P.A. Inamdar v. State of Maharashtra, (2004) 8 SCC 139

Sindhi Education Society & Anr vs Chief Secretary,Govt.Of Nct., [CIVIL APPEAL No.5489 OF 2007]
Society For Un-Aided P.School Of ... vs U.O.I & Anr., [WRIT PETITION (C) NO. 95 OF 2010]
Modern Dental College & Res.Cen. & Ors. vs State Of Madhya Pradesh & Ors., [2009 (9) SCR 845]
Committee Of Management & Anr vs Vice Chancellor & Ors., [CIVIL APPEAL NO. 7319 OF 2008]
Action ... vs Director Of Education & Ors., [REVIEW PETITION (C) NO. 1368 OF 2004]
M/S Mahalaxmi Motors Ltd vs Mandal Revenue Officer & Ors., [Appeal (civil) 4755 of 2007]
State Of Karnataka & Anr vs Asstd.Mang.Of Gov.Rec.Prim.&., [CIVIL APPEAL Nos.5166-5190 OF 2013]
Ashoka Kumar Thakur vs Union Of India & Others, [Writ Petition (civil) 265 of 2006]

This, in fact, is a case decided by a 2-Judge Bench of the Supreme Court, in which the dispute related to the fixation of quota in respect of unaided professional institutions and to the holding of examinations for admission into such colleges. The interpretation put by a 5-Judge Bench in the case of Islamic Academy of Education v. State of Karnataka, (2003) 6 SCC 697, on the 11-Judge Bench decision in the case of T.M.A. Pai Foundation v. State of Karnataka, (2002) 8 SCC 481, was also in question. The 2-Judge Bench decided that the issues raised should be referred to a larger Bench for final determination having regard to the nature of the controversy involved in this case.

As an interim measure, for the academic year 2004-05, for the State of Karnataka, it was prima facie held in this case that the seats should be filled up by the institutions concerned in the ratio of 50:50 purely as a temporary measure and without prejudice to the contentions of the parties for the purpose of the final disposal.

The Supreme Court delivered an unanimous judgement by 7 judges (full text available) on August 12, 2005 in the case of P.A. Inamdar & Ors. vs. State of Maharashtra & Ors.declaring that the State can’t impose its reservation policy on minority and non-minority unaided private colleges, including professional colleges.

This judgement was an attempt to bring clarity to two previous judgements by the Supreme Court.One of them is the judgement delivered on October 31, 2002 by 11 judges in the case of T.M.A. Pai Foundation & Ors. vs. State of Karnataka & Ors. (Pai Foundation case) with multiple opinions - a majority opinion by the 5 judges - G.B. Pattanaik, S. Rajendra Babu, K.G. Balakrishnan, P. Venkatarama Reddi & Arijit Pasayat with a separate but concurring opinion by the Chief Justice V. N. Khare, and three separate opinions by Ruma Pal, S.N. Variava and Ashok Bhan and Syed Shah Mohammed Quadri.

The other is the judgement delivered on August 14, 2003 by a constitution bench that interpreted the Pai Foundation judgement in the case of Islamic Academy of Edn. & Anr. vs. State of Karnataka & Ors (Islamic Academy of Education case), again with multiple opinions - a majority opinion by the 4 judges - CJI V. N. Khare, S. N. Variava, K. G. Balakrishnan & Arijit Pasayat and a separate opinion by S.B. Sinha

The Supreme Court in its judgement on August 12, 2005 ruled on the following issues in relation to minority and non-minority unaided higher education institutions.

reservation policy,

admission policy,

fee structure,

regulation and control by the state and

the role of committees dealing iwth admission and fees,

Here's a summary of the judgement quoting relevant excerpts of the judgement (emphasis mine).

Reservation policy

Neither the policy of reservation can be enforced by the State nor any quota or percentage of admissions can be carved out to be appropriated by the State in a minority or non-minority unaided educational institution.

Minority institutions are free to admit students of their own choice including students of non-minority community as also members of their own community from other States, both to a limited extent only and not in a manner and to such an extent that their minority educational institution status is lost.

So far as appropriation of quota by the State and enforcement of its reservation policy is concerned, we do not see much of difference between non-minority and minority unaided educational institutions. The State cannot insist on private educational institutions which receive no aid from the State to implement State's policy on reservation for granting admission on lesser percentage of marks, i.e. on any criterion except merit.

Merely because the resources of the State in providing professional education are limited, private educational institutions, which intend to provide better professional education, cannot be forced by the State to make admissions available on the basis of reservation policy to less meritorious candidate. Unaided institutions, as they are not deriving any aid from State funds, can have their own admissions if fair, transparent, non-exploitative and based on merit.

A limited reservation of seats, not exceeding 15%, in our opinion, may be made available to NRIs depending on the discretion of the management subject to two conditions. First, such seats should be utilized bona fide by the NRIs only and for their children or wards. Secondly, within this quota, the merit should not be given a complete go-by. The amount of money, in whatever form collected from such NRIs, should be utilized for benefiting students such as from economically weaker sections of the society, whom, on well defined criteria, the educational institution may admit on subsidized payment of their fee. To prevent misutilisation of such quota or any malpractice referable to NRI quota seats, suitable legislation or regulation needs to be framed. So long as the State does not do it, it will be for the Committees (constituted pursuant to the judgement in the Islamic Academy of Education case) to regulate.

Admission policy

Upto the level of undergraduate education, the minority unaided educational institutions enjoy total freedom.

Presumably this means upto and including undergraduate education in non-technical or non-professional courses, since the Court treats technical and professional education differently below.

However, different considerations would apply for graduate and post-graduate level of education, as also for technical and professional educational institutions. Such education cannot be imparted by any institution unless recognized by or affiliated with any competent authority created by law, such as a University, Board, Central or State Government or the like. Excellence in education and maintenance of high standards at this level are a must. To fulfill these objectives, the State can and rather must, in national interest, step in. The education, knowledge and learning at this level possessed by individuals collectively constitutes national wealth.

In minority educational institutions, aided or unaided, admissions shall be at the State level. Transparency and merit shall have to be assured. The State can also provide a procedure of holding a common entrance test in the interest of securing fair and merit-based admissions and preventing mal-administration.

Whether minority or non-minority institutions, there may be more than one similarly situated institutions imparting education in any one discipline, in any State. The same aspirant seeking admission to take education in any one discipline of education shall have to purchase admission forms from several institutions and appear at several admission tests conducted at different places on same or different dates and there may be a clash of dates. If the same candidate is required to appear in several tests, he would be subjected to unnecessary and avoidable expenditure and inconvenience.

There is nothing wrong in an entrance test being held for one group of institutions imparting same or similar education. Such institutions situated in one State or in more than one State may join together and hold a common entrance test or the State may itself or through an agency arrange for holding of such test. Out of such common merit list the successful candidates can be identified and chosen for being allotted to different institutions depending on the courses of study offered, the number of seats, the kind of minority to which the institution belongs and other relevant factors. Such an agency conducting Common Entrance Test (CET, for short) must be one enjoying utmost credibility and expertise in the matter. This would better ensure the fulfillment of twin objects of transparency and merit.

The Court seems to be recommending an entrance test like Common Admission Test (CAT) conducted by the IIMs for management admissions, which is accepted as the criteria for admissions by over 80 institutions apart from the IIMs. This works very well for management courses and could well be extended to other domains.

Pai Foundation has held that minority unaided institutions can legitimately claim unfettered fundamental right to choose the students to be allowed admissions and the procedure therefor subject to its being fair, transparent and non-exploitative. The same principle applies to non-minority unaided institutions.

Fee Structure

To set up a reasonable fee structure is also a component of "the right to establish and administer an institution" within the meaning of Article 30(1) of the Constitution, as per the law declared in the Pai Foundation case. Every institution is free to devise its own fee structure subject to the limitation that there can be no profiteering and no capitation fee can be charged directly or indirectly, or in any form.

According to the Constitution bench in the Islamic Academy Case, a provision for reasonable surplus can be made to enable future expansion. The relevant factors which would go into determining the reasonability of a fee structure, in the opinion of majority (in the judgement in the Islamic Academy Case) are:

(i) the infrastructure and facilities available,

(ii) the investments made,

(iii) salaries paid to the teachers and staff,

(iv) future plans for expansion and betterment of the institution etc.

S.B. Sinha, in his opinion in the judgement in the Islamic Academy Case defined what is 'capitation' and 'profiteering' (quoting Black's Law Dictionary, Fifth edition as: "Taking advantage of unusual or exceptional circumstances to make excessive profits") and also said that reasonable surplus should ordinarily vary from 6 per cent to 15 per cent for utilization in expansion of the system and development of education.

Presumably the Court in this judgement concurs with Justice Sinha's opinion in the Islamic Academy Case on anything upto 15% being a reasonable surplus. Justice Sinha in his opinion also stated "Future planning or improvement of facilities may be provided for. An institution may want to invest in an expensive device (for medical colleges) or a powerful computer (for technical college). These factors are also required to be taken care of."

Despite the legal position, this Court cannot shut its eyes to the hard realities of commercialization of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends. If capitation fee and profiteering is to be checked, the method of admission has to be regulated so that the admissions are based on merit and transparency and the students are not exploited. It is permissible to regulate admission and fee structure for achieving the purpose just stated.

Regulation and Control by the State

The judgement in the Pai Foundation Case is unanimous on the view that the right to establish and administer an institution, the phrase as employed in Article 30(1) of the Constitution (Right of minorities to establish and administer educational institutions), comprises of the following rights:

(a) to admit students;

(b) to set up a reasonable fee structure;

(d) to appoint staff (teaching and non-teaching); and

(e) to take action if there is dereliction of duty on the part of any of the employees.

A minority educational institution may choose not to take any aid from the State and may also not seek any recognition or affiliation. Such institutions cannot indulge in any activity which is violative of any law of the land. They are free to admit all students of their own minority community if they so choose to do. (para 145, Pai Foundation)

Affiliation or recognition by the State or the Board or the University competent to do so, cannot be denied solely on the ground that the institution is a minority educational institution. However, the urge or need for affiliation or recognition brings in the concept of regulation by way of laying down conditions consistent with the requirement of ensuring merit, excellence of education and preventing mal-administration. For example, provisions can be made indicating the quality of the teachers by prescribing the minimum qualifications that they must possess and the courses of studies and curricula. The existence of infrastructure sufficient for its growth can be stipulated as a pre-requisite to the grant of recognition or affiliation. However, there cannot be interference in the day-to-day administration.

The essential ingredients of the management, including admission of students, recruiting of staff and the quantum of fee to be charged, cannot be regulated.

Apart from the generalized position of law that right to administer does not include right to mal-administer, an additional source of power to regulate by enacting condition accompanying affiliation or recognition exists. Balance has to be struck between the two objectives:

(i) that of ensuring the standard of excellence of the institution, and

(ii) that of preserving the right of the minority to establish and administer its educational institution.

Subject to reconciliation of the two objectives, any regulation accompanying affiliation or recognition must satisfy the triple tests:

(i) the test of resonableness and rationality,

(ii) the test that the regulation would be conducive to making the institution an effective vehicle of education for the minority community or other persons who resort to it, and

(iii) that there is no in-road on the protection conferred by Article 30(1) of the Constitution, that is, by framing the regulation the essential character of the institution being a minority educational institution, is not taken away. (para 122, Pai Foundation)

I am not sure how much of the above with respect to the extent of permissible regulation would apply in the case of non-minority unaided institutions.

Role of Committees dealing with Admissions and Fees

The two committees for monitoring admission procedure and determining fee structure in the judgment of Islamic Academy, are in our view, permissive as regulatory measures aimed at protecting the interest of the student community as a whole as also the minorities themselves, in maintaining required standards of professional education on non-exploitative terms in their institutions. The suggestion made on behalf of minorities and non-minorities that the same purpose for which Committees have been set up can be achieved by post-audit or checks after the institutions have adopted their own admission procedure and fee structure, is unacceptable for the reasons shown by experience of the educational authorities of various States. Unless the admission procedure and fixation of fees is regulated and controlled at the initial stage, the evil of unfair practice of granting admission on available seats guided by the paying capacity of the candidates would be impossible to curb.

Non-minority unaided institutions can also be subjected to similar restrictions which are found reasonable and in the interest of student community. Professional education should be made accessible on the criterion of merit and on non-exploitative terms to all eligible students on an uniform basis

A fortiori, we do not see any impediment to the constitution of the Committees as a stopgap or adhoc arrangement made in exercise of the power conferred on this Court by Article 142 of the Constitution until a suitable legislation or regulation framed by the State steps in. Such Committees cannot be equated with Unni Krishnan Committees which were supposed to be permanent in nature.

However, we would like to sound a note of caution to such Committees. It was pointed out by citing concrete examples that some of the Committees have indulged in assuming such powers and performing such functions as were never given or intended to be given to them by Islamic Academy.

We expect the Committees, so long as they remain functional, to be more sensitive and to act rationally and reasonably with due regard for realities. They should refrain from generalizing fee structures and, where needed, should go into accounts, schemes, plans and budgets of an individual institution for the purpose of finding out what would be an ideal and reasonable fee structure for that institution.

We make it clear that in case of any individual institution, if any of the Committees is found to have exceeded its powers by unduly interfering in the administrative and financial matters of the unaided private professional institutions, the decision of the Committee being quasi-judicial in nature, would always be subject to judicial review.

The setting up of the committees in Islamic Academy, the extent of quotas and state reservation in private institutions, and the regulation of fees was once again challenged before the Supreme Court and a larger bench of seven judges was set up in PA Inamdar v. State of Maharashtra, (2005) 6 SCC 537, in order to clarify the ratio of the judgment in TMA Pai. Ten years after this judgment was delivered, one can conclusively state that this was the last in a long line of judgments that settled the questions surrounding private education and the rights of institutions. The Court in Inamdar held:

a. The policy of reservation cannot be enforced by the state nor can a quota or percentage of admissions be carved out to be appropriated by the state.

b. A common entrance test can be held by a group of similarly placed institutions provided that it is fair, transparent, and non-exploitative. The state may itself or through an agency, arrange for holding such tests and students can be admitted on the basis of merit out of these common entrance tests. However, the state may only take over if the three criteria mentioned above are not satisfied.

c. Every institution is free to devise its own fee structure subject to the limitation that there can be no profiteering and no capitation fee can be charged directly or indirectly, or in any form. NRI seats are permissible to the extent of 15 per cent in all institutions.

d. The two committees for monitoring admission procedure and determining fee structure under the judgment of Islamic Academy are permissible as regulatory measures.

e. In the absence of any central legislation, it is for the central and state governments to come out with a detailed, well-thought-out legislation on the subject.

It took the Supreme Court over two decades to come to terms with the policy of the government recognising the need for private institutions. PA Inamdar has now held the field for ten years now. The concepts of autonomy and liberalisation that were first stated in 1948 in the University Education Committee report appear to have finally been incorporated into law through this judgment.

Many states have implemented the judgment in Inamdar by enacting suitable legislation. For instance, in Karnataka, consensual agreements are entered into under the Karnataka Professional Educational Institutions (Regulation of Admissions and Fixation of Fee) (Special Provisions) Act, 2006, which provide for seat sharing and fee fixation in medical and engineering colleges in the state.

In my view, the law laid down by TMA Pai and PA Inamdar has balanced the interests of private institutions with those of students and also filled gaps in policy. However, there are widespread and increasingly entrenched problems in the implementation of these judgments. Ineffectual regulation, official corruption, and inadequate state capacity to oversee the functioning of private institutions has led to the proliferation of colleges that have been set up solely to earn a profit and exploit the demand-supply gap by charging exorbitant capitation fees. This is particularly so in medical education where thousands of students compete for a very limited number of seats.

The Court should also be careful that broadly stated rights do not become dogma and prevent any regulation in the interest of students. For instance, the Medical Council of India’s attempt at conducting a National Eligibility cum Entrance Test for admission to MBBS and BDS Courses and also PG medical courses, which was aimed at streamlining and providing a single window entrance procedure for all medical courses, was struck down by the Supreme Court in Christian Medical College v. Union of India, (2014) 2 SCC 305 on the ground that holding such a test violates the rights of private institutions under Article 19(1)(g) and under Article 30 of the Constitution.

I do not think that the judgment in PA Inamdar intended to prohibit regulations for the benefit of thousands of students. Such an interpretation of the judgment is contrary to the spirit of PA Inamdar. In fact, private institutions’ objection to a single window test on the ground that their right to admit is violated reflects perverse motivations and the abuse of the wide rights conferred on them. Regulations aimed at greater transparency and merit in admissions would make it harder for institutions to exercise discretion in ways designed primarily to augment profits. This case is also proof that Indian educational institutions and the legal framework they are governed by must evolve further before a culture of self-regulation, practiced in some developed nations, can be adopted.

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