Schools Have Saved Operational Costs During Lockdown; Can't Charge Students For Unused Facilities : Supreme Court

The Supreme Court has held that private schools demanding fees from students for the activities and facilities not availed by them due to the lockdown amounts to 'profiteering' and 'commercialization'.

Taking judicial notice of the fact that classes have been held online during the last academic year, the Supreme Court observed that schools must have saved on overheads and operational costs.  The Court reckoned that schools must have saved at least 15% in that way, and hence, they have to give a deduction in annual school fees to that extent. The Court said that the schools "must willingly and proactively" reduce fees to that extent.

In this regard, the Court followed the precedents laid down in TMA Pai, PA Inamdar and other cases which hold that fees charged by the educational institutions must be commensurate to their services and they cannot indulge in 'profiteering' or 'commercialization. The Court said that a private institution has the autonomy to fix its own fees so long as it does not result in 'profiteering' and 'commercialization', and to that extent the State has power to impose regulations.

The recovery of excess amount beyond permissible limit would result in profiteering and commercialisation, the Court said.

A bench comprising Justices AM Khanwilkar and Dinesh Maheshwari made this significant ruling in the case Indian School, Jodhpur vs State of Rajashtan and others. The bench was dealing with a batch of appeals challenging a Rajasthan Government order, which permitted CBSE schools in the state to collect only 70% and state board schools to collect only 60% of the annual school fee.

The Supreme Court partly allowed the schools' appeal, by allowing them to collect annual tuition fee after giving a deduction of 15% towards the savings made on account of overheads and operational costs. The Court has allowed six monthly instalments for the payment of fees.

The relevant observations made in the judgment(paragraphs 116 and 117) are :

"In law, the school Management cannot be heard to collect fees in respect of activities and facilities which are, in fact, not provided to or availed by its students due to circumstances beyond their control. Demanding fees even in respect of overheads on such activities would be nothing short of indulging in profiteering and commercialisation. It is a well­ known fact and judicial notice can also be taken that, due to complete lockdown the schools were not allowed to open for substantially long period during the academic year 2020-­21. Resultantly, the school Management must have saved overheads and recurring cost on various items such as petrol/diesel, electricity, maintenance cost, water charges, stationery charges, etc.

Indeed, overheads and operational cost so saved would be nothing, but an amount undeservedly earned by the school without offering such facilities to the students during the relevant period. Being fee, the principle of quid pro quo must come into play.

However, no accurate (factual) empirical data has been furnished by either side about the extent to which such saving has been or could have been made or benefit derived by the school Management. Without insisting for mathematical exactitude approach, we would assume that the school Management(s) must have saved around 15 per cent of the annual school fees fixed by the school/adjudicated by the Statutory Regulatory Authorities for the relevant period."

"We would assume that at least 15 per cent of the annual school fees would be towards overheads/expenses saved by the school Management. Arguendo, this assumption is on the higher side than the actual savings by the school Management of private unaided schools, yet we are inclined to fix that percentage because the educational institutions are engaged in doing charitable activity of imparting and spreading education and not make money. That they must willingly and proactively do. Hence, collection of commensurate amount (15 per cent of the annual school fees for academic year 2020­2021), would be a case of profiteering and commercialisation by the school Management".

Schools must be responsive to the hardships faced by students and parents

The Court further observed :

"The school Management supposedly engaged in doing charitable activity of imparting education, is expected to be responsive and alive to that situation and take necessary remedial measures to mitigate the hardship suffered by the students and their parents. It is for the school Management to reschedule payment of school fee in such a way that not even a single student is left out or denied opportunity of pursuing his/her education, so as to effectuate the adage "live and let live"".

While allowing schools to charge 85% of the annual fees, the Court also directed that no student should be debarred from attending either online classes or physical classes on account of non­-payment of fees, arrears/outstanding fees including the installments,and shall not withhold the results of the examinations of any student on that account.

If any individual request is made by the parent/ward finding it difficult to remit annual fees for the academic year 2020-­21 , the school Management must consider such representation on case ­to ­case basis sympathetically.

The school Management shall not withhold the name of any student/candidate for the ensuing Board examinations for Classes X and XII on the ground of non­payment of fee/arrears for the academic year 2020­-21, if any, on obtaining undertaking of the concerned parents/students.