Private Unaided Schools Need No Prior Approval From DoE For Fee Hike At Commencement Of Academic Session Under DSE Act: Delhi High Court

The Court clarified that prior approval from the DoE becomes necessary only where a school seeks to increase fees during an ongoing academic session.

The Court was hearing a batch of writ petitions filed by several private unaided recognised schools challenging orders, circulars and directions issued by the Directorate of Education regulating fee hikes and rejecting proposals for enhancement of school fees.

A Bench of Justice Anup Jairam Bhambhani observed: “…under section 17(3) of the DSE Act no prior permission or sanction is required by a private, un-aided, recognised school to increase its fee at the commencement of an academic session; and the only statutory obligation upon a school is that it must file its statement of proposed fee with the DoE prior to commencement of an academic session.”

The Court further observed: “…under section 17(3) of the DSE Act, however, a private, un-aided, recognised school does require prior approval of the DoE if the school proposes to implement a fee-hike during an ongoing academic session.”

Senior Advocates J.P. Sengh, Diya Kapur, H.L. Tiku and Puneet Mittal appeared on behalf of the appellants, while Chetan Sharma (ASG), Sameer Vashisht (Standing Counsel GNCTD), Avni Singh (Panel Counsel GNCTD), Shobhana Takiar (Standing Counsel) and Manika Tripathy (Standing Counsel) appeared for the respondents.

Background

The matter arose from a batch of petitions filed by private unaided recognised schools in Delhi challenging the legality of directions and orders issued by the Directorate of Education in relation to fee fixation and enhancement.

The schools argued that the DoE had unlawfully compelled schools to seek prior permission before increasing fees for academic sessions and had adopted an administrative process involving empanelled chartered accountants, Project Management Units and internal scrutiny committees to evaluate and reject fee hike proposals.

The schools contended that such a regime violated their fundamental right under Article 19(1)(g) of the Constitution to administer educational institutions with reasonable financial autonomy and that under the statutory scheme of the DSE Act, the role of the DoE was limited to preventing profiteering and commercialisation.

The schools further argued that the DoE had repeatedly ignored settled law laid down by the Supreme Court in T.M.A. Pai Foundation v. State of Karnataka (2002), Islamic Academy of Education v. State of Karnataka (2003), Modern School v. Union of India (2004), and by the Delhi High Court in Delhi Abhivabhavak Maha Sangh v. Govt. of NCT of Delhi and Action Committee v. Directorate of Education.

On the other hand, the DoE contended that schools situated on government-allotted land and governed by “land clauses” requiring prior approval before fee hikes were subject to greater regulatory oversight and that the DoE was empowered to scrutinise fee structures to prevent profiteering and protect the interests of students and parents.

Court’s Observation

At the outset, the Court made strong observations regarding the conduct of the Directorate of Education and observed that the litigation itself had become necessary because of the DoE’s repeated refusal to comply with settled legal principles and binding judicial precedents.

The Court observed: “The present batch of cases illustrates with uncomfortable clarity, how a public authority can persist in a course of action that betrays studied indifference to both the letter of the law and binding precedent.”

The Court further stated: “The DoE has precipitated a huge round of litigation only by reason of its plain refusal to obey the law as comprised in the statute, and as authoritatively interpreted by the constitutional courts.”

The Court extensively examined the statutory framework governing private unaided recognised schools and the law laid down in T.M.A. Pai Foundation, Islamic Academy, P.A. Inamdar and Modern School.

The Court reiterated that private unaided schools possess substantial autonomy in administration and management, including in relation to the fixation of fees, subject only to the restriction that they cannot indulge in profiteering or commercialisation of education.

The Court held that Section 17(3) of the DSE Act strikes a balance between the autonomy of private educational institutions and the regulatory role of the DoE.

The Court held that the statutory scheme does not require schools to obtain prior approval before increasing fees at the commencement of an academic session, provided the statement of proposed fees is filed before commencement of the session.

The Bench underscored: “The DoE’s regulatory power over a private, un-aided, recognised school in relation to fixation of fees is strictly ring-fenced. In view of the Supreme Court precedents, notably T.M.A. Pai Foundation, Islamic Academy, Modern School and P.A. Inamdar, a private, un-aided, recognised school enjoys significant autonomy in fixing its fees provided the school does not indulge in profiteering or commercialisation and does not charge capitation fees. The DoE’s authority to regulate fees does not extend to general interference in the fee structure of a private, un-aided, recognised school”.

The Court clarified that prior approval becomes necessary only where a school seeks to alter or enhance fees during an ongoing academic session after the fee structure has already been declared.

The Court observed that interpreting Section 17(3) otherwise would destroy the balance recognised in earlier judicial decisions between institutional autonomy and regulatory supervision.

The Court further noted that many rejection orders passed by the DoE suffered from a violation of principles of natural justice, including absence of proper hearing, non-supply of chartered accountant reports and lack of reasoned findings.

The Bench held: “Without issuing any show cause notice to the schools in relation to the disallowances that were proposed to be made by the DoE; and/or Without making available to the schools the recommendations for fee fixation made by the chartered accountants appointed by the DoE, which have been relied upon by the DoE; and/or Without affording an opportunity of hearing to the schools before the Director of Education are clearly in violation of the settled principles of natural justice for any quasi-judicial or administrative action, and therefore deserve to be set- aside.”

The Court also reiterated that generation of reasonable surplus by private unaided schools for future growth, development and expansion does not amount to profiteering.

The Court examined various accounting heads, including contingency reserve funds, development funds, depreciation reserve funds, gratuity liabilities and earmarked levies, and held that the DoE could not arbitrarily treat such funds as “available surplus” for denying fee hikes without a proper legal basis.

The Court further observed that schools are entitled to maintain reserve funds and developmental funds for infrastructure, expansion and statutory liabilities, and such amounts cannot automatically be treated as evidence of profiteering.

The Bench remarked: “…mere availability of surplus funds with a private, un-aided, recognised school, howsoever large, cannot be the sole basis for the DoE to infer that the school is indulging in commercialisation or profiteering, and to thereby object to fee-hike by a school. The aspect of commercialisation or profiteering can only be examined and determined by the DoE after conducting a full-dressed financial audit of a school by the prescribed authority in terms of section 18(5) of the DSE Act, based on duly audited financial and other returns that a school files before the DoE.”

The Court rejected the contention that schools governed by “land clauses” requiring prior approval for fee enhancement were entirely outside the statutory framework of Section 17(3).

The Court held that even such contractual conditions contained in land allotment letters must operate within the discipline of the DSE Act and constitutional principles governing private educational institutions.

The Bench stated: “…Land-clause does not override or supplant the statutory scheme under sections 17 and 18 of the DSE Act and Rule 177 of the DSE Rules. If after a full-dressed audit of the accounts of a ‘land-clause’ school, the DoE finds that the school is indulging in profiteering or commercialisation, the DoE may inform the land-owning/land administering agency accordingly; and such agency may take action against the school as may be permissible under the terms of the lease”.

While further highlighting that “as per Rule 180 of the DSE Rules the accounts of a private, un-aided, recognised school are open to inspection by auditors and inspecting officers of the DoE, as well as by any authorized officer of the Comptroller & Auditor General of India (‘CAG’)”, the Bench concluded that “though this rule clearly mandates transparency of the accounts of a school, such transparency does not translate to a requirement that a school must obtain prior permission of the DoE for increasing its fee at the commencement of an academic session.”

Conclusion

The Delhi High Court held that the orders passed by the Directorate of Education rejecting fee-hike proposals of private unaided recognised schools at the commencement of academic sessions were legally unsustainable since they proceeded on the erroneous assumption that prior approval of the DoE was mandatory even for fee enhancement at the beginning of an academic session. Accordingly, all such impugned orders were quashed and set aside.

The Court further held that all pending fee-hike proposals before the DoE, which were also founded upon the same misconceived understanding of Section 17(3) of the Delhi School Education Act, stood closed.

The Court, however, noted that because the DoE had delayed consideration of fee proposals for several academic sessions, certain schools had been placed under financial strain, while permitting retrospective implementation of fee hikes dating back to earlier years would impose an excessive burden upon parents and students.

Balancing the equities between the schools and parents, the Court directed that the last fee increase proposed by each school in its statement of fees filed before the DoE would become applicable only from the next academic session commencing in April 2027. The Court further directed that no school shall demand or recover any arrears of fee or other charges retrospectively for past academic sessions.

Accordingly, all the petitions and pending applications were disposed of

Cause Title: Delhi Public School Vasant Kunj & Anr. v. Government of NCT of Delhi & Anr. and Connected Matters (Neutral Citation: 2026:DHC:4590)

Appearances

Petitioners: Senior Advocates J.P. Sengh, Diya Kapur, H.L. Tiku and Puneet Mittal with Advocates Kamal Gupta, Tripti Gupta, Sparsh Aggarwal, Siddharth Arora, Pranav Rishi, Gaurav Mishra, Sukriti Kamra, Rishabh Sharma, Raghav Kumar, Ambica Sood, Yashmeet Kaur, Hitesh Wadhwa, Rahul, Sakshi Mendiratta, Pramod Gupta, Yogita, Anushu, Khagesh B. Jha, Jyoti Shokeen, Ankit Mann, Divjyot Singh, Nipun Diwvedi, Prashant Kumar, Arjun Garg, Gauri Puri, Apoorva Pandey, Soumya Singh, Hriman Dhaka, Pranav Gadi, Krishna Gaur, Pavi Maheshwari, Shivani, Nitin Bhardwaj, Saurabh Chadda, Rohit Bhagat, Aprajita, Anurag Lakhotia, Udit Dwivedi and Vibhor Kush.

Respondents: Chetan Sharma, ASG; Standing Counsels Sameer Vashisht, Shobhana Takiar and Manika Tripathy; Panel Counsel Avni Singh; Advocates Amit Gupta, Dhruv Rohtagi, Abhinav Sharma, Chandrika Sachdev, Dhruv Kumar,, Gaurav, Tushar Sannu, Sourav Verma, Kamal Gupta, Sparsh Aggarwal, Kuljeet Singh, Prateek Dhir, Senior Advocate Puneet Mittal with Rupendra Pratap Singh, Shikha Sharma Bagga, Aranya Moulick, Namya Rishi, Anubhav Gupta, and Ashutosh Kaushik.

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