1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE WRIT PETITION NO.5805 OF 2004 N. K. P. Salve Institute of Medical Science and Research Centre. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. .... Mr. V. R. Manohar, Senior Counsel with Mr. S. V. Manohar for the Petitioner. Mr. Pradeep Patil, A. G. P. for Respondent No.1. Mr. Janak Dwarkadas, Amicus Curiae for the Fees Fixation Committee. ..... WITH ORIGINAL SIDE WRIT PETITION NO.1750 OF 2004 K.J. Somaiya Medical Trust & Ors. ... Petitioners Versus The State of Maharashtra & Anr. ... Respondents ..... Mr. T. R. Subramaniam with Mr.Firdus Pooniwala i/b. M/s. Hariani & Co. for the Petitioners. Mr. Pradeep Patil, A. G. P. for Respondent No.1. Mr. Janak Dwarkadas, Amicus Curiae for the Fees Fixation Committee. .... WITH WRIT PETITION NO. 1649 OF 2004 WITH CHAMBER SUMMONS NO.171 OF 2004 2 Association of Managements of Unaided Private Medical Colleges. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. Firdus Pooniwala i/b.Hariani & Co. for the Petitioners. Mr. Pradeep Patil, A. G. P. for Respondent No.1. Mr. Janak Dwarkadas, amicus Curiae for the Fees Fixation Committee. Mr. S. V. Bedekar with Mr. A.B. Ketkar for the Applicants in Chamber Summons No. 171 of 2004. ...... WITH WRIT PETITION NO.2148 to 2150 OF 2004 Terna Public Charitable Trust & Ors. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. Firdus Pooniwala i/b.Hariani & Co. for the Petitioners. Mr. Pradeep Patil, A. G. P. for Respondent No.1. Mr. Janak Dwarkadas, amicus Curiae for the Fees Fixation Committee. ..... WITH APPELALTE SIDE WRIT PETITION NO. 5425 OF 2004 Krishna Charitable Trust & Anr. ...Petitioners. Vs. 3 The State of Maharashtra & Ors. ...Respondents. ..... Mr. R.V. Govilkar for the Petitioners. ...... WITH WRIT PETITION NO. 5746 OF 2004 Maharashtr a Technical Education Society. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. R. V. Govilkar for the Petitioners. ...... WITH WRIT PETITION NO. 5803 OF 2004 Pravara Medical Trust and Rural Medical College ..Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... Mr. T. N. Subramaniam with Mr. Firdus Pooniwala i/b.Hariani & Co. for the Petitioners. ...... WITH WRIT PETITION NO. 5804 OF 2004 Prakash Sikshan Prasarak Mandal & Anr. ...Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... Mr. T. N. Subramaniam with Mr.Firdus Pooniwala i/b. M/s. Hariani & Co. for the Petitioners. 4 ...... WITH WRIT PETITION NO. 5806 OF 2004 VSPM's College of Physiotherapy. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V.Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5807 OF 2004 Jawaharlal Nehru Medical College, Sawangi (Meghe), Wardha. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5808 OF 2004 Ravi Nair Physiotherapy College, Sawangi (Meghe). ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH 5 WRIT PETITION NO. 5809 OF 2004 V. S. P. M.'s Dental College & Research Centre. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5811 OF 2004 Sharad Pawar Dental College. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5813 OF 2004 Pandit Jawaharlal Nehru Memorial Institute of Homoeopathic Medical Sciences. ...Petitioner. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5815 OF 2004 Vidharbha Youth Welfare Society's Dental College & Hospital, Amravati. ...Petitioner. 6 Vs. The State of Maharashtra & Anr. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5816 OF 2004 Dr.Panjabrao alias Bhausaheb Deshmukh Memorial Medical College, Amravati. ...Petitioner. Vs. The State of Maharashtra & Anr. ...Respondents. ..... Mr. V. R. Manohar, Senior Advocate with Mr. S.V. Manohar for the Petitioner. ...... WITH WRIT PETITION NO. 5818 OF 2004 Dr.J. J. Magdum Trust & Anr. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. T. N. Subramaniam with Mr. Firdus Poonawala i/b. Hariani & Co. for the Petitioners. ...... WITH WRIT PETITION NO. 5819 OF 2004 Tatyasaheb Kore Dental College & Research Centre & Anr. ...Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... 7 Mr. T. N. Subramaniam with Mr. Firdus Poonawala i/b. Hariani & Co. for the Petitioners. ..... WITH WRIT PETITION NO. 5820 OF 2004 Mahatma Gandhi Mission Trust & Anr. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. T. N. Subramaniam with Mr. Firdus Poonawala i/b. Hariani & Co. for the Petitioners. ..... WITH WRIT PETITION NO. 5821 OF 2004 Mahatma Gandhi Mission Trust & Anr. ...Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. T. N. Subramaniam with Mr. Firdus Poonawala i/b. Hariani & Co. for the Petitioners. Mr.Pradeep Patil, A. G. P. for State in all matters. Mr.Janak Dwarkadas, Amicus Curiae for the Fees Fixation Committee in all matters. ...... WITH WRIT PETITION NO. 6047 OF 2004 Priyadarshani Rural & Adivasi Upliftment Foundation. ...Petitioner. Vs. The State of Maharashtra & Anr. ...Respondents. ..... WITH 8 WRIT PETITION NO. 6050 OF 2004 Maratha Vidya Prasarak Samaj Nasik & Anr. ...Petitioners. Vs. The State of Maharashtra & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6065 OF 2004 Yerala Medical Trust & Research Centre & Anr. ...Petitioners. Vs. The State of Maharashtra & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6066 OF 2004 Shri Vishwanathrao Shamrao Patil Charitable Trust & Ors. ...Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6068 OF 2004 Ayurved Mahavidyalaya of Bhartiya Sanskriti Dardhan Trust. ...Petitioner. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6069 OF 2004 9 College of Ayurved Research Centre & Pune Dist. Asso.Ayurved Mahavidyalaya & Research Centre. ...Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6070 OF 2004 Sumatibai Shah Ayurved Mahavidyalaya Maharashtra Arogya Mandals. ... Petitioners. Vs. Shikshan Shulka Samiti & Anr. ...Respondents. ..... WITH WRIT PETITION NO. 6432 & 6433 OF 2004 Association of Managements of Unaided Private Medical & Dental Colleges & Ors. ...Petitioners. Vs. The State of Maharashtra & Anr. ...Respondents. ..... Mr. T. N. Subramaniam i/b. Hariani & Co. for the Petitioners in W.P. 6065, 6066, 6432 and 6433 of 2004. Mr. Amol B. Patil with G.B. & A. G. Lohiya, R. S. Agarwal for Petitioners in W. P.6047/04. Mr. K. Y. Mandlik for the petitioners in W. P. 6050 of 2004. Mr. S. M. Gorwadkar for the petitioners in W.P. 6068, 6069 and 6070 of 2004. Mr.A. A. Kumbhakoni, Special Counsel with Mr. R. M.Patne, A. G. P. for Respondent No.1 and 2. Mr. Janak Dwarkadas, Amicus Curiae for Fees Fixation Committee. ...... WITH WRIT PETITION NO. 6646 OF 2004 10 P.A. Inamdar & Ors. ... Petitioners. Vs. The State of Maharashtra & Ors. ...Respondents. ..... Mr. T.N. Subramaniam with Ms. S. S.Khanzode for the Petitioners. .... CORAM : DALVEER BHANDARI,C.J. & DR.D.Y.CHANDRACHUD, J. August 17, 2004. JUDGMENT : (PER DR. D. Y. CHANDRACHUD, J): I Managements of privately owned professional colleges imparting education in Health Science disciplines are before the Court in proceedings under Article 226 of the Constitution. They are aggrieved by the determination of fees made by a Committee constituted under the Chairmanship of Mr.Justice R.A. Jahagirdar, a former Judge of this Court. The institutions have several objections to the decision of the Committee, both in regard to the methodology and on the merits of the determination. The institutions and their managements urge that the deprivation of an opportunity of a personal hearing is a matter of prejudice to them 11 because were they to be given that opportunity they would have established that expenditure which the Committee proposed to disallow was legitimate and had to be allowed. The Colleges urge that the methodology and basis are at variance with judgments of the Supreme Court. They contend that the jurisdiction of the Committee is not to fix fees but to determine whether the fees proposed amount to profiteering or capitation. In the conclusion that we have arrived at, we have permitted the institutions to have an opportunity to place their objections before the Committee. The Committee is being requested to consider those objections and to render a decision within three months. In the meantime, in view of the imminent deadline for admissions, the Court has directed that admissions shall be granted on the fees allowed by the Committee subject to the undertaking of each student to pay the difference, should there be an enhancement. II 2. On 31st October 2002, a Bench of eleven judges of the 12 Supreme Court delivered judgment in T. M. A. Pai Foundation vs. State of Karnataka (2002) SCC 481. The Court inter alia emphasised the principle of institutional autonomy and of merit based admissions in colleges imparting education leading up to professional degrees. On 14th October 2003, a Constitution Bench delivered judgment in Islamic Academy of Education vs. State of Karnataka (2003) 6 SCC 697. In T. M. A. Pai Foundation, the Supreme Court held that it was not open to Government to fix a rigid fee structure and, each Institution must have the freedom to fix its own fees based on the need to generate funds to run the institution and to provide facilities necessary for the benefit of students. These institutions, the Court held, must be able to generate a surplus which has to be used for the betterment and growth of the institution. The judgment laid down that a decision of the fee to be charged must be left to private educational institutions that do not seek funds from the Government and each institute would be entitled to have its own fee structure. The fee structure must be based upon the infrastructure and facilities available, investment made, salaries paid to teachers and the 13 staff, future plans for the expansion or betterment of the institution and such other factors. While the fees which are determined must provide funds for the growth of the institution and the development of facilities, profiteering should not be permitted. Governmental regulation was permissible in order to prevent the imposition of a capitation fee or profiteering. The surplus which is generated must be used by the institution for the betterment of education and the development of facilities. 3. In Islamic Academy of Education (supra) the Constitution Bench formulated four questions for determination, the first being whether educational institutions are entitled to fix their own fee structure. Adverting to the principles which were formulated in T. M. A. Pai Foundation, the Constitution Bench directed the State Governments to constitute in each State a Committee headed by a retired Judge of the High Court to be nominated by the Chief Justice. The Committee was to consist of a Chartered Accountant nominated by the Judge, a representative of the Medical Council of India or A. I. C. T. E., as the case may be, and the Secretary to the Government in Medical or Technical Education, as its Secretary. 14 The Committee was empowered to co-opt another independent person so that the total members of the Committee would be five. The parameters of the work and function of the Committee were laid down by the Supreme Court thus: “Each educational institute must place before this Committee, well in advance of the academic year, its proposed fee structure. Alongwith the proposed fee structure all relevant documents and books of accounts must also be produced before the Committee for their scrutiny. The Committee shall then decide whether the fees proposed by that institute are justified and are not profiteering or charging capitation fee. The Committee will be at liberty to approve the fee structure or to propose some other fee which can be charged by the institute. The fee fixed by the Committee shall be binding for a period of three years, at the end of which period the institute would be at liberty to apply for revision. Once fees are fixed by the Committee, the institute cannot charge either directly or indirectly any 15 other amount over and above the amount fixed as fees.” (emphasis supplied). In the State of Maharashtra such a Committee, known as the Shikshan Shulka Samiti was constituted by a Government Resolution dated 24th September 2003. Mr.Justice R. A. Jahagirdar, a former Judge, was appointed as its Chairman on the recommendation of the Chief Justice of this Court. On 23rd December 2003, on the recommendation of the Chairman, two members were appointed to the committee viz., (i) R.A. Ajgaonkar, a Chartered Accountant and (ii) Prof. V.R. Iyer, a former Faculty Member of the Jamnalal Bajaj Institute of Management and formerly President of the Costs and Works Accountants' Institute of India. Though the resolution provided for the appointment of an officer of the I. A. S. Cadre as a full time Secretary of the Committee, this part of the resolution was not implemented. The Committee was furnished with a list of 123 Medical Colleges by the Director of Medical Education and Research. The Committee was provided with accommodation in February 2004. 16 4. In order to elicit information from the private Colleges, the Committee prepared a set of formats allowing each institution to summarise its accounts and financial position. The institutions were called upon to submit audited statements of account of the relevant years. The Committee has placed on the record the methodology adopted by it. The exercise culminated in the determination of fees for the medical institutions concerned. Different fees have been held allowable for each institution. III 5. We have before us a batch of matters in which we have heard the challenge preferred by managements to the decision of the Committee. The principal submissions before the Court have been urged by Mr.V. R. Manohar and Mr. C. J. Sawant, Senior Counsel and by Mr. T. N. Subramanium. We have also heard other Counsel appearing on behalf of several institutions. Oral submissions have been supplemented by written arguments. On behalf of the State, we have heard Mr. A. A. Kumbhakoni. Mr. J.D. 17 Dwarkadas, Senior Counsel was appointed as amicus curiae. The Court would wish to express its appreciation of the fair and objective assistance rendered by Counsel. In view of the urgency of the matter, we have heard the petitions for hearing and final disposal with the consent of Counsel. 6. We consider it appropriate to set out the gist of the submissions which have been urged before us in the three principal arguments placed for the consideration of the Court. The other Counsel broadly adopted the same arguments. The Submissions : A. N. K. P. Salve Institute of Medical Science and Research Centre – W.P. 5805/04: (i)By the judgments in T. M. A. Pai Foundation and Islamic Academy of Education, an unaided institution is entitled to determine its own rational fee structure which would provide to it 18 a reasonable surplus for the development of education and the expansion of the institution. What is prohibited is profiteering and the charging of a capitation fee; (ii) The Committee did not seek the books of accounts or the auditors' report and what was sought was certified copies of the audited balance sheets of the last three years. No additional information was sought from the institutions; (iii) The institutions were not called for personal hearing. The determination of the fee structure is a quasi judicial determination and, at the minimum, the procedure followed by the Committee should have been just and fair. The methodology which was followed by the Committee was not made known in advance to any of the institutions; (iv) Under the decisions of the Supreme Court in T. M. A. Pai Foundation and in Islamic Academy of Education, the right to determine reasonable fees is with the management and the 19 proposed fee structure should be interfered with by the Committee only if it involved profiteering or capitation fee; and (v) The Committee as a quasi judicial authority ought to have recorded the grounds and reasons for its conclusion. 7. On merits, it was sought to be urged that the income of the institution for the year 2000-01 was Rs.4 crores, while its expenditure was Rs. 7.18 crores. For 2001-02, the income was Rs. 5.33 crores while its expenditure was Rs. 7.78 crores. For 2002-03, the income was Rs. 4.64 crores whereas the expenditure was Rs. 13.39 crores. In 2002-03 the salaries of College personnel were Rs. 4.70 crores, while those of the Hospital were Rs. 1.09 crores, making a total of Rs. 5.80 crores. Hence, the expenditure on salaries alone for the year is more than the income. In addition, an amount of Rs.75 lakhs was paid on account of the Fifth Pay Commission in November 2003 which was conveyed to the Committee, but has not been taken into consideration. The Committee, it was urged, did not take 20 into consideration the additional burden of increments of 10% per annum resulting in an additional burden of Rs.50 lakhs per year. A hike in D.A. from 55% to 61% of salary caused an additional liability of Rs.35 lakhs. In clause 9 of its methodology, the Committee proposed to award an additional 25% of the yearly salary with reference to the salary which was paid in March 2003. There is, however, an apparent error in the report of the Committee, in that the Committee has not awarded the additional component of 25% which works out to Rs. 1.18 crores for the college. In so far as the Hospital is concerned, while the figure of salary paid is Rs. 1.09 crores, the Committee has awarded an amount of Rs. 36.39 lakhs without any justification. In fact, the institution is entitled to an additional amount of 25% over and above Rs. 1.09 crores which would work out to Rs. 1.36 crores. On the item of hospital salary alone, an amount of Rs.1 crore has to be awarded in addition. On these two items, namely hospital and college salaries, an additional amount of Rs. 2.18 crores ought to have been awarded in addition. The Trust runs Medical, Dental and Physiotherapy Institutions on which 21 common expenditure was incurred. While the Committee made a pro-rata allowance for the Dental college, this was disallowed to the Medical and Physiotherapy Colleges. The building and assets owned by the Trust are valued at Rs. 14.43 crores. Depreciation thereon at the rate of 10% would work out to Rs. 1.43 crores which has, however, been disallowed as the trust owns the building. Only 5% of the total expenditure has been allowed towards actual rent paid which works out to Rs. 0.82 per sq.ft. for the College and Rs. 1.13 per sq.ft. for the hospital in a metropolitan City like Nagpur. The Committee, it was urged, has also erred in adopting the divisor factor. For the year 2000-01, the intake capacity of the College for the first year was reduced from 100 to 50 students. The total intake of students in 2002 was 300 and in 2003 it was 350. The divisor, it has been urged, has, therefore, not been correctly calculated. B. Krishna Charitable Trust, Karad : W.P.5425/04: 8. The Trust has submitted that salaries for April 2002 to 22 March 2003 were Rs. 333.07 lakhs. The Committee has allowed only Rs. 235.82 lakhs leaving a difference of Rs. 97.25 lakhs. The College has employed certain employees on consolidated pay and pays stipends to its resident doctors. The expenditure of Rs. 96.96 lakhs on this account has been ignored. According to the methodology of the Committee, admissible salary and wages for March 2003 should be multiplied by 15 to allow an increase of 25% on salary for 2002-03. The addition of 25%, on a total salary of Rs.837 lakhs, would be Rs.209 lakhs which has not been considered. Depreciation has been allowed to the College of Rs. 10.21 lakhs as against a claim of Rs. 26.29 lakhs. For the hospital, against a claim of Rs. 93.40 lakhs, Rs. 31.13 lakhs was admitted. The Committee has also erred in taking a divisor factor of 630 on the assumption that the College had 126 students for each of the five years. The College has 100 students who will receive education for 4.5 years of the M. B. B. S. Course, 16 students admitted for the 3 year post graduate degree courses and 10 students each admitted for 2 years for the diploma. The correct divisor factor, therefore, should have been 518. Moreover, 23 students who had been admitted on the basis of the judgment in Unnikrishnan' s case until 2002-03 will continue to pay the same fee. C. K.J. Somaiya Medical Trust : W. P. 1750/04; Association of Managements of Unaided Private Medical Colleges : W. P. 5818, 5819, 5820, 5821, 6065, 6066 of 2004 and companion matters : 9. The managements in this batch of cases submit that the Government Resolution dated 24th September 2003 transgresses the parameters for the jurisdiction of the Committee laid down in the judgment of the Supreme Court in Islamic Academy of Education. The judgments of the Supreme Court in T. M. A. Pai Foundation and in Islamic Academy of Education establish that the right to fix a reasonable and rational fee structure that would generate a reasonable surplus to meet the needs of expansion and the augmentation of facilities is that of the private managements. The role of the Committee is to ensure that there is no profiteering or the charging of capitation fees. The Government 24 Resolution dated 24th September 2003, however, requires the Committee to prepare a formula for the fixation of tuition fees, to examine whether the proposals of the institutions are in accordance with the formula thus fixed and to arrive at a determination. This, it was urged, was contrary to the judgment of the Supreme Court. In guideline 5, the Committee has taken into account the average of the last three years' expenses or the expenses for 2002-03 “whichever were more reasonable”. Counsel submitted that it was no part of the jurisdiction of the Committee to decide what was reasonable. Furthermore, in guideline 9, the salary in excess of the prescribed norms was sought to be reduced to 'correct costs' and it was urged that it was not open to the Committee to do so. The adoption of the historical cost of assets in guideline 10 was similarly sought to be questioned. Counsel urged that the Committee has fixed the fees without taking into account the minimum standards that are required to be fulfilled under the regulations of the Medical Council of India, Dental Council and the Councils regulating Homeopathy and Ayurved Courses which would lead to the withdrawal of 25 recognition. Projections for betterment and expansion of Institutions were not considered. Moreover, it was urged that the levy of service charges by the Government Resolution dated 24th September 2003 was in violation of the directions of the Constitution Bench in paragraph 20 of the judgment in Islamic Academy of Education. The Committee, it was urged, had erroneously, allowed a 25% increase in the salary payable during the year 2002-03 as a uniform and rigid basis for all institutions irrespective of whether the institution is old or new. A College which had commenced operations in 2003-03 will not have a full complement of staff as required for an established College with an intake capacity upto the final year. The incremental increase in staff strength has not been accounted for. Most Colleges, it was