The Legality of Fee Hikes in Private Unaided Schools of Delhi

The issue of fee hikes in private unaided schools has been a subject of significant legal scrutiny. The present discussion revolves around the challenge to fee increments sanctioned by the Directorate of Education (DOE) and the judicial pronouncements that have addressed this matter. A crucial aspect of this debate is whether private unaided schools require prior regulatory approval for increasing fees. Even though prior approval is not mandated, as a matter of practice, private unaided schools do seek permission from the DOE before implementing fee hikes.

Under the Delhi School Education Act, 1973 (DSEA) and the Delhi School Education Rules, 1973 (DSEAR), there is no explicit obligation on private unaided schools to seek approval from the DOE before increasing fees. In Action Committee Unaided Recognized Private Schools v. Directorate of Education 2024 SCC OnLine Del 3121, the Delhi High Court, has held, “...an unaided recognized private school is not required to take prior approval of the DoE before increasing its fees, irrespective of whether the land clause does, or does not, apply to it.”

In T.M.A. Pai Foundation v. State of Karnataka (2002) 8 SCC 481, the Supreme Court reaffirmed the autonomy of private educational institutions, stating that they have the right to fix fees to meet their expenses and ensure the sustainability of quality education. However, this right is subject to the condition that institutions do not indulge in profiteering or commercialization. The judgment emphasized that while private unaided schools must generate revenue to function efficiently, they cannot charge fees exorbitantly beyond their reasonable expenses.

Even though private unaided schools are not legally required to obtain prior approval for fee increases, they often follow a structured process to ensure compliance with regulatory expectations. Schools typically submit proposals detailing their financial records, justifications for the increment, and projected expenses. Regulatory authorities, such as the DOE, review these submissions and conduct financial audits to determine the reasonableness of the proposed hike.

In Islamic Academy of Education v. State of Karnataka (2003) 6 SCC 697, the Supreme Court elaborated on the distinction between reasonable revenue generation and profiteering. The judgment mandated that schools must justify their fee structures through financial disclosures, ensuring that any surplus is reinvested in educational development rather than distributed as profit.

A primary argument supporting fee increments is the necessity to meet financial obligations such as staff salaries, infrastructure maintenance, and compliance with statutory mandates. Courts have recognized that such hikes are legitimate when intended to sustain educational institutions rather than generate undue profits. In Modern School v. Union of India (2004) 5 SCC 583, the Supreme Court reiterated that while private schools can generate a reasonable surplus for future expansion and development, they cannot treat education as a business venture aimed at maximizing profits.

In several instances, the DOE does not provide its approval for years, exacerbating the financial challenges faced by schools. Regardless of whether the DOE ultimately approves the fee hikes, they are frequently challenged by parents of students enrolled in such institutions. However, it is observed that not all fee hikes are contested by such parents but rather these are selectively challenged, which calls into question the bona fides of such objections. Fee hikes for specific years are contested while other similar increments done in previous years are accepted. Another pertinent factor is that opposition to fee hikes often represents a fraction of the school community. The Courts have taken the view that limited number of parents cannot be determinative of broader policy decisions affecting the entire school community.

The legal framework governing fee hikes in private unaided schools reflects a balance between institutional autonomy and regulatory oversight. Judicial precedents affirm that unaided schools are entitled to increase fees, provided they do not engage in profiteering or commercialization. The principles laid down in T.M.A. Pai Foundation (2002) 8 SCC 481, Islamic Academy of Education (2003) 6 SCC 697, and Modern School (2004) 5 SCC 583 emphasize that fee hikes must be justifiable, transparent, and aligned with institutional needs rather than excessive profit generation. The practice of seeking permission from the DOE for a fee hike continued during the AAP government regime. The refusal or delay in approvals placed significant strain on school finances, and the fee hikes were subjected to a lot of litigations. However, whether the same approach will continue under the recently elected BJP government remains to be seen. 

(The author is Partner, Edictum Law & Co.)