‘Education is not the business to earn profit’: Supreme Court

The court imposed costs of INR five lakhs on the state of Andhra Pradesh and a private medical college for illegal enhancement of fees.


THE Supreme Court, on Monday, held that education is not a business to earn profit, and tuition fees need to be made affordable.

A division bench of Justices M.R. Shah and Sudhanshu Dhulia, in its judgment in Narayana Medical College versus The State of Andhra Pradesh & Ors., held that to enhance the tuition fee to INR 24 lakhs per annum, that is, seven times more than the fee fixed earlier, was not justifiable at all. The bench held so while deciding an appeal against an order passed by the Andhra Pradesh High Court, which had set aside the Government Order (‘G.O.’) dated September 6, 2017 passed by the Andhra Pradesh government increasing the fees of medical colleges to an exorbitant amount of INR 24 lakhs per annum, and directed the appellant medical college to refund the excess amount that was received by it illegally to students.


In 2005, the Supreme Court’s Constitution bench had passed a judgment in P.A. Inamdar & Ors. versus State of Maharashtra & Ors., pursuant to which the Andhra Pradesh government framed the Andhra Pradesh Admission and Fee Regulatory Committee (for Professional Courses offered in Private Un-­Aided Professional Institutions) Rules, 2006. Rule 4 of the Rules of 2006 is regarding fees fixation, and prescribes the role of the Admission and Fee Regulatory Committee (‘AFRC’) in fixing the fees. Under the provision, the AFRC is required to call from each institution its proposed fee structure well in advance before the date of issue of notification for admission, and then make a report regarding fixation of fees.

After receiving the report of the AFRC, the state government issued a G.O. dated June 18, 2011 fixing and enhancing the fee for the academic years 2011-­12 to 2013-­14. However, this same procedure was not carried out by the state government for the block years 2017 to 2020, as the state government fixed the fees without the report of AFRC. Rather, the government fixed the fees on representations made by private medical colleges.

The G.O. that was issued for the block of 2017 to 2020, dated September 6, 2017, increased the tuition fee payable by Bachelor of Medicine, Bachelor of Surgery students to an exorbitant rate of INR 24 lakh per annum, which is almost seven times the tuition fee notified for the previous block period.

Therefore, the G.O. dated September 6, 2017, was challenged before the Andhra Pradesh High Court, which set it aside. The high court also directed that if any fee has already been fixed by the government vide G.O. dated September 6, 2017 dehors the G.O. dated June 18, 2011, the same shall be refunded by the colleges to the students after adjusting the amounts payable under the G.O. dated June 18, 2011. Aggrieved by this, the appellant private medical college and the Government of Andhra Pradesh moved in appeal before the Supreme Court.

The Supreme Court’s reasoning

Before the Supreme Court, senior advocate K.V. Viswanathan, counsel for the appellant, argued that between 2011 and 2017, the costs of colleges had increased and the requirement of paying stipend to students had been introduced in the year 2016; therefore, the fee fixed in the year 2011 would have caused significant loss to the colleges. Hence, he submitted, the tuition fee was bound to be increased. It was prayed by him that at this stage, the respective colleges may not be directed to refund the amount.

The prayer on behalf of the medical colleges not to refund the amount at this stage was vehemently opposed by senior advocate, Basava Prabhu S. Patil, counsel for the students, who submitted that with respect to a similar G.O. issued by the State of Telangana, the same was set aside by the Telangana High Court, which had directed to refund the amount paid in excess pursuant to the illegal G.O. issued by the state government.

Patil argued that private medical colleges who were the beneficiaries of the illegal G.O. which was issued on the representations made by them could not be permitted to retain the amount which they had recovered on the basis of the illegal G.O.

It was further submitted by him that under the G.O. dated September 6, 2017, there was an exorbitant increase of tuition fee to INR 24 lakhs, and parents had to avail education loans to pay the tuition fee and were required to pay a higher rate of interest.

Advocate Krishna Dev Jagarlamudi, counsel for the AFRC, submitted that during the enquiry and proceedings to determine the tuition fee for the block period 2017-­2020, the state government unilaterally and without waiting for the report and recommendations by the AFRC, increased the tuition fee.

It was submitted by Jagarlamudi that, in fact, the AFRC vide notification dated December 8, 2016 proposed to review the fee structure, and called for relevant materials from the medical colleges. It was when the review and determination of fees was pending, that the association of the private medical colleges addressed a letter to the government seeking revision, which the state government permitted illegally.

The Supreme Court, after hearing both the sides, held that determination of fee and review of fee shall be within the parameters of the fixation rules and shall have direct nexus on the factors mentioned in Rule 4 of the Rules, 2006, namely:

(a) The location of the professional institution;

(b) The nature of the professional course;

(c) The cost of available infrastructure;

(d) The expenditure on administration and maintenance;

(e) A reasonable surplus required for growth and development of the professional Institution;

(f) The revenue foregone on account of waiver of fee, if any, in respect of students belonging to the reserved category and other Economically Weaker Sections of the society;

Further, with regard to the refund of the pending amount, the court was of the opinion that the high court had not committed any error in issuing such directions. The bench held:

“The management cannot be permitted to retain the amount recovered/collected pursuant to the illegal G.O. dated 06.09.2017. The medical colleges are the beneficiaries of the illegal G.O. dated 06.09.2017 which is rightly set aside by the High Court. If at all the AFRC determines/fixes the tuition fee which is higher than the tuition fee fixed earlier it will be always open for the medical colleges to recover the same from the concerned students, however, the respective medical colleges cannot be permitted to retain the amount collected illegally pursuant to G.O. dated 06.09.2017.”

In view of the above, the bench dismissed the appeal, while imposing costs of INR five lakhs against both the appellant medical college and the state government of Andhra Pradesh. The court held that the cost of INR five lakh would be equally paid by the appellant as well as the State of Andhra Pradesh, and had to be deposited with the Registry of the Supreme Court within a period of six weeks from the day of delivery of the judgment. The same would be transferred to the National Legal Services Authority, and the Mediation and Conciliation Project Committee of the Supreme Court equally, the bench directed.

Click here to view the Supreme Court’s full judgment.

The Leaflet