Kerala High Court
Malamkara Orthodox Syrian Church vs Fee Regulatory Committee For
Bench: K.S.Radhakrishnan, V.K.Mohanan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 16303 of 2007(N)
1. MALAMKARA ORTHODOX SYRIAN CHURCH
... Petitioner
Vs
1. FEE REGULATORY COMMITTEE FOR
... Respondent
For Petitioner :SRI.KURIAN GEORGE KANNAMTHANAM (SR.)
For Respondent :SRI.MURALI PURUSHOTHAMAN
The Hon'ble MR. Justice K.S.RADHAKRISHNAN
The Hon'ble MR. Justice V.K.MOHANAN
Dated :/ /
O R D E R
K.S.RADHAKRISHNAN & V.K.MOHANAN, JJ
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WP(C). No. 16303 of 2007
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Dated this the 18th day of August, 2007
J U D G M E N T
Radhakrishnan, J.
Ext.P5 order passed by the Fee Regulatory Committee for Professional Colleges dated 26-4-2007 is under challenge in this writ petition on the ground that the Regulatory Committee has exceeded the powers conferred on it under Section 6 of Act 19/06 in interfering with the power of the management in fixing the fee structure.
2. Petitioner has sought for a declaration that petitioner is entitled to collect fees from the students based on the fee structure proposed by them before the committee. Government of Kerala has constituted the Fee Regulatory Committee under section 6 of Act 19 of 2006. Powers conferred on the Regulatory Committee under the Act was the subject matter of the decision of this Court in Lisie Medical & Education Institutions v. State of Kerala, 2007(1) KLT 409. This court placing reliance on the decision of the Supreme Court in TMA Pai Foundation case (2002)8 SCC 481, Islamic Academy's case (2003) 6 SCC 697, and Inamdar's case WP(C). 16303/07 -2- (2005) 6 SCC 527 held as follows:
"It is further clear that the fee has to be decided by the institutions themselves and such right of the institutions cannot be arrogated by the State. While, however, fixing the fee structure, the institutions cannot indulge into profiteering nor can charge capitation fee, even though the element of surplus income to cater to the future needs of the institutions can be definitely taken into account while fixing the fee. The Committees that may be constituted or the law that may be even made could only regulate the profiteering and charging of capitation fee. The Committees would themselves have every right to modify the fee structure fixed by the institutions and debar institutions by an order and if legislation is made to that effect by law, to reduce the fee in the event of its coming to a finding that the fee structure had a component of profiteering and/or capitation fee, but nothing beyond that. The fixation of fee structure is the right of an institution particularly when unaided. The right of the Committees that may be constituted or the Government to legislate, in our considered view, cannot go beyond examining the fee structure to find out therein the element of profiteering or charge of capitation fee, be it by monitoring committees or by legislation."
(emphasis added) Learned senior counsel appearing for the petitioner submitted that the Committee has failed to bear in mind the above findings rendered by this court while issuing Ext.P5 order, but indulged in an exercise to fix fee by itself without examining the question whether in fact there was any element of profiteering and/or capitation fee in the fixation of fee structure by the petitioner management.
3. Learned counsel appearing for the respondent on the other hand WP(C). 16303/07 -3- contended that the Committee is not bound to accept the fee structure submitted by the management and in appropriate cases it can modify the fee structure fixed by the institutions depending upon the facts of each case. Learned counsel submitted that the Committee has examined all the materials furnished by the management and after taking into consideration of all aspects of the matter an amount of Rs.1,30,000/- was fixed per student per annum for the petitioner's institution for the academic years 2007-2008, 2008-2009 and 2009-2010.
4. Ext.P1 is a communication dated 18-1-2007 sent by the Regulatory Committee to the petitioner stating that the fee structure for each institution will have to be fixed by the management taking into account the factors such as the infrastructure facilities available, the investment made, salaries paid to the teachers and staff, future plans for expansion and/or betterment of the institution etc. Management was directed to forward the fee structure or their proposal for the academic years 2007-08 to 2009-2010 to the Committee along with the relevant documents and books of accounts, the income and expenditure statement, audited accounts and balance sheet for the last three years, ie., 2003-04 to 2005-06. Proforma of statement to be filed by the self financing institutions was also attached along with that WP(C). 16303/07 -4- letter. Petitioner responded to the said letter and forwarded the fee structure fixed by them vide letter dated 15-3-2007 in the format supplied by the Regulatory Committee. Along with the letter the details of the projected income and expenditure with notes and chartered accountants report and also the annual report for the year 2005-06 and audited financial statements for 2003-04 and 2004-05 were also forwarded. Fee proposed by the petitioner was Rs.3.2 lakhs per student per year.
5. Petitioner later received a letter dated 3-4-07 directing the petitioner to present for a hearing at the Committee's office on 10-4-2007. Petitioner has stated that as directed, the petitioner's representative appeared on that date but no clarification was sought for and they were under the impression that the fee structure fixed by them would be accepted. Committee raised no objection in any of the items of fees included and details furnished. Later petitioner was asked to be present on 26-4-2007. No questions or clarifications were elucidated from them and on the same day itself a very detailed order Ext.P5 was passed which is under challenge in this writ petition.
6. Senior counsel appearing for the petitioner submitted that Ext.P5 order would clearly indicate that the attempt of the Regulatory Committee WP(C). 16303/07 -5- was to fix a fee structure of its own rather than accepting the fee structure submitted by the petitioner. Counsel submitted that there is no case for the Committee that the fee structure forwarded by the petitioner had any element of profiteering or was there any indication for charging any capitation fee. Learned counsel submitted that the Committee has committed a grave error in disallowing depreciation on land and building, equipments and machinery . Learned counsel submitted that the petitioner has no intention to shift the burden of the investments on the students. Learned counsel submitted that out of the total investments made, a portion of it is borrowed capital from banks and for that borrowed capital there is a cost in the form of interests which is the actual expenses incurred for procuring the capital, which is allowable deduction under the Income-tax Act, which factor was completely ignored by the Committee. Learned counsel submitted that over and above the land and building the major item of depreciation reckoned by the management while fixing fee structure was depreciation on equipments and machinery. Those items wear out and will have to be replaced. Counsel submitted that wearing out is by usage and therefore that is the actual cost of wear and actual expenses incurred over a period and the yearly proportion has to be loaded on the person using it in WP(C). 16303/07 -6- the form of depreciation.
7. Learned counsel also submitted that the salary expenses shown is as per Medical Council Norms and the actual salary paid is much more than the MCI Norms and the petitioner is entitled to get credit to the actual salary paid and salaries are paid after deducting TDS and the entire audited figures were given and the details furnished were not adverted to by the Committee. Further it is also submitted that there is a small church in the campus and the Committee has disallowed the expenses for the Chapel, but has conveniently considered the income from the Church, which is much more than the expenses. Further it is also submitted that the Committee has taken the income from the hospital, but disallowed the expenses for the same. Counsel submitted that the Regulatory Committee has disallowed the various items on the ground of profiteering but has not pointed out any element of it. Counsel submitted that the management had claimed development reserve at 15% which was observed to be reasonable by the Supreme Court, but the committee has allowed only 10%. Further on a hypothetical figure, without any data the Committee had assumed a net income of Rs.200/- per bed per day for the hospital and loaded it to the income head. On the whole, counsel submitted that the matter requires a WP(C). 16303/07 -7- thorough re-examination by the Committee, after giving an opportunity of being heard to the petitioner on the various materials produced. Counsel also submitted that the petitioner would have clarified all the queries if there was any. Counsel also submitted that the attempt of the Committee was somehow or other to fix the fee somewhere around Rs.1,30,000/- to almost all the colleges. On that basis, for Amala Institute of Medical Science the Committee had taken the student strength at 500, at the same time the student strength of the petitioner's college was fixed at 300 with an idea to bring the fee structure uniform.
8. We have gone through Ext.P5 order in its entirety, and in our view, there is no clear finding by the Regulatory Committee as to areas where there is an element of profiteering or there has been any attempt to charge capitation fee in the proposal made by the petitioner. Division Bench in Lisie Medical & Educational Institution's case has specifically held that the fee has to be decided by the institutions themselves and such right of the institutions cannot be arrogated by the Committee. However, while fixing the fee structure, the institutions cannot indulge in profiteering or charge capitation fee, even though the element of surplus income to cater to the future needs of the institutions can be definitely taken into account while WP(C). 16303/07 -8- fixing the fee. Committee has got the power only to regulate the profiteering and charging of capitation fee. In our view, if there was any element of profiteering or charging of capitation fee in the fee fixed by the management, the Committee ought to have pointed out the same to the management in clear terms so that the management could either explain the same or rectify the anomaly, if any pointed out. The Committee in our view, should point out the anomalies, if any in writing so that the area of disagreement could be narrowed down. Such a procedure, if followed, would show application of mind by the Committee as well as the management and a reasonable fee structure could be arrived at, taking into consideration the overall public interest.
9. Petitioner has got a specific contention that they had furnished the entire details called for by the Committee and also was ready with all the relevant materials in case any clarification was necessitated, but no clarification or query was made by the Committee. Fee structure has to be fixed in respect of each college or institution independently considering individual statement and the fee structure may vary from institution to institutions depending upon the investment on land, building, equipment, machinery and other infrastructural facilities offered. Regulatory WP(C). 16303/07 -9- Committee, in our view, has completely ignored the claim for depreciation on equipments and machinery. Equipments and machinery would wear out by usage by students, necessarily they will have to be replaced. Expenses incurred over a period and the yearly proportion has definitely to be loaded on to the beneficiaries in the form of depreciation. On the other hand, Committee has concentrated more on the land and building which will remain an asset of the management for which depreciation at the rate of 1% was provided. But the crucial issue, that is, depreciation in respect of equipments and machinery has been negatived without any legal basis. Further we also notice that the salary expenses was also not noticed by the Committee. Committee had also disallowed the expenses for Chapel and not considered the income from the chapel which according to the petitioner will be much more than the expenses. Committee had also taken the income from the hospital but disallowed the expenses for the same. Further on a hypothetical figure, without any data, the Committee has assumed a net income of Rs.200/- per bed per day which was loaded on the income head. Further Committee has not pointed out any specific area of profiteering and capitation fee which was the only area where the Committee has power to interfere. Committee ought to have pointed out to the management the WP(C). 16303/07 -10- component of profiteering and/or capitation fee in the fixation of fee structure, the same was not done. On the whole, the Committee has fixed their own fee structure to make it around Rs.1,30,000/- which in the facts and circumstances of the case cannot be sustained.
10. We are informed that the Government had entered into an agreement with few Medical Colleges in the State for seat sharing and fees sharing. Ext.P7 is one of such agreements. Agreement would indicate that the average fee agreed to by the Government would be around Rs.3,67,500/-. Agreement would indicate that the total revenue permissible under the agreement is Rs.3,37,50,000/- plus Rs.3,00,00,000/-, ie., Rs. 3,67,50,000/0-. Agreement would indicate that the average fee works out to more than Rs.3 lakhs in the place of Rs.1,38,000/- fixed by the Regulatory Committee so far as the petitioner is concerned. Petitioner has made a fee structure of Rs.3,20,000/- which is lesser than the amount agreed to vide Ext.P7 agreement. True, as per the agreement there has been seat sharing between the Government and the Management, but that will have no bearing on the expenditure to run the Medical College.
11. We are therefore inclined to set aside Ext.P5 order passed by the Committee dated 26-4-2007 and direct the Regulatory Committee to point WP(C). 16303/07 -11- out the areas if any where there is any element of profiteering or capitation fee in the fee structure submitted by the petitioner institution. Wherever clarification is required the same would be communicated to the petitioner in writing within a period of one week from the date of receipt of a copy of this judgment, therefore Management would be in a better position to explain the same. Reply, if any may be furnished within 3 days of the receipt of the communication from the Committee. On receipt of the reply Committee will fix a date for hearing and dispose of the matter within two weeks thereafter.
Writ petition is disposed of as above.
K.S.RADHAKRISHNAN, JUDGE.
V.K.MOHANAN, JUDGE.
ksv/ WP(C). 16303/07 -12-