Holding

The institute may continue to function under the existing government conditions, with AICTE regulations applicable, and the trust requirement waived subject to accounting conditions.

Summary

Larson & Toubro Ltd. established a polytechnic institute for the children of its employees, charging no fees and admitting students solely on merit with reservation as per government rules. After the Supreme Court's Unnikrishnan judgment, AICTE framed regulations governing admissions to technical institutions, but the institute could not fit within the scheme and sought exemption, which was denied. The institute filed a writ petition under Article 32 of the Constitution challenging the denial. The Court held that the institute's purpose of training children for potential employment aligns with the objectives of the Unnikrishnan scheme and AICTE regulations, and therefore it may continue operating subject to specific conditions imposed by the Maharashtra government. The requirement that the institute be run by a public/charitable trust was waived, provided the company maintains a separate account and records of all expenditures and receipts. The Court directed that AICTE and the Maharashtra government may inspect the institute to ensure compliance, and disposed of the petition with these directions.

Issues considered

Whether the polytechnic institute falls within the ambit of the AICTE admission scheme framed pursuant to the Unnikrishnan judgment.
Whether the requirement that the institution be run by a public/charitable trust can be waived in this case.
Whether the institute may continue to operate without charging fees and with the reservation policy prescribed by the Maharashtra government.
Whether AICTE regulations and other statutory provisions apply to the institute despite its unique admission criteria.

Legislation cited

All India Council for Technical Education Act, 1987
Constitution of Indias. Article 32
Income Tax Act, 1961s. 40A(9)

Subjects

Technical educationAICTE regulationsAdmission schemePublic charitable trustReservation policyFee-less instituteArticle 32Writ petitionIncome tax deduction

Judgment

I
l'

A POLYTECHNIC BY NAME LARSON AND TOUBRO A
INSTITUTE OF TECHNOLOGY AND ANR.
v.
ALL INDIA COUNCIL FOR TECHNICAL EDUCATION
AND ORS.
B
MARCH 10, 1995

[B.P. JEEVAN REDDY AND SUHAS c. SEN, JJ.]

Education:
c
Polytechnic institute run by a Public Limited Company exclusively for
children of its employees-No fees charged-Admission on merit
basis-Reservation policy followed-Not covered by scheme prepared in pur-
suance of Unnikrishnan-Allowed to function subject to conditions as it
fulfilled the underlying purpose and object of Unnikrishn~onstitution of D
India-Article 32.

-' Larson and Toubro Ltd., a Public Limited Company, established a
polytechnic institute to be run by a trust constituted by them. As the
amount paid by the company into the said trust was not being allowed as E
a deduction in the assessment of the company under the Income Tax Act,
the trust was dispensed with. The admission to the institute was open only
to the children of those employees of Larson and Toubro group who had
been confirmed in service for atleast five years. Admissions were made
purely on merit and no fees was charged. The Government rules regarding
reservations were followed. Certain conditions laid down by the Govern· F
ment while granting permission for starting the Institute were followed by
the Institute.

After the judgment of this court in Unnikrishnan, J.P. v. State of
Andhra Pradesh, (1993) 1 SCC 645. Regulations were framed by the All
India Council for Technical Education (A.I.C.T.E.) which were consistent G
\/' with and in furtherance of the scheme and directions contained in Unnik-
rishnan. The idea behind the scheme framed in Unnikrishnan was to put an
end to financial and other irregularities in admission to professional
colleges including colleges imparting technical education and to regulate
admissions to such colleges. H
741
r

742 SUPREME COURT REPORTS [1995] 2 S.C.R.

A The petitioner-institute could not fit itself in the scheme framed by
All India council for Technical Education and therefore, applied for )--1

exemption to the Government which was not granted. Hence, this writ
petition.

Disposing of the writ petition, this Court
B
HELD : 1. The idea of the appellant is to train the students keeping
the requirements of the company in mind and to absorb them ultimately
in company service to the extent feasible. It is thus obvious that the
purpose for which this institute has been started and run are in no way
C inconsistent with the underlying purpose and object sought to be achieved
by the scheme enunciated in Unnikrishnan and the regulations framed by
the A.l.C.T.E. (745-F]

2. In the instant case, therefore, the institute may be allowed to
D function as at present, i.e. subject to several conditions imposed by the
Government of Maharashtra, viz., (1) no fee shall be charged from any
student; (2) the parents of the students must be in service of the company
for atleast five years; (4) the government rules regarding reservation are
followed and (5) only where no candidates are available in the backward
class category, those seats will be filled up by open category candidates. In
E all other respects, the regulations framed by All-India Council for Techni·
cal Education shall apply as also the relevant rules and regulations, if any,
• made by the Education and Employment Department (including the omce
of Director of Technical Education, Bombay), Government of
Maharashtra. It shall be open to the Government of Maharashtra and All
F India Council for Technical Education to inspect, call for records . and
information and take all other steps to ensure that the institution· is
adhering to the above conditions. (744-B-C, 745-G-H, 746-A-B]

3. The condition that the institute is run by a Public/charitable trust
as required by one of the cla.uses of the scheme· in Unnikrishnan was
G dispensed with in the case of this institute alone subject to the following
further conditions, viz. (1) the company shall open, if not already opened,
a separate account concerning the petitioner institute, (2) all the expendi-
ture incurred on the institute and any other receipts by the said institute
shall be entered therein as also the particulars of the application of the
H said amounts. (746-D, ff, 747-A]
I
'

L. AND T. INSTT. OF TECH. v. Al.C.T.E. [B.P. JEEVAN REE[)Y, J.] 743

Unnikrishnan J.P. v. State ofAndhra Pradesh, (1993] 1 SCC 645, relied A
on.

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 738 of
1994.

(Under Article 32 of the Constitution of India.) B

--"( K.~. Venugopal, K.V. Vishwanathan, Vikram B. Trivedi and Bharat
y Sangal for the Petitioners.

J.P. Verghese and S.P. Sharma for the Respondent. c
J. Rama Murthy, S.M. Jadhav and Bhasme for the State.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Larson and Toubro Limited, a public D
limited company, is a leading engineering concern in this country. It has
got a large work force required for its various projects. In the year 1983,
it set up Larson and Toubro Institute of Technology. For establishing and
running the institute, a trust called 'Larson and Toubro Staff and Welfare
Trust' was constituted. Because of certain legal complications, it is stated, E
the institute is being run directly by the company, dispensing with the trust.
The institute imparts instruction in four-year diploma course-sixty seats in
diploma in mechanical engineering and sixty seats in diploma in electrical
•
__ j
engineering. According to the copy of the prospectus filed in this writ
petition, the admission is open only to children of the employees of Larson F
and Toubro group of companies. It is further required that the employee
should have put in a minimum period of five years of service as confirmed
employee on July 1st of the year of admission to enable his child to claim
the eligibility. The admission is made purely on the basis of merit deter-
mined on the basis of marks obtained in the Secondary Sc:hool Certificate
Examination of the Maharashtra State Board of Secondary Education or G
an equivalent examinatioli. The minimum marks are fifty per cent in tfle
case of general candidates and forty five per cent in the case of backward
class students. Thirty four per cent of the seats are stated to be reserved
in favour of backward classes. It is further stated before us by Sri K.K.
Venugopal, learned counsel for the petitioners that no fee whatsoever is H
744 SUPREME COURT REPORTS (1995) 2 S.C.R.

A charged or collected from the students or from their parents for admission
and/or instruction in the said institute. It is stated that as a matter of fact,
the Government of Maharashtra had granted permission for starting this
institute in the year 1983 subject to the specific conditions that (1) no fee
shall be charged from any student of the said institution; (2) the parents
B of the students must be Indian nationals; (3) the father/mother must be in ·
service of the company for atleast five years; (4) that government rules
regarding reservation of thirty four per cent of seats for backward classes y.
are followed and (5) that only where no candidates are available in the
backward class category, that those seats will be filled up by open category ~
candidates. It is stated that these conditions are being implicitly and
C faithfully followed by the Institute.
On February 4, 1993, this Court delivered judgment in Unnikrishnan,
J.P. v. State of Andhra Pradesh, (1993) 1 SCC 645 inter alia framing a
scheme governing admission to professional colleges, which expression
D includes colleges imparting technical education. The idea behind the
scheme was to put an end to the financial and other irregularities which
had become rampant in these institutions, converting most of these institu-
tions into teaching shops. The idea was to regulate admission to these
colleges. Fifty per cent of seats are to be filled purely on the basis of merit
E (who shall pay only a nominal fee) and other fifty per cent being treated
as 'payment seats', the admission to which seats also was to be on the basis
of merit. On review petitions being filed by several persons, they were
entertained only to the limited extent of providing a certain percentage of
seats for non-resident Indians. It was directed that five per cent of the seats
shall be reserved for non-resident Indian students. It appears that the .
F petitioner was one of the review petitioners therein though it was not one
of the writ petitioners in the batch of writ petitions disposed of on February
4, 1993.

In pursuance of the judgment in Unnikrishnan, the All- India Council
G for Technical Education framed two sets of regulations under All-India
Council of Technical Education Act, 1987, viz., A.l.C.T.E. (Norms and
Guidelines for Fees and Guidelines for Admissions in Professional C<ll-
leges) Regulations, 1994 dated May 20, 1994 and A.l.C.T.E. (Grant of
Approval for starting new Technical Institutions, Introduction of Courses
H · or Programme§ and Approval of intake capacity of seats for the Courses
1
'
LANDT. INSIT. OF TECH. v. Al.C.T.E. [B.P. JEEVAN REEDY, J.) 745
,_
or Programmes) Regulations 1994 dated October 31, 1994. These regula- A
tions have been framed consistent with and in furtherance of the scheme
Le
' and directions contained in the judgment aforesaid.

Since the petitioner-institute could not fit itself into the said scheme,
it applied for exemption and for appropriate orders both from the Govern-
ment of Maharashtra and from the A.l.C.T.E. The request was to permit
B
it to continue according to its present scheme and, at the same time, not
to refuse or withdraw the recognition and affiliation granted by the govern-
y ment and the council. Since the council expressed its inability to accede to
·-r
i
the said request, the present writ petition was filed.
c
-.-f- It would be seen from the facts stated above that this institute is not
an engineering college but only a polytechnic, which means that primarily
it will cater to the children of comparatively lower echelons of the
employees of the company. It is confmed to the children of the employees
alone and that too employees who have put in a minimum of five years of D
confirmed service on 1st July of the relevant year of admission. No fee is
charged either for admission or for imparting instruction. (The admission

-- to hostel is, of course, a different matter and for which charges are levied,
to which no objection can be taken.) Admissions are being made exclusive-
ly on the basis of merit with reference to the marks in the qualifying
E
examination, viz., the marks obtained in S.S.C. Examination conducted by
the Maharashtra State Board or Secondary Education or any other
equivalent examination. No outside student is being admitted. The idea is
to train the students keeping the requirements of the company in mind and
to absorb them ultimately in company service to the extent feasible. It is
..::~ F
- I thus obvious that the purpose for which this institute has been started and
is being maintained and run are in no way inconsistent with the underlying
purpose and object sought to be achieved by the scheme enunciated in
Unnikrishnan and the regulations framed by the A.l.C.T.E. We are, there-
fore, inclined to allow the institute to function as at present, i.e., subject to
the several conditions mentioned hereinbefore. In all other respects, the G
regulations framed by All-India Council for Technical Education shall
,,1. apply as also the relevant rules and regulations, if any, made by the
Education and Employment Department (including the office of Director
of Technical Education, Bombay), Government of Maharashtra. It is made
clear that the conditions imposed by the Maharashtra government while H
746 SUPREME COURT REPORTS [1995] 2 S.C.R.

A permitting the institute to be started, referred to above, shall continue to
be observed. rt shall be open to the Government of Maharashtra and
All-India Council for Technical Education to inspect, call for records and
information and take all other steps to ensure that the institute is adhering
to the above conditions. For this purpose, the institute shall send each year,
B to both the government and the council, a statement of particulars of
students who had applied for admission and those who had been granted
admission. The statement shall contain the full particulars of the students
alongwith the particulars of their parents (in service of the company), their
service particulars, the marks obtained by each applicant and an integrated
merit list and a separate merit list of the students belonging to backward
.c classes.

At the same time, we wanted to ensure that the institute is run by a
public/charitable trust as required by one of the clauses of the scheme in
Unnikrishnan. It was, however, explained to us by Sri Venugopal that
D initially the company had established a trust for the purpose of running the
said institute but it had to dispense with the said trust because the amount
paid by the company into the said trust was not being allowed as a
deduction in the assessment of the company under the Income Tax Act. It
is explained that by virtue of insertion of sub-section (9) in Section 40A of
E tl,e Income Tax Act by Finance Act, 1984 (with retrospective effect from
April 1, 1980) the amounts paid by the company into the trust were held
not deductible as permissible expenditure by the Income Tax Department
and for this reason the trust had to be dispensed with. With a view to satisfy
ourself as to the position of law obtaining in this be4alf, we requested Sri
F J. Ramamurthy, Senior Advocate, to assist us and tell us whether it would ?
be possible for the company to claim full deduction for the amounts paid \-
into the trust established, or to be established, for running the said institute.
Sri Ramamurthy and Sri Venugopal have taken us through the relevant
provisions of the Income Tax Act. We find that by virtue of sub-section (9)
of Section 40A, it may not be possible for the company to claim such full
G dedu~tion. Even if the said trust is recognised for the purpose of Section
BOG, the deduction can be only to the extent of fifty per cent of the amo~t
paid into the trust. In the circumstances, we dispense with the said condi-
tion in the case of this institute alone subject to the following further
conditions, viz., the company shall open, if not already opened, a separate
H account concerning the petitioner-institute. All the expenditure incurred
I
r

L. AND T. INSTT. OF TECH. v. Al.C.T.E. [B.P. JEEVAN REEDY, J.) 747

on the institute and any other receipts by the said institute shall be entered A
)-"I' therein as also the particulars of the application of the said amounts. If
there is any change in law relevant in this behalf, it shall be open to the
Government of Maharashtra, A.l.C.T.E. or any other interested person to
apply to this court for appropriate modification.

We are grateful to Sri J. Ramamurthy for gladly assisting us in the B
matter.

The writ petition is disposed of with the above directions. No costs.

B.K.M. Petition disposed of.

-~

J