Private schools can hike fees without prior government approval if declared before academic session: Delhi HC

The Delhi High Court has held that private unaided recognised schools in Delhi can increase their fees at the beginning of an academic session without prior approval from the Directorate of Education (DoE), provided the proposed fee structure is declared before the academic session begins [DPS Vs Government of Delhi]..Justice Anup Jairam Bhambhani ruled that Section 17(3) of the Delhi School Education Act, 1973 does not require such schools to wait for the DoE’s approval before implementing a fee hike at the start of an academic year. "Under section 17(3) of the DSE Act no prior permission or sanction is required by a private, un-aided, recognised school to increase its fee at the commencement of an academic session; and the only statutory obligation upon a school is that it must file its statement of proposed fee with the DoE prior to commencement of an academic session," the Court held. However, if a school seeks to increase fees during an ongoing academic session, prior approval of the DoE would be necessary.The Court said that the DoE’s role is regulatory and limited to ensuring that private schools do not indulge in profiteering, commercialisation of education or charging of capitation fee.The judgment was passed in a batch of petitions led by Delhi Public School, Vasant Kunj, challenging several DoE orders rejecting fee-hike proposals submitted by private unaided schools.“The present batch of cases illustrates with uncomfortable clarity, how a public authority can persist in a course of action that betrays studied indifference to both the letter of the law and binding precedent,” the Court added..It is not for the DoE to dictate or micro-manage how the fiscal affairs of a school are to be conducted.Delhi High Court.The schools had argued that the DoE had been arbitrarily rejecting their proposals for fee increase, thereby affecting their financial autonomy and their right to run private educational institutions. They contended that under the Delhi School Education Act and Rules, the DoE could interfere with fee fixation only if there was a finding that a school was indulging in profiteering or commercialisation..The Court accepted the broad submission. It held that the law does not require a private unaided recognised school to seek prior approval for increasing fees, except where the proposed increase is during an ongoing academic session. A finding of profiteering or commercialisation, the Court added, can be returned only after an audit under Section 18(5) of the Act, based on returns filed under Rule 180 of the Delhi School Education Rules..Justice Bhambhani also found that several observations in the DoE orders alleging profiteering or commercialisation were not based on definitive findings. The Court described them as “gratuitous rhetoric” arising from the DoE’s flawed understanding of accounting norms applicable to schools..The Court further held that within the Delhi School Education Act and Rules, private unaided recognised schools enjoy financial autonomy. It said it is not for the DoE to dictate or micro-manage how schools conduct their fiscal affairs."Within the bounds of the DSE Act and the DSE Rules, as interpreted by the courts, a private, un-aided, recognised school enjoys financial autonomy, and it is not for the DoE to dictate or micro-manage how the fiscal affairs of a school are to be conducted," the Court said. .The Court also rejected the DoE’s distinction between schools governed by a “land clause” and those not governed by such a clause. It held that a land clause, which is usually a condition in an allotment letter, must operate within the framework of the Act and Rules and cannot enlarge the DoE’s statutory powers..The Court further said that private unaided schools cannot be prevented from maintaining a reasonable surplus of funds for legitimate needs, including future growth and development. The schools had argued that the maintenance of such surplus funds cannot be termed as 'profiteering' by the DoE. The Court agreed."That mere availability of surplus funds with a private, un-aided, recognised school, howsoever large, cannot be the sole basis for the DoE to infer that the school is indulging in commercialisation or profiteering, and to thereby object to fee-hike by a school. The aspect of commercialisation or profiteering can only be examined and determined by the DoE after conducting a full-dressed financial audit of a school," it said. The Court quashed all DoE orders rejecting fee-hike proposals at the commencement of academic sessions. It also closed pending fee-hike proposals before the DoE, since they were based on the mistaken premise that prior approval was required even at the start of an academic session..However, the Court refused to allow schools to recover arrears for past academic sessions. It noted that some proposals dated back to 2016-17, and allowing recovery now would impose an “inordinate and unacceptable burden” on parents and students.The Court, therefore, directed that the last fee increase proposed by the schools would apply only from the next academic session beginning April 2027. No school can demand or recover arrears retrospectively for past academic sessions, the Court clarified. .Senior Advocates JP Sengh, Diya Kapur, HL Tiku and Puneet Mittal, along with other advocates, appeared for the petitioner schools..Additional Solicitor General Chetan Sharma, Standing Counsel Sameer Vashisht and others appeared for the respondent authorities..[Read Judgment]