Private Unaided Schools Do Not Require Prior Approval from Directorate of Education for Academic Session Fee Hikes

Petitioner schools, which are private, un-aided, and recognized by the Directorate of Education (DoE), challenged various orders and circulars that rejected their proposals for fee increases

The DoE had mandated that schools (especially those on land with a "land-clause") seek prior approval for annual fee hikes and had subjected their accounts to layered scrutiny by Chartered Accountants (CAs) and a Project Management Unit (PMU)

The DoE rejected the hikes primarily on the grounds that schools possessed "surplus funds" and that certain accounting practices—such as maintaining contingency reserves or paying remunerations to managers—amounted to "profiteering"

1. Whether private un-aided schools are required to obtain "prior approval" from the DoE before increasing fees at the commencement of an academic session under Section 17(3) of the DSE Act

2. Whether the DoE’s regulatory power to prevent "profiteering" allows it to interfere with a school's internal accounting and "reasonable surplus"

3. Whether schools on land with a "land-clause" are subject to different regulatory powers than those on private land

4. Whether the DoE’s rejection orders violated principles of natural justice by failing to provide hearings or CA reports to the schools

The court primarily applied Section 17(3) of the Delhi School Education Act (DSE Act), 1973, which requires schools to file a statement of fees but only mandates prior approval for mid-session hikes

It relied on the Constitution Bench rulings in T.M.A. Pai Foundation v. State of Karnataka, which established "maximum autonomy" for un-aided institutions

Modern School v. Union of India, which balanced institutional autonomy with the DoE's power to prevent "commercialisation" through Fund-Based Accounting

The court also applied Rule 177 of the DSE Rules, which outlines the permissible utilization of fees and savings

Section 10(1) regarding employee pay parity

The court reasoned that under Section 17(3), a school’s only obligation at the start of a session is to "file" a fee statement; "prior approval" is a statutory requirement reserved only for mid-session increases

The court found the DoE’s definition of "funds available" legally flawed, as it improperly included earmarked reserves (Depreciation, Development, and Contingency funds) which, under Rule 176 and Rule 177, cannot be diverted to meet revenue expenses like salaries

Regarding the "land-clause," the court held that a contractual lease condition cannot override the statutory framework of the DSE Act; thus, the DoE cannot acquire additional powers of "prior approval" through land allotment letters

Furthermore, the court criticized the DoE for passing orders based on "third-party" CA reports without providing them to the schools or granting a personal hearing, which rendered the process "destructive of the concept of judicial hearing"

As an equitable relief to prevent sudden financial burdens on parents, the court directed that proposed fee increases shall only apply prospectively from the April 2027 academic session, prohibiting the retrospective recovery of arrears.