Supreme Court of India
RUSTOM KERAWALLA FOUNDATIONversusSTATE OF MAHARASHTRA AND ORS.
- Citation
- 2017 INSC 705
- Decided
- 3 August 2017
- Disposal
- Disposed off
- Bench
- ADARSH KUMAR GOEL
Holding
The State may exclude expenditure on land and buildings in fee approval, and only the actual outlay on such assets (Rs 35.02 lakhs) may be considered, with rent limited to a reasonable return, necessitating remand for fresh determination.
Summary
The Rustom Kerawalla Foundation runs Vibgyor High School in Mumbai and pays an annual lease rent of Rs 2.5 crore for a building on land allotted by MHADA under a 2% discretionary quota, i.e., not through competitive bidding. The Deputy Director of Education disallowed the rent as part of the school’s fee structure under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987, leading to writ petitions and appeals. The Supreme Court examined whether the entire lease rent could be included in the fee approval under Section 4(2)(b) of the Act and whether the State could exclude expenditure on land and buildings. It held that the State may exclude such expenditure and must balance the institution’s right to a reasonable fee with the statutory purpose of curbing capitation fees. Because the lease was granted non‑competitively, the locational advantage must be severed; only the actual outlay on land and building (Rs 35.02 lakhs) may be considered, and the rent claim limited to a reasonable return on that investment. The matter was remanded to the State Government for fresh consideration, and the appeals and transfer petitions were disposed of without costs.
Issues considered
- The applicability of Section 4(2)(b) of the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 to lease‑rent expenditure of an unaided school.
- Whether the State Government may exclude expenditure on land and buildings while approving fees.
- Whether the power to approve fees under the Act can be delegated to officials such as the Deputy Director of Education.
- How the rent payable should be computed when the lease was granted under a discretionary, non‑competitive quota.
Legislation cited
- Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987s. 3, s. 4, s. 4(2)(b), s. 4(3), s. 6
- MHADA (Disposal of Land) Regulations, 1982s. 16(2)
Subjects
capitation feefee structureunaided educational institutionlease rentMaharashtra Educational Institutions Actpublic aidMHADAdiscretionary quotafee approvalexclusion of land and building expenditureremand
Judgment
[2017] 13 S.C.R. 330
A RUSTOM KERAWALLA FOUNDATION
V.
STATE OF MAHARASHTRA AND ORS.
(Civil Appeal No. 3696 of2017)
B AUGUST03,2017
[ADARSH KiuMAR GOEL AND UDAY UMESH LALIT, JJ.]
Maharashtra Educational Institutions (Prohibition of
Capitation Fe'!) Act. 1987 - Appellant-Foundation runs a School -
c 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
D 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
Government at concessional rate to MP MCT (Trust) - Thereafter. a
F 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
on discretion{j1y quota of the State Government. the locational
H 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 E
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] F
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 G
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 H
332 SUPREME COURT REPORTS [2017] 13 S.C.R.
A 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
B
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
c 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)
D
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
E 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
F 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 Sub-
clause (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
G 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 stand-
alone part a1td must always be excluded. If this construction is
H accepted, expenditure on lands and buildings must always be kept
RUSTOM KERAWALLA FOUNDATION v. STATE OF 333
MAHARASHTRA AND ORS.
out of consideration while arriving at the decision with regard to A
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
B
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 c
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
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 E
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 F
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 G
idea' of the legislation in mind. [Para 20) [358-A-C)
n )Jt
, .. 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
be., .tal!.en
,
"'
into account in order to arrive at a just and fair decision H
334 SUPllEME COURT REPORTS (2017] 13 S.C.R.
A 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]
B
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
c 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
D 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
E 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
F 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
G 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]
Associ!:ltion of international Schools and Principal
FoundaJion and Another v. State of Maharashtra (2010)
H
RUSTOM KERAWALLA FOUNDATION v. STATE OF 335
MAHARASHTRA AND ORS.
SCC online Bombay 1291; Unni Krishnan J. P. and A
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
B
Academy of Education & Anr. v. State of Kamataka &
Ors. (2003) 6 SCC 697 : [2003) 2 Suppl. SCR 474 -
referred to.
Case Law Reference
. [1993) l SCR 594 referred to Para 14 c
[2002) 3 Suppl. SCR 587 referred to Para 15
[2004) 1 Suppl. SCR 668 referred to Para 15
[2003) 2 Suppl. SCR 474 referred to Para 21
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
E
C. A. No. 3698 of2017
T. P. (C) Nos. 89 and 90 of 2013.
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, F
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. G
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 H
SUPREME COURT REPORTS (2017] 13 S.C.R.
A 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)
B
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
c 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 2008-
D 2009 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.
E "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-
F ( 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
H
RUSTOM KERAWALLA FOUNDATION v. STATE OF 337
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
educational institutions or for creation of endowment fund for A
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 B
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
c
such acceptance of donation shall be deemed to be collection of
capitation fee.
(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 D
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 E
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 F
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 G
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
H
338 SUPREME COURT REPORTS [2017] 13 S.C.R.
A 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.
B 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
C institution in respect of any or all classes of students.
(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
D 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:
E
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
F
(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;
G (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;
H
RUSTOM KERAWALLA FOUNDATION v. STATE OF 339
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
( e) Gymkhana fee on yearly basis; A
(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 B
. 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 c
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.
D
(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- E
( 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 F
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 G
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
H
340 SUPREME COURT REPORTS [2017] 13 S.C.R.
A relating 10 searches and seizures shall apply, so far as may be, to
searches and seizures under sub-section (I).
7. Penalties
Whoever contravenes any provision of this Act or the rules made
thereunder, shall, on conviction, be punished with imprisonment
B 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
c 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
D 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 Parents-
Teachers' Association. This letter suggested that the fee structure of
the School was not justified and it was submitted" .. we are sure Education
E 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
F 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.
G
A) Recommended Expenditure for 2008-09 I 0, 75,22,351 /-Non-
Accepted Exp.:
l) Professional Fee 60,91.264/-
2) Building Repairs 6,03, 132/-
H
RUSTOM KERAWALLA FOUNDATION v. STATE OF 341
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
3) StaffWelfare 5,00,009/- (-) 71,94.405/- A
Sanctioned Expenditure by 10,03,27,946/-
Education Inspector
B) Other Income (2007-08) support (-) 25,31,046/-
9,77,96,900/-
B
C) 5 % increase as per GR) . 48,89,845/-
dated 27/05/2005
Approved Salary Exp.+ Other Exp. 10,26,86,745/-
Out of the total expenditure during 2007-08, 54.24% is utilized
for Primary section and 45.76% for Secondary section. This C
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 Secondarv Section D
54% Exnenditure 46% Exnenditure
5,54,40,842.50 4,72,35,903.00
No. of Students· 746 No. of Students -575
Annual Fee -73,347/- Annual Fee- 82,149/-
Monthly Fee -6112.25 Monthlv Fee- 6.845. 75
Approved Monthly Fee-6112.00 Approved Monthly Fee E
6,845.00
Yours truly,
Sd/-
Accounts Officer
(Education-West Zone) F
Mumbai."
4. Complaining about the rise in school fees from Rs.55,000/-to
. 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 G
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 H
342 SUPRBME COURT REPORTS [2017] 13 S.C.R.
A 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
B 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
c 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
D 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.
E 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.
F
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.
G 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,
H 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"' B
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: C
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 D
sections expenses have been reflected proportionately.
3) Regarding Fees:
A) Proposed Expenses for the Rs.10,75,22,351/-
year 2008-09
E
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/- F
3.Staff Welfare - 5,00,009/-
4.
Total - 71,94,405/-(Less) Rs.71,94,405/-
G
Expenses earlier approved by Education
Inspector Rs.10,03,27,946/-
Building's rent expenses disallowed
(Task Force) (Less)Rs. 2,50,00,000/-
H
344 SUPREME COURT REPORTS [2017] 13 S.C.R.
A Permissible Expenses Rs.7,53,27,946/-
B) Other Income (Basis: Report of the
Yeav 2007-08) (Less) Rs.25.31.046/-
Rs. 7 ,2 7,96,900/-
C) As per GR dated 271h May 2003
B Incremental income (Add) Rs.36,39,845/-
Permissible Salary & Other Expenses Rs. 7,64,36,745/-
After considering the use of the building during the year 2007-
08 as 46% for Secondary section and 54% for Primary section,
C 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, 9031-
Stu:leQts count -756 Studcntconnt-575
D 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. I
For the Primary Section and the Secondary Section, Rs.4550/-
E & 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
F 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
G 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
H 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 B
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 C
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 D
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. E
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 F
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, G
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, H
346 SUPREME COURT REPORTS (2017] 13 S.C.R.
A 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
B
cost of rent of the building proposed by you cannot be taken into
account.
Sd/-
Sunil Chowhan
c 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
D 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
E 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
F SCHOOLS AND PRINCIPAL FOUNDATION AND ANOTHER v.
STATE OF MAHARASHTRA 1 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
G 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 ofrent for school building
as claimed Respondent Nos.3 to 7 while contesting the petitions submitted
H 'W.P. No 1f76 of 2010 decided on 1.09.2010 (2010 SCC Online Bombay 1291)
RUSTOM KERAWALLA FOUNDATION v. STATE OF 347
MAHARASHTRA AND ORS. [UDAY UMESH LAL!T, J.]
'
that a device was adopted by the appellant to profiteer and the alleged A
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 B
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
c
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 D
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 E
State Government."
Very same thought was expressed by the High Court in para 53
of the judgment in following terms:
"Going by Section 4 of the Capitation Fee Act, the State
Government alone is competent to approve the amount claimed F
by the unaided school as usual expenditure so as to permit the
school to recover commensurate amount from the students by
way of fees. Ifthe 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 G
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 H
348 SUPREME COURT REPORTS [2017] 13 S.C.R.
A 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
B
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."
c 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
D 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.
E 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
F notice was issued by this Court on 01.02.2013. After hearing the learned
counsel for the parties, this Court, on 07.10.2015 felt that one of the
disputes was about admissibility of expenditure incurred by the appellants
towards lease rents. The Court recorded the submission of the connsel
appearing for the Appellants that it was not possible to supply a copy of
"building rent certificate" provided by a competent authority and that
G the Appellants could furnish the details about the rent paid and the
certificate of the valuer to show that the lease rent paid by the Appellants
was reasonable and that the matter could thereafter be 'verified by
Respondent No.2 through concerned Executive Engineer. This Court
permitted the Appellants to submit material which would be considered
H by Respondent No.2 who would then submit a report to this Court.
RUSTOM KERAWALLA FOUNDATION v. STATE OF 349
MAHARASHTRA AND ORS. [UDAY UMESH LALIT, J.)
Pursuant to the aforesaid directions, an affidavit was filed by Respondent A
No.2 on.11.02.2016 stating that the Executive Engineer vide his letter
dated 07.01.2016 had informed Respondent No.2 that he could not certify
oi. verify whether lease rent paid by a private party was as per the
market rate. The affidavit however, stated that in order to ascertain
whether the rent paid by the School was reasonable or not, the Appellants
B
had produced reports of valuation prepared by approved valuer. The
affidavit annexed copies of the reports of such valuers namely, Cushman
and Wakefield, Shrinivas M. Kini and Co. and Santosh Kumar. In his
subsequent affidavit filed on 02.03 .2016 Respondent No.2 in a tabulated
form placed a summary of valuation reports as under:-
Summary of Valuation Reports c
Name of Year of Building Area Building Rate per sft. Ammal
Valuer va1uation 111entioned in Area per month Lease rent
Report mentioned
(including in the
Pool and Report D
Sports (Including
facility) Pool and
Sports
facility)
Cushman & 2008 1,08,202 88 11.4 Cr.
Wakefield
Cushman & 2011 1,08,202 94 12.2 Cr. E
Wakefield
Cushman & 2014 1,08,202 103 13.3Cr.
Wakefield
Shriiiivas 2008 69,795 81.34 6.8 Cr.
M. Kini &
Co
Shriiiivas 2010 69,795 96.15 8.05 Cr. F
M. Kini &
Co,.
Santo sh 2008 81,547 88 8.6 Cr.
Kumar
Kakode & 2008 89,181 (Mentioned 8.02 Cr.
Associates 75 to 80)
considered G
75
Kakode & 2010 89,181 (Mentioned 10.07Cr.
Associates 100 to 105)
considered
100
H
350 SUPREME COURT REPORTS (2017] 13 S.C.R.
A I 0. When the matters were taken up for final hearing, Dr. Abhishek
Manu Singhvi, Mr. Aspi Chinoy and Mr. Praveen Sarndani, learned Senior
Advocates app~ared on behalf of Appellants and submitted:-
(i) Power under Section 4 of the Act could be exercised only by the
State Government and such power could not be delegated. (ii)
B Respondent N<1>.2 could have exercised power under Section 6 which
was in the nature of Search and Seizure but such power could not be
utilized to regulate the fees. (iii) Expenses towards lease rent are
permissible ancj not barred under the Act or the Rules or the Regulations;
and (iv) There 'was comple\c lack of jurisdiction to regulate fees with
regard to minority schools, in the absence of any exploitation or
c profiteering.
It was also submitted that the Appellants would argue the issues
regarding constitutional validity of certain provisions in the High Court in
pending Writ Petitions and they would not press for transfer of those
petitions to this Court.
D
Mr. Suni\ Fernandes, learned Advocate appearing for Respondent
No.3 submitted that the land in question was originally given by
Maharashtra Housing and Area Development Authority ("MHADA"
for short) on behalf of the State Government at a concessional rate to a
Trust and part of such land was then sub-leased to a company which in-
E tum had allowed the Foundation to run the School from the building
situated thereon. He further submitted that the trustees of the Foundation
themselves were Directors in the company and the payment of lease
rent was nothin~ but a device to siphon substantial sums of money. None
appeared for Respondent Nos. I and 2.
11. After conclusion of submissions, a note was filed on behalfof
F
the appellants on 04.03.2017 annexing documents concerning the
allotment and permission to sub-lease. The facts as set out in the note
were as under:
"Maharashtra Housing and Area Development Authority
(MHAPA) is the owner of a land earmarked under the
G Development Plan (DP) for a restricted user of only a school
and a play ground (PG) and as such the intrinsic value of the
same is much lesser than a plot of land which can be used for
any pulT]Joses including residential or commercial. Under an
Agreement of Lease dated 4ili December 2002 MHADA granted
H to Madhya Pradesh Mitra Charitable Trust (MPMCT), lease in
RUSTOM KERAWALLA FOUNDATION v. STATE OF 351
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
respect ofland admeasuring 6032.86 sq.rots situated at Goregaon A
(West), Mumbai fora one timepremiumofRs.40,17,151/- and a
lease rent of Rs.Ii-per year for a tenure of 30 years .......... The
calculation of one time lease rent by way of premium and other
charges including rent are made as per the policy of MHADA
and reproduced at Schedule H of the lease deed dated 41h B
December 2002 .......... By a tripartite agreement dated 21"
December 2004 entered into between MHADA, MPMCT and
KARE Educational Institute (India) Limited (now known as
KARE Edumin Pvt. Limited) the said KARE was granted a
sub-lease in respect of a plot of land admeasuring 3016.44 sq.
mtrs. out of the total of6032.86 sqmtrs. for the residual term of C
the original lease. Though MPMCT had paid 40 lakhs to
MHADA for the entire 6032.86 sq. mtrs. ofland, KARE paid
to MHADA over and above the said sum a premium of Rs. 5,
02, 144/-. Kare also paid to MPMCT sum of Rs. 30,00,000/- for
acquiring the leasehold rights in respect of 3016.44 sq. mtrs. D
(50% ofthe original land leased to MPMCT). Pertinently, 1508.22
sq. mtrs out of 3016.44 sq. mtrs (50%) is reserved under the
Development Plan (DP Plan) as a play ground (PG) ........ KARE
using its own resources and /or amounts borrowed from banks
and financial institutions constructed thereon a building comprising
of Ground+ 12 upper floors and fully furnished the said building E
with central air conditioning, high speed elevators and other state
of the art amenities such as swimming pools, etc ...... By and
under a registered Deed of Lease dated 31" July 2006, Kare
assigned to RKF' the leasehold right alongwith right to use, occupy
and enjoy, the finished building with all the infrastructure and
F
amenities therein for a term of 26yeai-s at a fixed rent of Rs.
2,50,00,000/- per annum (without any clause for escalation).
Pertinently, the said lease agreement is only jn respect of the
building along with the infrastructure and facilities and/or amenities
thereon and no right, title or interest and /or any assignment of
leasehold right in respect of the land is given by virtue of the said G
agreement by KARE to RKF."
12. Along with the note, the Appellants produced certain documents
including Agreement of Lease dated 04.12.2002, the relevant recitals of
which are:-
.' RKF is abbreviation for the Foundation H
352 SUPREME COURT REPORTS [2017] 13 S.C.R.
A "WHERij:AS the Authority is possessed of or otherwise well
and suffiqiently entitled to a piece or parcel ofland admcasuring
6032.86 $q. mt. situated at S.No. 16(pt) corresponding C.T.S.
223 & 224, village Pahadi Goregaon, Goregaon (west), Mumbai-
400 I 04, in the registration Sub-District of Andheri Mumbai
Suburban District and more particularly described in the Schedule
B
I hereinunder written and shown by red coloured boundary line
on the plan hereto appended (hereinafter referred to ns "the said
land").
AND WHEREAS the Jessee requested to the government vide
its application Jated 14.02.1999 to grant the plot ofland on lease
c situated al '\1ouje Pahadi, Goregaon (W) Motilal Nagar-1 for the
purpose of constructing, maintaining and locating building for
School.
AND WHEREAS on the request of the lessee, the Govt. of
Maharashtra as per the provisions, Regulation 16(2) of the
D MHADA (Disposal of Land) Regulations 1982, decided to lease
out the plot of land under 2% discretionary quota of the State
Government, for plots developed by the Authority to Lessee and
the Govetlnment in Housing and Special AssistanceDepartment
vide its letter No.ADL-7799/Case No.3746/Desk-I dated
15.05.19'l9 directed the Mumbai Housing andArea Development
E Board, a r¢gional board of the Authority established under Section
18 of the said Act (hereinafter referred to as "the said board")
to allot the said plot of land to the lessee on the terms and
conditions hereinafter appearing and contained;
AND WHEREAS in response to the Government directions it
F has been proposed by the Authority vide its letter No.Motilal
Nagar-l/File-45/L-Br/5228 dated 24/10/2001 and letter No.CO/
MB/ALM/(B)/Madhya Pradesh/4828/2002 dated 2/1112002 to
allot the said plot ofland on lease admeasuring 6032 sq. mts. in
S.No. 16~t) corresponding C.T.S. No. 223 and 224 at village
Pabadi Goregaon, Goregaon (West) Mumbai- 400104 to the
G
lessee for the purpose of constructing maintaining and locating
School & P.G (Hereinafter refereed to as "the said purpose")
for a period of30 years lease with effect from the date of taking
over the possession of the said land by the lessee, for the said
purpose on the terms and conditions rent and covenants herein
H after appearing and contained.
RUSTOM KERAWALLA FOUNDATION v. STATE OF 353
MAHARASHTRA AND ORS. [UDAY UMESH LALIT, J.]
AND WHEREAS in pursuance of the said decision, the said A
Board vide No.Motilal Nagar-I/File-45/L-Br./5228 dated 24/10/
2001 and letter No.CO/MB/ALM/(B)/Madhya Pradesh/4828/
2002 dated 02.11.2002 for Rs.40, l 7, 151/- (Rupees Forty Lakhs
Seventeen Thousand One Hundred and Fifty One Only) towards
lease premium, 1% annual lease r~n!. 8% capitalized lease rent B
and nominal lease rent Rs. I/- per year for 30 years and legal
charges for school and for playground b~ase Premium, annual ·
lease rent and nominal lease rent Rs. I/- per year for 30 years
(as per Schedule II affixed herewith) on terms and conditions
hereinafter appearing contended.
AND WHEREAS the lessee has agreed to take the said land C
admeasuring 6032.86 square metres on lease for the said terms
of thirty years with effect from the date of taking over the
possession of the said land i.e. the by the lessee for the
said purpose on the terms and conditions rent and covenants
hereinafter contained; D
AND WHEREAS the lessee Charitable Trust, at present to
discharge their objective effectively constituted to affiliated trust
namely 'Rajashtan Vidya Niclhi' dulyregistcredvidc No. E-20322,
Mumbai dated 18"' July, 2002 and Rustamji Kerawalla
Foundation' duly registered vide no. E 19386, Mumbai dated 3"' E
May 2001 and by letter dated 4th June 2002, accordingly reque>ted
. to incorporate these affiliated trust along with the main trust and
the lessee itselforthrough its affiliated trust (which will not amount
subletting requested to execute lease deed in view of compliance
of the terms and conditions of allotment.)
F
AND WHEREAS it is expedient and necessary to execute this
indenture to lease in favour of the lessee in pursuance of the
above mentioned decision of the Authority agreed to by the
lessee."
13. These recitals show that the allotment was made by MHADA G
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
Regulation 16(2) ofMHADA (Disposal of Land) Regulations 1982 (''the
Regulations", for short). The Regulations deal with modes of disposal
of land vested in MHADA by Government or acquired by MHADA.
Regulation 3 speaks of normal modalities of disposal such as inviting H
354 SUPREME COURT REPORTS (2017] 13 S.C.R.
A tenders by public advertisement, offers through public advertisement,
public auction, etc., to which Regulation 16 is an exception.
Secondly, the consideration paid by the Lessee under this Deed
was one time payment of Rs.40.17 lakhs with Rs. I/- as nominal lease
rent to be paid annually for an extent of 6032 sq. mtrs. The recitals also
B show that the Foundation was very much in picture on the day the Deed
was executed and was shown as affiliated trust. The Deed further shows
that all three trustees of the Foundation are also trustees of Madhya
Pradesh Mitra Charitable Trust (MPMCT).
14. The jiresent matters are required to be considered in the
c aforementioned factual scenario. At this stage, we may quote Para 195
from the majority decision authored by Justice B.P. Jeevan Reddy in
UNNT KRISHNAN J. P. AND OTHERS v. STATE OF ANDHRA
PRADESH AND OTHERS':
"I 95. Private educational institutions may be aided as well as
D un-aided, Aid given by the Government may be cent per cent or
partial. So far as aided institutions arc concerned, it is evident,
they have to abide by all the rules and regulations as may be
framed by the Government and/or recognising /affiliating
authorities in the matter of recruitment of teachers and staff,
their conditions of service, syllabus, standard of teaching and so
E on. In ]llarticular, in the matter of admission of students, they
have to follow the rule of merit and merit alone- subject to any
reservations made under Article 15. They shall not be entitled to
charge any fees higher than what is charged in Governmental
institutions for similar courses. These are and shall be understood
F to be the conditions of grant of aid. The reason is simple public
funds, when given as grant- and not as loan- carry the public
character wherever they go, Public funds cannot be donated for
private purposes. The element of public character necessarily
means a fair conduct in all respects consistent with the
constitulional mandate of Articles 14 and 15. All the Governments
G and oth~r authorities in charge of granting aid to educational
institutions shall expressly provide for such conditions (among
others), ifnot already provided, and shall ensure compliance with
the same. Again aid may take several forms. For example, a
medical college does necessarily require" hospital. We are told
H '0 993)1 sec 6451
RUSTOM KERAWALLA FOUNDATION v. STATE OF 355
MAHARASHTRA AND ORS. [UDAY UMESH LALIT, J.]
that for a 100-seat medical college, there must be a fully equipped A
700 bed hospital. Then alone, the medical college can be allowed
to function. APrivate Medical College may not have or may not
establish a hospital of its own. It may request the Government
and the Government may permit it to avail of the services of a
Government hospital for the purpose of the college free of charge.
B
This would also be a form of aid and the conditions aforesaid
have to be imposed- may be with some relaxation in the matter
of fees chargeable- as observed. The Governments (Central and
State) and all other authorities granting aid shall impose such
conditions forthwith, if not already imposed. These conditions
shall apply to existing as well as proposed private educational C
institutions."
15. It is true that while answering Question No.9, larger bench of
this Hon'ble Court in T.M.A. PAI FOUNDATION v. STATE OF
KARNATAKA 4 held the Scheme framed in Unni Krishnan to be
unconstitutional. The aforesaid observations in Para 195 D
arc, however, completely distinct from the Scheme formulated in the
decision of U1111i Krisll11a11 and those observations, still hold good. As a
matter of fact, in MODERN SCHOOL v. UNION OF INDIA &
OTHERS5 the very next paragraph namely Para 196 from the decision
of this Court in Unni Krisll11a11 was quoted by Justice S.H. Kapadia, as
the learned ChiefJustice oflndia then was, while speaking for majority. E
16. In the instant case, the plot of land came to be allotted not
through normal 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 may take several F
forms and that when public property or funds are given as grant, they
carry public character wherever they go, the allotment made by MHADA
at the instance of the Government in favour of a lessee can certainly be
termed as "aid". As laid down in said para 195, among others, the
condition that the institution shall not be entitled to charge any fees higher G
than what is charged in Government Institutions for similar courses, shall
be understood to be the condition of grant of aid. Will not such "aid"
mean that the institution is in theory and practice, an aided institution; in
which case the fee structure has to be one which has been prescribed in
'r20021 s sec 481
s
'(2004) sec 583 H
356 SUPREME COURT REPORTS (2017] 13 S.C.R.
A terms of Section 4(2)(a) of the Act? We may hasten to add that this part
has not been dealt with at any juncture in the present proceedings and
before a decision in that behalf is taken, the parties must have an
opportunity to contest the position, if they so wish. Our observations
must, therefore, be taken as purely tentative. The fact however remains
that the lessee spent Rs.40.17 lakhs only for allotment of 6032 Sq. mtrs.
B
through non-conipetitive mode.
I 7. We wil) now deal with the question whether the Appellants are
entitled to take t~e entirety of lease rent into account while having the
foe structure apptoved in terms of provisions of the Act and if not, what
should be the correct approach and for the present purposes, we proceed
c on the footing that the School is an unaided institution.
18. Section 3(1) of the Act prohibits demand or collection of any
capitation fee from any student in consideration ofhis 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
D 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 contemplated by
Section 3(1) squarely applies to and covers the School run by the
E Foundation. The definition of"capitationfee" 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 be regulated shall be such as may be prescribed by the
University or the State Government and b) in respect of w1aided institution
F it shall be such ai; 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
G 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.
19. 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 re~'Pect of unaided institutions. namely; (i) regard must be had to
H
RUSTOM KERAWALLA FOUNDATION v. STATE OF 357
MAHARASHTRA AND ORS. [UDAY UMESH LALIT, J.]
the usual expenditure; (ii) excluding any expenditure on lands and buildings A
or on such other items as the State Government 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 as the State Government may notify" is very
crucial. Important to note that expenditure on lands and buildings or for B
that matter any expenses towards rents do not form part of any of the
items under sub-section (3) of Section 4. While considering the ambit of
the aforesaid crucial expression in Sub-clause (b) of Section 4(2), two
constructions arc possible:
(i) The qualification, "as the State Government may notify" c
covers only the second part, i.e., that part of the expression
occurring after "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 stand-alone part and must always be excluded D
If this construction is accepted, expenditure on lands and
buildings must always be kept 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" E
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. F
(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 G
in the context of any individual facts and circumstances. Since
all the authorities have gone on the latter construction in the
present matter, we refrain from carrying the discussion further
and adopt the latter construction as the basis for our
assessment in the instant case.
H
358 SUPREME COURT REPORTS [2017] 13 S.C.R.
A 20. Assuming that the expenditure on lands and buildings can 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 m4st be guided to arrive at a just balance between two
B
essentials, one • interest of the unaided institution to have a just and
reasonable fee structure and the other· the very purpose of the legislation
namely to curb capitation fee. While discharging this duty and undertaking
such exercise, the State Government must naturally be alive to and take
all possible fac(1ts of the matter into account. In a given case, claim for
c 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.
21. If the State Government, while making over public assets or
funds, has rendered a helping hand to an institution, the resultant benefit
D flowing in favour of the institution must always be taken into account in
order to arrive at a just and fair decision 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 ultilnate
benefit the publi~ assets or funds were made over to it in the first instance.
E At this juncture, we may refer to the following passage from the majority
judgment of this Court in ISLAMIC ACADEMY OF EDUCATION &
ANR. v. STATE OF KARNATAKA & ORS.':
"7 ...... .The fee structure for each ins ti lute must be fixed keeping
in mind the infrastructure and facilities available, the investments
F made, salaries paid to the teachers and staff, future plans for
expansion and/or betterment of the institution etc. Of course
there crun be no profiteering and capitation fees cannot be charged.
It thus needs to be emphasized that as per the majority judgment
imparting of education is essentially charitable in nature. Thus
G the surplus/profit that can be generated must be only for the
benefit/use of that educational institution. Profits/surplus cannot
be diverted for any other use or purpose and cannot be used for
personal gain or for any other business or enterprise ....... "
H '' (2003) 6 sec 691 Para 7
RUSTOM KERAWALLA FOUNDATION v. STATE OF 359
MAHARASHTRA AND ORS. [UDAY UMESH LAUT, J.]
22. In the present case, the Foundation was always in the picture A
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
is therefore not off the mark in her contention that in the process
B
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-Jessee 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 c
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 present D
case was on non-competitive basis and purely under the discretionary
quota of the State Government, the locational advantages of the land
ought to be completely severed and segregated and what should be the
basis for computation mll~t be purely that what was expended "on land
and buildings". The expenditure on lands being to the tune ofRs.35.02
lakhs, what the Foundation and the School are entitled to is only that, E
which represents reasonable return on such investment and the facilities
therein, or the rent as claimed, whichever is lower.
23. With this view, we remand the matter to the State Government
for fresh consideration. The High Court in Para 53 of its judgment had
observed that the State Government would be free to examine all aspects F
before arriving at a final decision. While reiterating that, we further direct
the State Government to consider the matter in the light of the observations
made herein. Since we are making over the matter to the State
Government, all those submissions advanced on behalf of the appellants
that Respondent No.2 was incompetent to deal with the matter need not
be gone into. We direct the State Government to consider the matter G
and pass appropriate orders within three months from the date of this
Judgment and the status quo as prevailing today shall continue to be in
operation till such time. It goes without saying that in case the fees as
proposed by the Appellants are not approved, consequential orders for
refund in terms of Section 3(3) of the Act shall be made. H
360 SUPREME COURT REPORTS [2017) 13 S.C.R.
A 24. Before we conclude, we must advert to one part which struck
us as incongruent. When the matter was taken up on 21.02.2017, the
State Government was duly represented by its counsel. The matter was
thereafter ad~ourned and taken up on subsequent date when none
appeared for tlie State Government. On our enquiries, the learned counsel
appearing for Respondent No.3 told that the counsel who was earlier
B
appearing fon the State Government would no longer appear as his
instructions were withdrawn. We had no way to confirm that as even
the learned advocate on record for the State chose not to appear. The
matter, therefpre, went completely by neglect and default on part of the
State Government and we were deprived of any assistance on behalf of
c the State Government. This must be brought to the notice of the concerned
authorities an~ we direct that a copy of this Judgment and Order be sent
to the Law Secretary for the State as well as to the learned Advocate
General for the State.
25. Lastly, since Transfer Petitions were not heard on merits, we
D discharge the notice issued in Transfer Petitions and request the High
Court to deal with the pending Writ Petitions. With these observations,
the present appeals and transfer petitions stand disposed of, with no
order as to costs.
Ankit Gyan Appeals and Petitions disposed of.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "capitation fee"Sign in to search