for the academic session 2017-18, the same shall be refunded to the parents or adjusted in the fee of subsequent months.

2. To communicate the parents through its website, notice board and circular about rejection of fee increase proposal of the school by The Directorate of Education.

3. To ensure that the salaries and allowances shall come out from the fees whereas capital expenditure will be a charge on the savings in accordance with the principles laid down by Hon’ble Supreme Court of Delhi in its Judgment of Modern School v/s Union of India. Therefore, school not to include capital expenditure as a component of fee structure to be submitted by the school under section 17(3) of DSEA, 1973.

4. To utilise the fee collected from students in accordance with the provisions of Rule 177 of the DSER, 1973 and orders and directions issued by this Directorate from time to time.

5. To remove all the financial and other irregularities as listed above and submit the compliance report within 30 days to the D.D.E. Non-compliance of this order or any direction herein shall be viewed seriously and will be dealt with the provision of Section 24(4) of DSEA, 1973 and DSER, 1973. Sd/- 20.04.2019 Neelam Yadav DDE(NORTH)”

63. As in the case of the orders under challenge in Ramjas School, Mahavir Senior Model School and Bluebells International School, the above order also contains initial allegations against the petitioner/ school and follows up the allegations by a meticulous dissection of the manner in which the petitioner has worked out the fees that it intends to charge as well as analyzes of the accounts of the petitioner, with a comparison of income against expenditure and profit against loss. The conclusion is the same at which the DoE arrived in Ramjas School and Mahavir Senior Model School and at which DoE has arrived in the case of Bluebells International School which is that the “school is having sufficient funds to meet the financial implications for the financial year 2017-2018 after meeting its expenditure and there was no need to increase the fee for the year 2017-2018.”

64. As has already been noted by this Court in Ramjas School and Mahavir Senior Model School and as already noted hereinabove, the DoE did not possess the jurisdiction, absent any element of commercialization of education by charging of capitation fee or profiteering, to come to its own subjective decision regarding the sufficiency of the funds available with the school to meet its financial liabilities. Such a decision clearly impinges the autonomy that the school enjoys – an exercise which stands castigated by the Supreme Court from as far as back as T.M.A. Pai.

65. The reasoning in W.P.(C) 8794/2018, therefore, applies mutatis mutandis to the present case. Conclusion

66. The impugned order to the extent it proscribes increase of fees by the petitioner – school is, therefore, quashed and set aside.

67. This, however, shall not inhibit the DoE from taking any decision in respect of any perceived infraction by the school of the provisions of the DSE Act or the DSE Rules, in accordance with law as has been permitted in the case of Bluebell International School. Overall Conclusion

68. Both the aforesaid writ petitions, therefore, stand allowed to the extent indicated in paras 61 and para 66 supra with no orders as to costs.

C. HARI SHANKAR, J.