Private unaided schools require no prior approval for fee-hike at the commencement of academic sessions.

The Petitioner schools, comprising 137 private un-aided recognized institutions in Delhi, challenged various orders and circulars issued by the Directorate of Education (DoE) that rejected their fee-hike proposals for academic sessions ranging from 2016-17 to 2022-23

The DoE had mandated that schools situate on land allotted by government agencies (the "land-clause") obtain prior approval before increasing fees

These proposals were scrutinized by DoE-appointed Chartered Accountants (CAs) and a Project Management Unit (PMU), often leading to rejections on the grounds that schools possessed "available funds" in the form of reserves, or were indulging in "profiteering"

The schools alleged these rejections violated their fundamental right under Article 19(1)(g), breached statutory provisions of the DSE Act, and ignored settled accounting principles

1. Whether private un-aided schools require prior approval from the DoE to increase fees at the commencement of an academic session

2. Whether the DoE has the power to regulate fees beyond the prevention of "profiteering" and "commercialization"

3. Whether the DoE can mandate schools to use "earmarked funds" (like Development or Depreciation funds) to meet revenue expenditures like salaries

4. Whether the regulatory powers of the DoE differ for schools governed by a "land-clause" versus those on private land

5. Whether the impugned orders violated principles of natural justice by denying hearings or withholding CA reports

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

Rule 177 of the DSE Rules, 1973, governing the utilization of fees and permissible savings

Constitution Bench principles in T.M.A. Pai Foundation v. State of Karnataka, establishing maximum autonomy for un-aided schools in fee fixation

Islamic Academy of Education v. State of Karnataka, permitting a "reasonable surplus" (6-15%) for growth

Modern School v. Union of India, which balanced institutional autonomy with the DoE's duty to prevent "commercialization" using Generally Accepted Accounting Principles (GAAP)

The Court reasoned that Section 17(3) is a "balancing provision" where the filing of a fee statement serves as intimation, not an application for permission

The Court noted that the DoE’s "prior approval" requirement for the start of a session was ultra vires the DSE Act

The Court criticized the DoE for miscalculating "available funds" by including earmarked reserves (Depreciation, Gratuity, and Development Funds) which, under Rule 176 and GAAP, cannot be diverted to revenue expenses

Regarding the "land-clause," the Court held that a contractual lease condition cannot override the statutory framework of the DSE Act; thus, even "land-clause schools" only need prior approval for mid-session increases

The Court found the DoE’s process "vitiated" as it relied on CA reports never shared with the schools and passed orders without granting a personal hearing before the actual decision-maker (the Director), violating the audi alteram partem rule

The DoE’s role is limited to post-facto audits under Section 18(5) to catch actual profiteering

(a) no school can be forced to use earmarked funds for salaries; (b) schools can pay higher salaries than government scales; and (c) Depreciation/Reserve funds are not "available funds"

The Court directed that the last proposed fee hikes would apply only prospectivesly from April 2027, prohibiting schools from recovering retrospective arrears from parents for the years lost in litigation; all pending fee-hike proposals were ordered closed