# RUSTOM KERAWALLA FOUNDATION v. STATE OF MAHARASHTRA AND ORS

- **Citation:** [2017] 13 S.C.R. 330
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Case number:** Civil Appeal No. 3696 of2017
- **Bench:** ADARSH KiuMAR GOEL, Uday Umesh Lalit
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rustom-kerawalla-foundation-v-state-of-maharashtra-and-ors-31800
- **Pages:** 31

## Headnote

Maharashtra Educational Institutions (Prohibition of
Capitation Fe'!) Act. 1987 - Appellant-Foundation runs a School -
Whether the Appellants are entitled to take the entirety of lease rent
into account while having the fee structure approved in terms of
provisions of the Act and if not, what should be the correct
approach - Held: Under sub-clause (b) to s.4(2) of the Act the State
is empowered, to exclude certain expenditure in regulating fees
collected by the educational institution - The exercise on part of
State Government must be guided to arrive at a just balance between
two essentials. one-interest of the unaided institution to have a just
and reasonable fee structure and other -the very purpose of the
legislation to curb the capitation fee - In instant case, the plot of
land of school came to be allotted not through normal competitive
E
channels but purely under discretionwy quota - Consideration
payable for th~ plot was not guided by market conditions, and public
property was made over purely for sub-serving public interest -
The land in question was originally given by MHADA (Maharashtra
Housing and Area Development Authority) on behalf of the State
F
Government at concessional rate to MP MCT (Trust) - Thereafter. a
tripartite agreement was executed between the MHADA, MPMCT
and a limited company - Consequent to which the said plot of land
was sub-leased, to the company, which in turn gave leasehold rights
to the appellant-Foundation to run the School from the building
situated - The appellant-Foundation is paying rupees 2.5 crores
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every year towards rent - Respondent No.3 is not off" the mark in
contention thai in the process substantial sums of money are being
made over to Me company in which the trustees of the Foundation
are the only directors - Since, the lease deed and subsequent lease
deed in the present case was on non-competitive basis and purely
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on discretion{j1y quota of the State Government. the locational
advantages of the land ought to be completely severed and
330
RUSTOM KERAWALLA FOUNDATION v. STATE OF
331
MAHARASHTRA AND ORS.
segregated and what should be basis for computation must be purely
A
that what was expended "on land and building" - Matter
accordingly remanded to the State Government for fresh
consideration - MHADA (Disposal of Land) Regulations 1982 -
regn.16.
Disposing of the appeals and transfer petitions, the Court
B
HELD: 1. On perusal of documents on record, it 'shows
that the allotment in question was made by Maharashtra Housing
and Area Development Authority (MHADA) pursuant to the
decision of the State Government to lease out a plot of land under
2% discretionary quota of the State Government, in terms of c
Regulation 16(2) ofMHADA (Disposal of Land) Regulati~ns 1982.
In the instant case, the plot ofland came to be allotted not through
norn.ial competitive channels but purely under discretionary quota.
The consideration payable for the plot was also not guided by
market conditions, and public property was made over purely for
sub-serving public interest. Going by the test laid down that aid D
may take several forms and that when public property or funds
arc given as grant, they carry public character wherever they go,
the allotment made by MHADA at the instance of the Q9vernment
in favour of a lessee can certainly be termed as "aid". As laid
down in Unni Krishnan J.P. case, among others, the condition
that the institution shall not be entitled to charge any fees higher
than what is charged in Government htstitutions for similar
courses, shall be understood to be the condition of grant of aid.
The fact however remains that the lessee spent Rs.40.17 lakhs
only for allotment of 6032 Sq. mtrs. through non-competitive
mode. [Paras 13, 16] [353-G-H; 355-E-G; 356-B]
2.1 Section 3(1) of the Maharashtra Educational Institutions
(Prohibition of Capitation Fee) Act, 1987 prohibits demand or
collection of any capitation fee from any student in consideration
of hi.s admission to, and prosecut

## Text

_Characters 0–39,898 of 68,540. This is a partial read: ask again with offset=39898 for what follows._

A
[2017] 13 S.C.R. 330
RUSTOM KERAWALLA FOUNDATION
V.
STATE OF MAHARASHTRA AND ORS.
(Civil Appeal No. 3696 of2017)
B
AUGUST03,2017
c
D
[ADARSH KiuMAR GOEL AND UDAY UMESH LALIT, JJ.]
Maharashtra Educational Institutions (Prohibition of
Capitation Fe'!) Act. 1987 - Appellant-Foundation runs a School -
Whether the Appellants are entitled to take the entirety of lease rent
into account while having the fee structure approved in terms of
provisions of the Act and if not, what should be the correct
approach - Held: Under sub-clause (b) to s.4(2) of the Act the State
is empowered, to exclude certain expenditure in regulating fees
collected by the educational institution - The exercise on part of
State Government must be guided to arrive at a just balance between
two essentials. one-interest of the unaided institution to have a just
and reasonable fee structure and other -the very purpose of the
legislation to curb the capitation fee - In instant case, the plot of
land of school came to be allotted not through normal competitive
E
channels but purely under discretionwy quota - Consideration
payable for th~ plot was not guided by market conditions, and public
property was made over purely for sub-serving public interest -
The land in question was originally given by MHADA (Maharashtra
Housing and Area Development Authority) on behalf of the State
F
Government at concessional rate to MP MCT (Trust) - Thereafter. a
tripartite agreement was executed between the MHADA, MPMCT
and a limited company - Consequent to which the said plot of land
was sub-leased, to the company, which in turn gave leasehold rights
to the appellant-Foundation to run the School from the building
situated - The appellant-Foundation is paying rupees 2.5 crores
G
every year towards rent - Respondent No.3 is not off" the mark in
contention thai in the process substantial sums of money are being
made over to Me company in which the trustees of the Foundation
are the only directors - Since, the lease deed and subsequent lease
deed in the present case was on non-competitive basis and purely
H
on discretion{j1y quota of the State Government. the locational
advantages of the land ought to be completely severed and
330
RUSTOM KERAWALLA FOUNDATION v. STATE OF
331
MAHARASHTRA AND ORS.
segregated and what should be basis for computation must be purely
A
that what was expended "on land and building" - Matter
accordingly remanded to the State Government for fresh
consideration - MHADA (Disposal of Land) Regulations 1982 -
regn.16.
Disposing of the appeals and transfer petitions, the Court
B
HELD: 1. On perusal of documents on record, it 'shows
that the allotment in question was made by Maharashtra Housing
and Area Development Authority (MHADA) pursuant to the
decision of the State Government to lease out a plot of land under
2% discretionary quota of the State Government, in terms of c
Regulation 16(2) ofMHADA (Disposal of Land) Regulati~ns 1982.
In the instant case, the plot ofland came to be allotted not through
norn.ial competitive channels but purely under discretionary quota.
The consideration payable for the plot was also not guided by
market conditions, and public property was made over purely for
sub-serving public interest. Going by the test laid down that aid D
may take several forms and that when public property or funds
arc given as grant, they carry public character wherever they go,
the allotment made by MHADA at the instance of the Q9vernment
in favour of a lessee can certainly be termed as "aid". As laid
down in Unni Krishnan J.P. case, among others, the condition
that the institution shall not be entitled to charge any fees higher
than what is charged in Government htstitutions for similar
courses, shall be understood to be the condition of grant of aid.
The fact however remains that the lessee spent Rs.40.17 lakhs
only for allotment of 6032 Sq. mtrs. through non-competitive
mode. [Paras 13, 16] [353-G-H; 355-E-G; 356-B]
2.1 Section 3(1) of the Maharashtra Educational Institutions
(Prohibition of Capitation Fee) Act, 1987 prohibits demand or
collection of any capitation fee from any student in consideration
of hi.s admission to, and prosecution of any course of study, or
promotion to a higher standard or class in any educational
institution. The definition of educational institution under Section
2(b) means.a school including kindergarten, pre-primary, balwadi
or nursery, college or any institution by whatever name called
whether managed by Government, Local authority, a University
or a Private Management. Thus the extent of prohibition
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SUPREME COURT REPORTS
[2017] 13 S.C.R.
contemplated by Section 3(1) squarely applies to and covers the
School run by the appellant- Foundation. The definition of
"capitation fee" under Section 2(a) means any amount in excess
of the prescribed fee or as the case may be approved rates of fee
regulated under Section 4. The regulatory mechanism under
Section 4 has two facets; a) in case of aided institution, the fees
to he regul11ted shall be such as may be prescribed by the
University ot the State Government and b) in respect of unaided
institution it shall be such as the State Government may approve.
Under the first category the fees are "prescribed" either by the
University or by the State Government while in respect of unaided
institution the fees have to be "approved" by the State
Government. Sub clause (4) of Section 4 speaks of constitution
of a committee of experts in education field whose reports can
be the basis for revision of fees. Said sub-section further provides
that the fees regulated under Section 4 shall ordinarily remain in
force for a period of three years. [Para 18] [356-D-G)
2.2 Reading sub-clause (b) of Section 4(2) along with Section
4(3) of the Act, three elements ought to be considered while
approving the fees in respect of unaided institutions, namely; (i)
regard must be had to the usual expenditure; (ii) excluding any
expenditure pn lands and buildings or on such other items as the
State Gover~ment may notify; and (iii) the fees shall include the
items specified in sub-clause (3) of Section 4. The expression
"excluding any expenditure on lands and buildings or on such
other items 11s the State Government may notify" is very crucial.
It is importapt to note that expenditure on lands and buildings or
for that matter any expenses towards rents do not form part of
any of the items under sub-section (3) of Section 4. While
considering (he ambit of the aforesaid crucial expression in Subclause (b) of Section 4(2), two constructions are possible:
(i) The qualification, "as the State Government may notify"
covers only the second part, i.e., that part of the expression
occurring at]ter "or" namely "on any such other items". Thus,
the power entrusted with the State Government applies to and is
restricted to "any such other items". In other words, the earlier
part namely, "any expenditure on lands and buildings" is a standalone part a1td must always be excluded. If this construction is
accepted, expenditure on lands and buildings must always be kept
RUSTOM KERAWALLA FOUNDATION v. STATE OF
MAHARASHTRA AND ORS.
out of consideration while arriving at the decision with regard to
the fees to be approved in respect of an unaided institutions.
The power of the Government to notify will only be with respect
to "other items" and not with respect to expenditure on lands
and buildings. The fact that rent for building does not find any
place in Section 4(3) of the Act, is an indicia in favour of such
construction. Logical extension of this thought would be that in
all, matters, no expenditure on lands and buildings can or ought
to ,be taken into account .
. (ii) The other possible construction is that the expression
·· · "as the State Government may notify" must apply to the entirety
of the clause including "any expenditure on lands and buildings"
in which event, the State Government may, either as a matter of
policy come out with any general notification or may decide in
tlie 'context of any individual facts and circumstances. Since all
333
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the ~uthorities have gone on the latter construction in the present
matter, the latter construction has been adopted as the basis for D
a~sessment in the instant case. [Para 19) [356-H; 357-A-H]
·• 2.3 Assuming that the expenditure on lands and buildings
ca·n be reckoned while considering the case under sub-clause
(b); the State Government is empowered to exclude certain
expenditure. What then is the extent of power and under what
circumstances and in what manner such discretion is to be
guided? The exercise on part of the State Government must be
guided to arrive at a just balance between two essentials, one -
iiltetest of the unaided institution to have a just and reasonable
foe ·structure and the other - the very purpose of the legislation
nllniely to curb capitation fee. While discharging this duty and
undertaking such exercise, the State Government must naturally
b'e 'alive to and take all possible facets of the matter into account.
In a given case, claim. for payment of rent in respect of buildings
may' be just and reasonable while in other cases it may not be so.
The ·exercise must and ought to be undertaken keeping the basic
idea' of the legislation in mind. [Para 20) [358-A-C)
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, .. 2.4 If the State Government, while making over public assets
o~ f111ids, has rendered a helping hand to an institution, the
.,. t..
resultant benefit flowing in favour of the institution must alwavs
. ' ·~·d
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be .tal!.en into account in order to arrive at a just and fair decision
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SUPllEME COURT REPORTS
(2017] 13 S.C.R.
while approving the fees as claimed by that institution. The least
that is expected is that the institution would not seek to profiteer
from the public assets or public funds but must be made to let
the benefit flow in favour of those, for whose ultimate benefit the
public assets or funds were __ made over to it in the first instance.
[Para 21] (358-D-E]
3. In thp present case, the appellant- Foundation was always
in the picture right since the beginning and was named as affiliated
trust in the deed in question. It was only later that KARE Edumin
Pvt. Limited came to be inducted as a sub-lessee to which the
Foundation is presently paying rupees two and a half crores every
year towards rent. Respondent No.3 ls therefore not off the mark
in her conten~ion that in the process substantial sums of money
are being made over to KARE Edumin Pvt. Limited in which
company the trustees of the Foundation are the only Directors.
In any event of the matter, all that the sub-lessee had expended
towards acquisition of interest in the land was Rs.30 Lakhs, which
was paid to MPMCT and Rs.5.02 Lakhs that was paid by it to
MHADA towards premium. All the evaluation reports relied
upon and placed on record have computed the rent payable on
the basis of what was payable in market to similar premises in
the locality in, question. Evaluation reports have gone on the basis
of the locational advantages of the land, which are nothing but
elements depending upon the market value of the locality in
question. Since the lease deed and subsequent sub-lease in the
prese,nt case was on non-competitive basis and purely under the
discretionary quota of the State Government, the locational
advantages l)f the land ought to be completely severed and
segregated and what should be the basis for computation must
be purely that what was expended "on land and buildings''. The
expenditure on I~nds being to the tune of Rs.35.02 lakhs, what
the Foundation and the School are entitled to is only that, which
represents reasonable return on such investment and the facilities
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therein, or the rent as claimed, whichever is lower. With this
view, matter remanded to the State Government for fresh
consideration. [Paras 22, 23] (359-A-F]
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Associ!:ltion of international Schools and Principal
FoundaJion and Another v. State of Maharashtra (2010)
RUSTOM KERAWALLA FOUNDATION v. STATE OF
MAHARASHTRA AND ORS.
SCC online Bombay 1291; Unni Krishnan J. P. and
Others v. State of Andhra Pradesh and Others (1993) 1
SCC 645 : [1993) 1 SCR 594; T.MA. Pai foundation
v. State ofkarnataka (2002) 8 SCC 481 : [2002) 3 Suppl.
SCR 587 Modern School v. Union of India & Others
(2004) 5 SCC 583 : [2004) 1 Suppl.-SCR 668; Islamic
Academy of Education & Anr. v. State of Kamataka &
Ors. (2003) 6 SCC 697 : [2003) 2 Suppl. SCR 474 -
referred to.
. [1993) l SCR 594
Case Law Reference
referred to
[2002) 3 Suppl. SCR 587
[2004) 1 Suppl. SCR 668
[2003) 2 Suppl. SCR 474
referred to
referred to
referred to
Para 14
Para 15
Para 15
Para 21
335
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3696
D
of2017
From the Judgment and Order dated 16.09.2011 of the High Court
of Judicature at Bombay in Writ Petition No. 1925 of 2009.
WITH
C. A. No. 3698 of2017
T. P. (C) Nos. 89 and 90 of 2013.
E
Dr. A. M. Singhvi, Aspi Chinoy, Praveen Sandhani, Sr. Advs.,
MaheshAgarwal, Prateek Seksaria, Nivit Srivastava, Vivek Jain,Ankur
Saigal, Navjot Singh, Raghav Dwivedi, Ms. Rangita Rohatagi,
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E. C. Agrawala. E. R. Kumar, Ms. Nandita Bajpai, A. Jindal,
Mis. Parekh & Co., Advs., for the Appellant.
Sunil Fernandes, Ms. Astha Sharma,Amav Vidyarthi, Ms. Avisha
Gopalkrishnan Kulkarni, Naveen R. Nath, Darpan K.M ., Nishant
Ramakantrao Katneshwarkar, Advs., for the Respondents.
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Respondent-in-person
The Judgment of the Court was delivered by
UDAY UMESH LALIT, J. I. Rustom Kerawalla Foundation
(appellant in Civil Appeal No.3696 of2017 and hereinafter referred to
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SUPREME COURT REPORTS
(2017] 13 S.C.R.
as the Foundation), runs a school named Vibgyor High School (appellant
in Civil Appeal No.3698of2017 and hereinafter referred to as the School)
in Mumbai. These appellants are questioning cotTectness of the corrunon
Judgment and Order dated 16.09.2011 passed by the High Court of
Bombay in Writ Petition Nos.1925 of2009 and 19 I 9 of 2009 preferred
by them. Along with these appeals, two transfer petitions, namelyT.P.(C)
Nos.89 and 90 of2013 preferred by the Appellants are also listed before
us.
I
These writ petitions challenged the orders dated 03.07.2009 and
04.09.2009 passed by the Deputy Director ofEducation, i.e. Respondent
No.2 who had disallowed the expenses incurred by the School towards
rent in respect of school building in the sum ofRs.2.50 crores per annum.
While so disapproving, the amounts towards other expenses claimed by
the school were accepted by Respondent No.2 as usual expenditure and
the fees prescribed by the school to the extent ofRs.54,598/- for Primary
Section and Rs.61.149/- for Secondary Section from the years 20082009 were approved.
2. The Maharashtra E<lucational Institutions (Prohibition of
Capitation Fee) Act. 1987 (hereinafter referred to as the Act) prohibits
collection of capitation fee for admission of students to, and prosecution
of any course of study, or for promotion to a higher standard or class.
"Capitation Fee" is defined in the Act as, "any amount by whatever
name called, whether in cash or kind. in excess of the prescribed or, as
the case may bo approved rates of fees rPgulated under Section 4 ".
Sections 3. 4, 6 and 7 of the Act are a' under:-
"3 Demand or Collection of capitation fee prohibited-
( I)
No!M. ithstanding anything contained in any law for the time
being in force, no capitation fee shall be demanded or collected
by or on behalf of any educational institution or by any person
who is in charge of or is responsible for, the management of
such institution.
(2)
Notwithstanding anything contained in sub-section (1 ). the
management may in good faith, demand or, collect or accept
donations in cash or kind in prescribed manner, from benevolent
persons or organisations or public trusts or any other association
of persons. for opening of new educational institution or for
devclopnjcnt or expansion ofcducational facilities in the existing
RUSTOM KERAWALLA FOUNDATION v. STATE OF
337
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
educational institutions or for creation of endowment fund for
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award of scholarships, prizes or the like, but while collecting or
accepting such donations the management shall not reserve any
seats in any educational institution run by it in consideration of
such donations. All money and articles received in donation shall
be accounted for in the institution and the money shall be deposited
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in the name of the institution in any scheduled or co-operative
bank and shall be applied or expended for the purpose for which
such donations are collected or accepted or shall be applied
towards the objects of the institution:
Provided that, where in consideration of accepting such donations
any scat is reserved for admission to any student in such institution
such acceptance of donation shall be deemed to be collection of
capitation fee.
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(3)
Where the State Government, on receipt of any complaint
or otherwise, is satisfied that the management of any institution
or any person who is in-charge of or is responsible for the
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management of such institution, has contravened the provisions
of this Act or the rules made thereunder, the State Government
· may, in addition to any prosecution that may be instituted under
this Act. aflcr giving a reasonable opportunity of being heard,
direct such institution or person responsible that the capitation
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fee collected in contravention of this Act shall be refunded to the
person from whom it was collected and on its or his failure to do
so. the amount together with interest thereon shall~
(a) in the case of an aided educational institution, be deducted
from the grant-in-aid payable by the State Government to
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such institution; and then the same be paid to the person
from whom such capitation fee was collected; and
(h) in the case of an un-aided educational institution, be
recovered as arrear ofland revenue; and when so recovered
be paid to the person from whom such capitation fee was
collected.
(4) The management of any educational institution or any person
who is in-charge of or who is responsible for the management of
such institution demanding, collecting or accepting donations under
sub-section (2) in connection with or in relation to any student in
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SUPREME COURT REPORTS
[2017] 13 S.C.R.
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consid¢ration of his admission to and prosecution of, any course
of study or his promotion to a higher standard or class in institution,
shall be deemed to have contravened the provisions of sub-section
(I) and shall be liable to be proceeded against and punished
accordilngly.
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4. Regulation of Fees
(I) It shall be competent for the State Government to regulate
the tuitjon fee or any other fee that may be received or collected
by any educational institution for admission to, and prosecution
of study in any class or standard or course of study of such
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institution in respect of any or all classes of students.
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(2) The fees to be regulated Ullder sub-section (I) shall -
(a)in the case of the aided institutions, be such as may be
prescribed by a university under the relevant University Law
for the time being in force in the State or as the case may
b¢, by the State Government; and
(b) in the case of the un-aided institutions, having regard to the
usual expenditure excluding any expenditure on lands and
buildings or on any such other item as the State Government
may notify, be such as the State Government may approve:
Provided that, different fees may be approved under clause
(b) in relation to different institutions or different classes or
different standards or different courses of studies or
djfferent areas.
(3) The fees, to be prescribed or approved under sub-section
(2) shall include the following items, namely:-
(a) Tuition fee, whether on term basis or monthly or yearly
basis;
(b) Term fee per academic term;
(c) Library fee and deposit as security per year or for the
eμtire course;
( d) Laboratory fee and deposi·, as security per year or for
the entire course;
RUSTOM KERAWALLA FOUNDATION v. STATE OF
339
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
( e) Gymkhana fee on yearly basis;
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(f) Caution money for the entire course;.
(g) Examination fee, if any, per year or for the entire course;
(h) Hostel fee, Messing charges, if these facilities are
provided, whether on term basis or on monthly or yearly
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. basis;
(i) Any such other fee or deposit as security or amount for
any other item, as the State Government may approve.
( 4) The fees regulated under the section shall ordinarily remain
in force for a period of three years and the State Government
shall appoint a Committee of persons who, in the opinion of the
State Government, are experts in educational field, for taking
the review of the fee structure and may, after considering the
report of the Committee, revise the fees ifit considers it expedient
to do so.
(5) Every educational institution or as the case may be,
management shall issue an official receipt for the fees or deposits
or any other amounts collected for any purpose, which shall be
specified in such receipt.
6. Power to enter and inspect-
( I) Any Officer not below the rank of Deputy Director of
Education specially authorised by the State Government in this
behalf, may at any time during the normal working hours of any
educational institution enter such institution or any premises
thereof or any premises belonging to the management of such
institution in relation to such institution, ifhe has reason to believe
that there is or has been any contravention of the provisions of
this Act or the rules made thereunder and search and inspect
any records, accounts, registers or other documents belonging
to such institution or of the management in so far as such records,
accounts, registers or other documents relate to such institution
and seize any such records, accounts, registers or other
documents for the purpose of ascertaining whether there is or
has been any such contravention.
(2) The provisions of the Code of Criminal Procedure, 1973
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[2017] 13 S.C.R.
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relating 10 searches and seizures shall apply, so far as may be, to
searches and seizures under sub-section (I).
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7. Penalties
Whoever contravenes any provision of this Act or the rules made
thereunder, shall, on conviction, be punished with imprisonment
for a term which shall not be less than one year but which may
extend to three years and with fine which may extend to five
thousancj rupees :
Provided that, any person who is accused of having committed
lhe offelilce under sub-section (I) of Section 3 of demanding
capitation fee sha II, on conviction, be punished wi lh imprisonment
for a term which shall not be less than one year but which may
extend to two years and with fine which may extend to five
thot1sand rupees."
3. Respondent Nos.3 to 7 herein, namely parents of children
studying in the $chool along wilh other parents had complained to the
Education Minister of the State vidc letter dated 19.07.2007 alleging
mal-administratitm in the School including unlawful elections to ParentsTeachers' Association. This letter suggested that the fee structure of
the School was not justified and it was submitted" .. we are sure Education
Ministry will not allow any educational institution to run as a business,
profit center". While !his letter was pending consideration. !he School
proceeded to issue Circular dated 19.03.2008 increasing school fees.
This increase wμs purportedly on the basis of approval granted by the
Accounts Officer (Education) vide his letter dated 21.02.2008 which set
out the recommended expenditure and consequential increase in fees as
under:
"Thouglj it is impossible to implement the revised fee during this
year, we arc furnishing herewith the Recommended Expenditure
for the year 2008-09 as per the GR dated 22/07/1999, 27/05/
2005 and also as per the Secondary School Code.
A) Recommended Expenditure for 2008-09 I 0, 75,22,351 /-NonAccepted Exp.:
l) Professional Fee 60,91.264/-
2) Building Repairs 6,03, 132/-
RUSTOM KERAWALLA FOUNDATION v. STATE OF
341
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
3) StaffWelfare 5,00,009/-
Sanctioned Expenditure by
Education Inspector
(-) 71,94.405/-
10,03,27,946/-
B) Other Income (2007-08) support (-) 25,31,046/-
C) 5 % increase as per GR)
dated 27 /05/2005
9,77,96,900/-
. 48,89,845/-
Approved Salary Exp.+ Other Exp. 10,26,86,745/-
Out of the total expenditure during 2007-08, 54.24% is utilized
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for Primary section and 45.76% for Secondary section. This
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year the Recommended Expenditure is to be divided in the
proportion of 54% for primary and 46% for secondary section.
The revised fee structure has been recommended as shown
below:
Primarv Section
54% Exnenditure
5,54,40,842.50
No. of Students· 746
Annual Fee -73,347/-
Monthly Fee -6112.25
Approved Monthly Fee-6112.00
Yours truly,
Sd/-
Accounts Officer
(Education-West Zone)
Mumbai."
Secondarv Section
46% Exnenditure
4,72,35,903.00
No. of Students -575
Annual Fee- 82,149/-
Monthlv Fee- 6.845. 75
Approved
Monthly
Fee
6,845.00
4. Complaining about the rise in school fees from Rs.55,000/-to
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. Rs.82,500/-per annum, Respondent Nos.3 to 7 filed Writ Petition No. 722/
2008 praying for quashing of Circular dated 19.03.2008 issued by the
School regarding increase in fee structure. Said writ petition was disposed
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of by the High Court on 20.04.2009 directing that the earlier complaint
dated 19.07 .2007 which was still pending consideration, be disposed of
by l)eputy Director and that the writ petitioners would be at liberty to
submit any additional submissions/material in support of their complaint.
It was directed that the Deputy Director would consider the entire
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material produced before him and pass a reasoned order. The High Court
further directed that the fees would be paid in terms of the revised fees
structure but recovery of fees would be subject to the orders to be passed
by the Deputy J:i>irector.
5. It app~ars that a Task Force was thereafter assigned the work
of scrutiny and audit of accounts of the School which noticed that certain
documents nec~ssary for arriving at any decision were not submitted by
the School. Accordingly Respondent No.2 by his letter dated 15.06.2009
called upon the school to furnish certain details. It further appears that
as the infonnation was not forthcoming from the School, Respondent
No.2 issued communication dated 30.06.2009/03.07.2009, relevant portion
being:
"As per the orders given by the Hon'ble High Court on
20.04.2009, a joint decision from the Education Deputy Director
regarding Vibgyor High School Goregaon(W), is expected. As
per the~c orders, a meeting of the Task Force was organized at
the otlice of the Education Deputy Director, Mumbai on 12/06/
09. In the meeting, with reference to the issues raised in the
complaint, documents were checked and the following information
was requested from the school through this office letter dated
15.06.2009.
1.
Inc;ome & Expenditure Statement and the Audit Statements
of the Financial Year 2008-09 (Certified by a Chartered
Aacountant).
2. Building Rent Certificate provided through a competent
authority and the copy of Property Tax paid.
3.
List of Teaching & Non-teaching Staff & their Salary scale.
H~s the PTA permitted in case of salary paid is higher than
the regular salary structure?
4.
Copy of establishment of the Parent Teacher Association.
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Since the above information was not submitted by the school,
a meeting of the Task Force was held on 30.06.2009 under the
chairmanship of the Education Deputy Director to take a final
decision.
In this meeting, as per the documents available with the office,
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the Expenses for the year 2008-09 as certified by the Education
RUSTOM KERAWALLA FOUNDATION v. STATE OF
343
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.)
Inspector (West Zone), the Audit Report dated 21.02.2008 of A
the Accounts Officer(Education) West Zone, has been
considered. After considering the same, the following decision
has been taken.
1) Formation of the PTA:
As per the GR No. SSN 1099 (27/99) Sec. Edu.-2 dated 22"'
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May, 2000 issued by the School Education Department,
Mantralaya, Mumbai Vibgyor High School should innnediatcly
form a PTA as per the prescribed procedure set out in the GR.
2) With regard to expenses of Pre-Primary, Primary and
Secondary Sections:
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As per the Certificate dated 15.05.2009 of the Chartered
Accountant submitted by VIBGYOR High School, the connnon
expenses for Pre-Primary, Primary and Secondary sections have
been segregated section-wise, which means the Income and
Expenditure for Pre-primary is separate and Primary/Secondary
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sections expenses have been reflected proportionately.
3) Regarding Fees:
A) Proposed Expenses for the
Rs.10,75,22,351/-
year 2008-09
Expenses disallowed by the Education Inspector in his report as
per the GR No.SSN 11197(311/97)/Sec.Edu.3 dated 22"' July,
1999.
I.Professional Fees -60,91,264/-
2.Building Repairs
- 6,03, 132/-
3.Staff Welfare
- 5,00,009/-
4.
Total
- 71,94,405/-(Less) Rs.71,94,405/-
Expenses earlier approved by Education
Inspector
Building's rent expenses disallowed
(Task Force)
Rs.10,03,27,946/-
(Less)Rs. 2,50,00,000/-
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Permissible Expenses
B) Other Income (Basis: Report of the
Yeav 2007-08)
C) As per GR dated 271h May 2003
Incremental income
Permissible Salary & Other Expenses
[2017] 13 S.C.R.
Rs.7,53,27,946/-
(Less) Rs.25.31.046/-
Rs. 7 ,2 7 ,96,900/-
(Add) Rs.36,39,845/-
Rs. 7,64,36,745/-
After considering the use of the building during the year 200708 as 46% for Secondary section and 54% for Primary section,
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the below mentioned fees is being considered.
Primarv Section
Secondary Section
Rs. 7,64,36, 745/- x 54% Exp.
Rs.7,64,36,74?1-_x 46% EX!).
Rs. 4,Jl,75,842/-
Rs.3,51,60, 9031Stu:leQts count -7 56
Studcntconnt-575
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Yearly Fees Rs. 54,598/- per Yearly Fees Rs. 61,149/- per
student.
student.
Mont!ily Fee Rs. 4,550'- per Monthly Fee Rs. 5,096/- per,
student.
student.
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For the Primary Section and the Secondary Section, Rs.4550/-
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& Rs.5096/- respectively, such monthly fees seem pennissible.
Prima facie it appears that the salaries of the teaching and
non-t~aching staff is more than the salary prescribed by the
Government. As per the GR No.SSN 1197 (311 /97)/Sec.cd-3
dated 22'"' July, 1999 at Sr. no.2, it is necessary to take approval
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from lhe PTA regarding such high salary.
However, vide GR No.Mis-2009/(108/09) Sec.Ed-3 dated 8"'
May, 2009, order not to increase Education and other foes without
the consent of the Fee Control Committee has been passed. As
per this order, every school has been prohibited to increase their
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fees without the recommendation of the Fee Control Committee.
Accordingly vide GR. No. Mis-2009 (108/09) Sec.Ed-3 dated
11"' Jlllne, 2009, a committee has been formed to study and make
recommendations for the purposes of fixing the fees. For taking
a final decision in this regard, it will be appropriate that th~ further
decision is taken in the Fee Fixation committee formed as per
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the a\love GR.
RUSTOM KERAWALLA FOUNDATION v. STATE OF
345
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
Sd/
A
(Counterfoil signed by the
(Dongre)
Deputy Director-Education)
Deputy Director-Education
Mumbai Division, for Mumbai"
6. The communication dated 30.06.2009103.07 .2009 disallowing
expenses towards rentand subsequent letter dated 04.09.2009 stating
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that the fees determined in the decision dated 03.07.2009 were final and
be acted upon, were questioned by the Appellants by filing Writ Petitions
as stated' above. Considering the grievance that no reasons whatsoever
were recorded in the decision dated 03.07.2009, the High Court by its
order 03.08.2010 directed Respondent No.2 to permit the parties to file
their response/submissions on the basis of which said respondent was
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called upon to record reasons. Pursuant to the aforesaid order, Respondent
No.2 passed order on 27.10.2010 recording reasons for disallowing the
amount towards school building rent, the translation of relevant portion
being:-
"Government has fasued a detailed order vide Government
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Resolution dated 22"" July 1999 in respect of fixation of fees of
unaided schools.
While taking into account the expenses at the time of the
fixing the fees, the above Government Resolution has been
considered.
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The proposal submitted by you (o this office for fixation of
fees in pursuance of the order passed by the Hon 'ble High Court
in Writ Petition No.722 of 2008 and other Writ Petitions has
been received and such received proposal was scrutinized. As
per the criteria laid down by the Government from time to time
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and by the Task force constituted under GR dated 3"' July 1999
and the final decision dated 3"' J~ly 2009 was communicated.
Your attention was drawn to schedule "A" of Secondary
School Code in relation to provisions of fixation of building rent
and further the directions given by respected Education Director,
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Maharashtra State Punc, vide letter dated l 9'h July 1996 about
documents to be submitted with the proposal for fixation offees
ofunaided schools.
In your proposal you have not submitted rent certificate,
certified by Executive Engineer PWD, for allowing building rent,
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required under above both the provisions. However instead of
submitting certified normal rent certificate you have submitted
rent certificate prepared on the basis of market value prepared
by the valuer (Shrinivas S. Kini & Co.). As per prescribed
provisions you have not submitted reasonable rent certificate of
the CoIIjpetent Authority. Therefore while fixation of fees the
cost of rent of the building proposed by you cannot be taken into
account.
Sd/-
Sunil Chowhan
Dy. Dir. of Education
Mumbai Div. Mumbai."
7. The reasons so recorded in support of the decision dated
03.07 .2009 and the direction contained in communication dated 04.09.2009
were challenged before the High Court. It was submitted by the
Appellants that! a) In terms of orders of the High Court passed on
20.04.2009 and 08.05.2009, the proceedings were limited to examine
the issues raised in the complaint dated 19.07.2007 and as such the
subsequent decision to increase the tuition fee could not have been the
subject matter of challenge. b) Respondent No.2 was not competent to
fix tuition fees and could not have exercised any power on the basis of
procedure prescribed in Government Resolutions. c) Respondent No.2
could not have disallowed the expenses towards building rent on the
ground of non production of the building rent certificate and in disregard
of the approved/recommended expenditure by the Accounts Officer,
Education, West Zone, Mumbai in his letter dated 21.02.2008. d) As
held by the High Court in ASSOCIATION OF INTERNATIONAL
SCHOOLS AND PRINCIPAL FOUNDATION AND ANOTHER v.
STATE OF MAHARASHTRA1 the power to approve the fees stood
conferred by the Act on the State Government, which power could not
be delegated.
In response, it was submitted on behalf of Respondent No. I that
the submission$ in the complaint dated 19 .07 .2007 were also in respect
of excessive fees and alleged profiteering and therefore Respondent
No.2 was quite competent to examine the grievances and while doing so
was justified in disallowing the claim in respect of rent for school building
as claimed Respondent Nos.3 to 7 while contesting the petitions submitted
'W.P. No 1f76 of 2010 decided on 1.09.2010 (2010 SCC Online Bombay 1291)
RUSTOM KERAWALLA FOUNDATION v. STATE OF
MAHARASHTRA AND ORS. [UDAY UMESH LAL!T, J.]
'
that a device was adopted by the appellant to profiteer and the alleged
rent was being paid by the Foundation to a Private Linrited Company in
which, very same trustees were the only Directors.
8. Writ Petition Nos.1925 and 1919 of2009 were disposed ofby
the High Court by its judgment and order which are presently under
appeal. The High Court rejected the subnrission that the scope of enquiry
was limited and confined to the allegations made i11 the complaint dated
19 .07 .2007. According to the High Court, the aspect regarding
commercialization and profiteering was put in issue and the authorities
were within their rights to consider the matter. It was further.observed
that even if it were to be accepted that Respondent No.2 had no right to
prescribe the fees in respect of unaided institutions, in exercise of his
powers under Section 6 of the Act he could certainly find out if any part
of fees was in excess of what was prescribed under Section 4(3) of the
Act and whether collection was without any approval by the State
Government. It was observed by the High Court:-
" As aforesaid, we may not construe the said order of the Deputy
Director as strictly regulating the fees or one of approval thereof.
Even so, the conclusion reached by the Deputy Director, will
have to be upheld for the reasons mentioned hitherto. In that
case, the petitioners cannot recover any amount in excess of the
amount reworked by Respondent No.2, unless approved by the
State Government."
Very same thought was expressed by the High Court in para 53
of the judgment in following terms:
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"Going by Section 4 of the Capitation Fee Act, the State
Government alone is competent to approve the amount claimed
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by the unaided school as usual expenditure so as to permit the
school to recover commensurate amount from the students by
way of fees. If the petitioners are keen that they should be allowed
to recover the entire amount spent by them towards building
rent for the relevant period from their students, they may have
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to pursue the matter before the State Government for its approval.
As aforesaid the State Government would be free to examine
all aspects before taking final decision on the said proposal,
including the grievance of the parents (such as respondent Nos.3
to 7) that the amount spent by the school towards buildings rent
is a subterfuge and device to siphon off that amount, which would
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eventually be received in the hands of three persons, who are
the only Directors and shareholders of the private limited company
and also the only trustees of the Trust, which claims to have
incurred such expenditure. In other words, the payer and the
receiver of the stated expenses are the same persons under the
fa(:ade1orcloak of two juristic persons. All contentions available
to the respective parties may have to be examined by the State
Government on its own merits. We are not expressing any opinion
as to whether the petitioners are entitled to claim recovery of
entire lllllOUnt spent by them towards buildings rent from their
students during the relevant period or otherwise."
With this view the High Court disposed of the matters and the
operative part of the order reads thus:
"Both the petitions arc disposed of on the above terms with costs
to be paid by the petitioners. Resultantly, in absence of approval
of the State Government permitting the School to recover the
expenditure from its students incurred on buildings rent during
the relevant period, the petitioners are obliged to comply with
the C-Ourt's order dated 20" April, 2009. Ordered accordingly."
9. While issuing notice on 14.11.2011, this Court stayed the
operation of the aforesaid judgment and order passed by the High Court.
During the pendency of these matters Writ Petition Nos.2701 of2012
and 2542 of 2012 were filed by the Appellants in the High Court of
Bombay challenging constitutional validity of Sections 2 and 4 of the
Act. The Appellants later filed Transfer Petition Nos.89 and 90 of2013
in this Court s~king transfer of said Writ Petitions to this Court in which
notice was issued by this Court on 01.02.2013.