2021 (5) TMI 1046 - HC - Indian Laws

Validity of condition imposed by the respondents private medical institutions that the students seeking admission to MBBS Course to submit bank guarantee against the annual fees for next 3 years of course duration in addition to deposit of annual fee for the first year of the course, at the time of admission - petitioner is an advocate by profession - interest of petitioner in the present case - HELD THAT - The education is essentially a charitable activity, which cannot be regarded as profession, trade or business rather, it will fall within the meaning of expression occupation under Article 19(1)(g) of the Constitution of India. The right to establish an educational institution can be regulated; but such regulatory measures must, in general, be to ensure the maintenance of proper academic standards, atmosphere and infrastructure (including qualified staff) and the prevention of maladministration by those in charge of management. In establishment of the education institutions, there cannot be a profiteering motive but it is permissible for such institution to generate a reasonable revenue surplus for the purpose of development of education and expansion of the institution - There is autonomy with the institution in fixing the fee structure but it has to be rational and there cannot be any profiteering motive and no capitation fee could be charged. Until the suitable legislation or regulation framed by the State, the fee structure in various institutions shall be determined by the Committee separately having regard to relevant factor and the management is not entitled to charge anything more. It is permissible for the institutions to charge fee only for one year in accordance with the rules and not the fee for the entire course. As laid down in Islamic Academy 2003 (8) TMI 469 - SUPREME COURT , if an educational institution feels that any particular student may leave in midstream then at the highest it may require that student to give bond/bank guarantee that the balance fee for the whole course would be received by the institution if the student left in midstream, however, in such situation, ordinarily, the management should insist a bond from the concerned student and thus, the management of the educational institution cannot insist upon each and every student to furnish a bank guarantee as a matter of course and the advance fee cannot be charged in addition to annual fee for more than one year. It is pertinent to note that the factum of the respondent private medical institutions insisting upon each and every student admitted to the professional course to deposit the fee for one year and to furnish bank guarantee towards the fee for remaining duration of the course, is not even disputed before this Court. Rather, some of the institutions have even admitted that in addition to the fee for one year, the advance fee is being accepted generally for one more year, which is not kept in separate account and the interest accrued thereon is also not credited to the fee account of the concerned student or refunded to him at the time of completion of the course - the respondent private educational institutions imparting medical education, inherently with a charitable purpose, must always take care of the students belonging to lower echelons of the society or to a middle income group admitted to the medical courses on being found meritorious and must ensure that they are not deprived from pursuing the medical course merely on account of their inability to deposit advance fee in addition to the annual fee for one year or the bank guarantee for remaining 3 years duration of the medical course. Insisting upon the students who are otherwise eligible to be admitted to the course being meritorious but are not in position to arrange the requisite funds to procure a bank guarantee towards the fees for entire course duration would be absolutely unjustified - the directions issued by the Hon'ble Supreme Court in Islamic Academy are quite unequivocal that if an institution feels that any particular student may leave in midstream then, at the highest, it may require that student to give a bond/bank guarantee that the balance fees for the whole course would be received by the institute even if the student left in midstream. The fee structure determined by the 'Fee Fixation Committee' constituted by the respondent University in supersession of fee structure already proposed by the 'Fee Regulatory Committee' constituted by the State of Rajasthan pursuant to the directions of the Supreme Court was held not sustainable in the eyes of law. Petition allowed.

Summary

Issues Involved:
1. Legality of the condition imposed by private medical institutions requiring students to submit a bank guarantee against the annual fees for the remaining 3½ years of the MBBS course.
2. Whether the insistence on bank guarantees instead of bonds is arbitrary and unfair.
3. The authority of private medical institutions to determine their own fee structure outside the purview of the State's Fee Regulatory Committee.
4. The maintainability of the Public Interest Litigation (PIL) filed by the petitioner.

Detailed Analysis:

1. Legality of the Condition Imposed by Private Medical Institutions:
The petitioner challenged the condition imposed by private medical institutions requiring students to submit a bank guarantee against the annual fees for the next 3½ years of the MBBS course. The court noted that the Supreme Court in Islamic Academy of Education vs. State of Karnataka (2003) had held that educational institutions could only charge prescribed fees for one semester/year. If an institution feels that a student may leave midstream, it may require that student to give a bond/bank guarantee that the balance fees for the whole course would be received by the institution even if the student left midstream. The court declared that the action of the respondent institutions in levying advance fees in addition to the annual fee for one year and insisting upon each student to submit a bank guarantee for the remaining 3½ years was illegal.

2. Insistence on Bank Guarantees Instead of Bonds:
The court emphasized that the management should ordinarily insist on a bond from the concerned student rather than a bank guarantee. The court found that insisting on bank guarantees from each and every student was unreasonable and unfair, especially since banks generally do not issue guarantees without collateral security or fixed deposits, causing hardship to students from middle-class or low-income families. The court directed that the respondent institutions must accept bonds as a rule and only insist on bank guarantees for specific reasons as an exception.

3. Authority to Determine Fee Structure:
The court discussed the issue of private medical institutions determining their own fee structure outside the purview of the State's Fee Regulatory Committee. The court referred to the decision in Sachin Mehta vs. State of Rajasthan, where it was held that private universities could not fix their own fee structure independently and must adhere to the fee structure determined by the Fee Regulatory Committee constituted by the State. The court reiterated that the fee structure must be rational, without any profiteering motive, and must be approved by the appropriate committee.

4. Maintainability of the PIL:
The respondents raised a preliminary objection regarding the maintainability of the PIL, arguing that the petitioner, being an advocate, had no locus standi. The court rejected this objection, stating that the strict rule of locus standi does not apply to PILs. The court noted that the petitioner had filed the petition in the larger interest of students intending to pursue medical courses and not in the interest of his clients. The court held that the issues raised by the petitioner were of public interest, and therefore, the PIL was maintainable.

Conclusion:
The court allowed the writ petition, declaring the action of the respondent private institutions and the medical/dental institutions run by the State Government in levying advance fees and insisting on bank guarantees from each student as illegal. The court directed the institutions to refrain from such practices and to ensure compliance with the directions issued by the Supreme Court in Islamic Academy's case. The court also directed that any advance fees already collected should be kept in a fixed deposit in a nationalized bank, with the interest accrued to be paid to the students.