The judgement of an eleven judge bench of the apex court in the Pai Foundation case (2002) caused much contention. The phraseology of the principles adumbrated in the judgement had a broad scope, leaving much room for judicial creativity (Annual Survey of India Law, 2002). To deal with the lacunae and interpret the judgment of Pai Foundation, a seven judge bench was formulated in the Islamic Academy case (2003).

Despite the expeditious judicial pronouncements in Islamic Academy, several pertinent questions remained as moot points, which were attempted to be resolved in the present case. However, the cause of utmost discord was the court’s directions to set up twin committees, empowered to monitor the admission process and fix the maximum fee for minority educational institutions. 

Aggrieved, minority institutions, both aided and unaided appealed the Islamic Academy judgement before the Hon’ble Supreme Court. Hence, the present seven judge bench chaired by CJI R.C. Lahoti, author of the judgement was instituted. 

Contentions by the Petitioners 

Learned counsel Mr. Harish Salve appearing on behalf of private unaided institutions contended that the decision of the court in Islamic Academy to set up twin committee’s for ascertaining the fees and regulating the admission procedure to the institution was in derogation to the earlier pronouncements of the court in the Pai Foundation, St. Stephen’s, St. Xavier’s and Kerala Education Bill.

Moreover, the state assuming the responsibility of fixing the fees and admission procedure to the institutions was tantamount to nationalization of educational institutions, and constituted an unreasonable restriction under article 19. The rationale of this argument was that the right of rational selection of private unaided institutions was being deprived. Mr. Salve’s interpretation of the ratio in the Pai Foundation case was that the state was not allowed to nationalize, either in whole or part, such private enterprises. 

Mr. Salve submitted that an equipoise has to be effected between the rights of the minorities to establish and administer educational organizations and the rights of state to regulate educational activities to maintain the standards of education.

Thus, the right to maladminister was outside the purview of article 30. Maladministration encompasses charging of capitation fee (profiteering) and sacrificing merit. He concluded by submitting that mere likelihood of such maladministration cannot furnish justification for transgressing the rights of the institution.

Shri Ashok Desai, learned counsel for the unaided Karnataka Medical College impugned the ratio of Islamic Academy. He argued that it was in contravention to the autonomy of unaided private institutions. This autonomy, the SC had held an important facet of their right under article 19(1)(g) read along with article 30. Mr. Desai adverted to instances where committees in Karnataka had fixed the fee on the sole basis of the affordability for the parents. He contended that no regard had been paid to the financial desiderata of the institutions. 

Hon’ble counsel Fali S. Nariman, assailed fixing of quotas for state governments in unaided institutions. 

Mr. R.F. Nariman, delineated the contours and connotations of the “ratio decidendi” of a judgement. Referring to the Halsbury Laws of England, Mr. Nariman, contended that it is only the essence of the reason or principle upon which the question before a court has been decided which alone has a binding value as a precedent. It is dangerous to take one or two observations out of a long judgement and treat it as the ratio decidendi. 

Lastly, learned counsel U.U. Lalit proposed a three pronged cross subsidised fee structure. Herein, 25% students were charged five times the average fee. 50% students were charged the average fee and 25% students were charged one fourth of the average fee. Such a demarcated fee structure would allow meritorious students from all sections of society to take admission while preventing any pecuniary harm to the institution.

Rejoinder by the Respondents

Learned counsel Mr. K.K. Venugopal appearing for the state of Kerala defended the pre-fixation of fee and monitoring of the admission process by the twin committees. He argued that they do not tantamount to a serious encroachment, since the institutions retain the discretion to fix the fee, as long as they do not charge a capitation fee.

Furthermore, ostensibly as a rejoinder to the last argument put forth by Mr. Salve, Mr. Venugopal stressed on the importance of pre fixation, since the entire raison d’être of the exercise would stand defeated if it were to be carried out after the admission process was complete, since, it would be no consolation for the students to know that the fee has been lowered AFTER the classes began. Again, meritorious students would have been unable to get admitted in the first place.

Moreover, fixing fees on account of the peculiar exigencies of each college is a logistically strenuous task, necessitating that it is carried out before the admission procedure is initiated. Hence, pre fixation was in the interest of not just the students, but the organizations as well.

On the matter of cross subsidizing, as the learned counsel U.U. Lalit had suggested, the learned counsel for the respondent contended it was held impermissible in the Pai Foundation case. Rather, Mr. Venugopal suggested setting asunder 15% seats in management quota to be filled by NRI/person of independent origin/foreign student on the basis of inter se merit. This way, the education of the economically weaker students would get subsidized. 

Lastly, Mr. Venugopal concluded by favouring a common entrance test (‘CET’) to be organized, either by the state or a group of similar institutions.

The Judgement

The Hon’ble Justice commenced by emphasizing on the importance of education, and, excellent education, at that, in order to achieve the golden goals envisaged in the preamble of the Indian constitution.  He sundered questions that seem to be the common catena in all the cases pertaining to educational institutions.

1.  What is the inter-relationship of the article 19(1)(g) , 29 and 30 of the constitution?
2.   In cases pertaining to state regulation of minority institutions, what difference does it make whether they are aided or unaided, seek affiliation, or abstain from doing so?
3. Whether the nature of education imparted (professional or non professional) has any bearing on the extent of state regulation permitted?

On the question of inter-relationship of the three articles, it had been previously established by the court that the right to establish a minority educational institution falls under the ambit of an occupation, and hence, is protected by article 19(1)(g). However, with a view to bestow some additional protection on minorities, article 30 was enacted. This was done as an additional safeguard, to instil a sense of confidence in the minorities and allow them to preserve their language and culture despite their numerical or cultural disadvantages. However, article 30(1) is more in the nature of a protection, and merely styled as a right. Thus, it does not render the minority institutions immune from the operation of regulatory measures of the state. Furthermore, if the institution is aided by the state, the extent of autonomy enjoyed gets diluted, on account of article 29 (2) being attracted. 

The scope of such regulations has been laid down by a seven judge bench of the SC in the St. Xavier case-

 1.      The regulation has to be reasonable and rational.

2.      It is regulative of the essential character of the institution and is conducive to making the institution an effective vehicle of education for the minority community or other persons who resort to it;

3.       It is directed towards maintaining excellence of the education and efficiency of administration so as to prevent it from falling in standards.

These guidelines of the SC were re-affirmed in the Pai Foundation Case. However, there was one discrepancy between the two judgements. In the St. Xavier’s case, it was held that the State could not cast a regulation ‘in interest of the nation’ if it ran counter to the interest of the minority institution. This was overturned by the larger bench of the Pai Foundation case, wherein, it was held that the protection conferred under article 30(1) could not override the national interest, which was paramount.

In response to the second question, in the early case of Kerala Education Bill (1958) the minority institutions were fractionated into three- 

I. Unaided institutions that do not seek affiliation to any state run institution.

II. Institutions that seek aid and affiliation from the state.

III, Unaided institutions that do not seek aid but only affiliation from the state.

The established jurisprudence was that the first category of institutions could practice their autonomy “to their heart’s content” but not in derogation of the national interest. Furthermore, the scope of autonomy dilutes, when the minority institution seeks for aid by the government (second category of institutions). In instances where the institution seeks merely recognition and not aid, the extent of regulations was to  be at par with those of non minority institutions. However, there were two caveats-

1.      The regulation could not be denied solely on the ground of the educational institution being one belonging to minority, and

2.      The regulation is neither aimed at nor has the effect of depriving the institution of its minority status.

On the last question, whether the nature of education being imparted by the institution has a bearing, the constitutional provisions make no such distinction, withal, the jurisprudence of the apex court till Pai Foundation stands that merit and excellence assume special importance in the sphere of professional education. Herein, transparency and meritocracy become indispensable.  Hence, it is an accepted proposition by virtue of numerous judicial pronouncements that rigorous scrutiny is a must in cases of educational institutions imparting professional knowledge.

On the issue of appropriation of seats and reservation by the state, the present bench drew a distinction in cases of-

a. Minority aided and unaided institutions.

As was held in Kerala Education Bill, they could practice their autonomy “to their heart’s content” but not in derogation of the national interest. 

In the instant case, the bench held that the admission of students was an integral part of administration under article 30(1). Hence, upto undergraduate level, minority unaided institutions enjoy total freedom. They were empowered to have their own admission process as long as it was fair, transparent, non exploitative and based on merit. However, in professional courses, the court explicitly enjoined the state to step in and regulate in order to ensure transparency and meritocracy.

Furthermore, on the question of appropriation of seats and reservation by the state  the Court observed that in Pai Foundation, the Court did not did not lay down for appropriation of seats by the state, it merely recommended it as a possible consensual arrangement. Thus, the decision of Islamic Academy to fix seats between the state and management in lieu of the “local needs” ran counter, and was liable to get stuck down, being tantamount to nationalisation, it could not be equated with a regulatory measure under article 30(1) or a reasonable restriction under article 19(1)(g).

 On the recommendation of NRI seats, the Court acknowledged being privy to cases of misuse of the provision to admit less meritorious students, hence, it enjoined the state to enact legislations ensuring bona fide use of such seats, till then the committees formed pursuant to the Islamic Academy case were empowered to monitor.

On the recommendation of a CET, the Court opined that it did not dent the institution’s right to admit students of it’s choice, and it is permissible to monitor the admission process and fee-structure to check the evil of profiteering and capitation fee. Lastly, on the validity of the most vehemently opposed feature of the Islamic Academy, the twin committees. The Court deemed them to be a reasonable restrictions under 19(1)(g) and 30(1). The two committees for monitoring admission procedure and determining the fee structure, were protecting the interest of the student community as a whole as also the minorities themselves, in the Court’s view. The Court upheld their constitutionality until a legislation was framed, by virtue of article 142. The pre-fixation by these committees was also upheld in consonance with the arguments advanced by the learned counsel for the respondents.

However, the Court cautioned the committees to be more cautious of the needs of the institutions and the accompanying ground realities, the decision being subject to judicial review.

Lastly, the bench adverted that there were numerous lacunae in the Pai Foundation judgement, which it was unnamed to remedy, since the present bench could not overturn the decision of an eleven judge bench.