Capitation Fee Writ Petition

MOST RESPECTFULLY SHOWETH

1. The Petitioner is a citizen of India. He is a Lawyer by profession. He prefers this Petition in Public Interest. He is pained by the manner in which populist programs with vote banks only in mind been ruining the nation. The need of the hour is to build infrastructure. Physical infrastructure like roads, ports, power plants etal. And even more importantly social infrastructure like education, health care etc.

2. The whole world has now started reckoning India as an emerging economic power house of 21st century. India with 54% of its population below the age of 25 is the youngest country in the world. Europe, Japan and to an extent America and China are facing or will soon face great economic slowdown due to their aging population. The world today looks India as an important provider of manpower and particularly knowledge based manpower. Therefore, the India’s future is in the quality and quantity of higher education, both professional and technical. Not alone to meet the domestic requirement, but for the whole world. Many entrepreneurs and venture capitals’, even Universities and Institutions are contemplating of investing in India’s education industry. Education is considered to be one of the hottest areas of investment after I.T. and I.T. enabled services, Pharmaceuticals, Tourism and Hospitality, Media, etc. But, there is a hitch.

3. The hitch is that the education industry has not yet been opened up. There are a number of hurdles ahead. At the first place, there is no political consensus on opening up of educational sector to foreign investment. With the left, the right and even the middle speaking almost in one voice against opening up of or liberalization of the education sector, the government seems to be undecided and directionless.

4. Besides the political and psychological dark clouds of uncertainty and confusion, there are a number of legal hurdles in the way of opening up of India’s education sector for private investment, both domestic and international, including institutional investment. One such obstruction is the categorical ‘no’ of the Supreme Court to capitation fee. Though it should be said to the credit of the Supreme Court that, it for the first time, in TMA Pai Foundation’s case [(2002) 8 Supreme Court Cases 481], had the vision to recognize education as an occupation. Recognizing education as an occupation was a milestone. The Supreme Court further expanded the scope of private investment/participation in education sector in P. A. Inamdar’s case [(2005) 6 Supreme Court Cases 537], by holding that the governmental interference in private educational institutions should be the minimal. And that too in laying down standards only. However, the Supreme Court again made it clear that capitation fee and profiteering are impermissible.

5. The Supreme Court even offered a reason in declaring an absolute ban on capitation fee and profiteering. Its reasoning was perfectly valid. In its judgment in TMA Pai Foundation’s case, the Supreme Court observed that if capitation fee is permitted, those students who come out of such colleges paying lakhs of Rupees as capitation fee would resort to unethical means to recoup what they had invested. However, the Supreme Court missed the most obvious. It failed to consider at all as to why such a situation could exist. It failed to consider that capitation fee exists, spreads and flourishes only because of the gap between the demand and supply. Sting operations of news channels could expose that capitation fee is extracted right from kinder garden to the post-graduate level. There is a huge gap between the demand and supply. The fifteen years of India’s liberalization has raised many more people to the upper strata of the society. Educated, as they are, look for the best of education for their children. And they are willing to invest heavily even beyond their means. However, there are not enough high quality institutions. This demand and supply mismatch is the fertile breeding ground for capitation fee/profiteering. Today Indians spent close to $4 billion annually for studying abroad. The capitation fee gets somewhere balanced between the cost of studies abroad and the capitation to be paid here.

6. Nobody could welcome capitation fee and profiteering in education sector. However, that cannot be eradicated by a ban. No matter imposed by law or orders of this Court. Experience teaches that even the Christian church and missionaries held in high esteem for their centuries of selfless contribution to the education, accept, if not demand capitation fee. The NRI’s, particularly those settled in Gulf, are the worst victims. The profiteers do not even ask for an Application Form. All that they ask for is Demand Drafts and that too through un-accounted channels.

7. There is only one sure way of bringing an end to profiteering. Accept education as an industry, entitled to the full protection of Article 19(1)(g). Allow whoever wants to invest in the education sector to do so without any restrictions. Open up the education sector for private investment, both domestic and international. Individual and Institutional. Allow the principles of the nature and market to govern the game. Since there is so much of a mismatch between demand and supply, a lot of people and institutions will invest heavily in the sector. As the competition grows, the supply will offset the demand and not only that, capitation fee will disappear. And only those institutions which maintain the highest of standards alone can survive. Indians could thus save $4 billion now spent abroad and instead earn as much of still higher an amount by allowing India to become a much sought after international hub of education.

8. There are umpteen examples for us to learn from in the post-liberalization era. Fifteen years before a telephone connection was a much sought after privilege and an MP could dispense with and ordinary citizens were to wait for 5 to 10 years for a connection. The Telecom Department was notorious for its Corruption and inefficiency. Opening up of the telecom sectors to private investors led to the re-writing of the history. Today, even a rickshaw puller in Calcutta has a mobile. The density of telephone connections went up by thousand times and the tariff today is 1/10th of what it was fifteen years before. Opening up of Aviation Sector to private investment is a watershed. Traveling has become many a time cheaper. Affordable, even to a common man and the frequency of flights has increased to many times. Air traveling has been never as comfortable as is today. There are umpteen other examples of the unbelievable benefits that opening up of economy has brought to the common man.

9. We have still many examples of monumental blunders if not crime we had committed and still committing in the name of welfare legislations. The Urban Land Ceiling Act and the Rent Control Act are stark examples. In Bombay there are hundreds of buildings which are categorized as extremely dangerous and could fall any time. During every monsoon a number of such buildings collapse. This is because no kind of maintenance was done for many decades. These flats are occupied by tenants, sub-tenants and their tenants. The owner had virtually abandoned the building and is waiting for the day for it to collapse to get rid of his tenants, whom he could not have got evicted because of the Mumbai Rent Control Act. The Urban Land Ceiling Act was also enacted with the laudable purpose of making available cheap or affordable accommodation to the lower income groups. But, in reality, that has led to the creation of artificial scarcity of land available for construction. These two legislations did not do any service to those for whose benefit it was enacted. On the contrary, it had done unthinkable damage to them. If Bombay’s life is miserable and people have to live in dilapidated matchbox like apartments that is only because of the shortsighted governmental interference in areas where economics of the market would have decided the fate. The redundant Labour Laws are yet another ghost of the Inspector Raj era which still hampers our industrial growth and ultimately work against the interest of the labour. Bombay’s taxi drivers are literally worshiped for their professionalism and civilized behavior. It is a common sight in Bombay for a taxi driver to return one Rupee balance when rupees twenty is paid against a fair of nineteen Rupees. However, the very sight of the taxi arouses pity. We talk of making Bombay a Shanghai or Singapore. But the taxies of Bombay even the scrap vendor would consider too worthless to buy. The actual value of a taxi would be Rupees five thousand at the most. But, with the permit, it is worth Rupees 1.5 lakhs. In short, the value of the taxi is the value of the old piece of permit paper. Such situation remains only because the government does not issue permits at all for new taxies. Pre-liberalization era, for a bag of cement, poor consumer had to queue up at the Tahsildar’s office. The rampant corruption then existed has not still faded away from public memory.

10. Capitation fee may be a capital sin. But, no law can prevent it. But, opening up of the education sector could certainly. The Enforcement Directorate of the Finance Ministry and the Coast Guard and the Police with their might could not prevent smuggling. But, opening up of the economy could to so with great ease. COFEPOSA, FERA and SAFEMA are all statutes now in cold storage. Today there are only two types of smuggling. Smuggling of high speed diesel and may be explosives and arms. The smuggling of diesel is a highly lucrative business. Because of the huge tax on petroleum products which makes diesel cost double in the domestic market.

11. From the above backdrop, the Petitioner respectfully submit that the judgment of this Hon’ble Court in TMA Pai Foundation’s case needs a review to a limited extent in the larger national interest or perspective. If education could be recognized if necessary even by a review of the judgment, as an industry, where the profit making is permissible, that could lead to a heavy flow of investment by high net worth individuals, corporate, institutions, universities, venture capitals and others, both domestic and international, provided the government has the fortitude to open up the education sector. It is said, investments worth millions of US Dollars will flow into the professional and technical education sector. Even foreign universities, institutions and venture capitals could be investing in setting up of world class universities. This could hopefully lead to a situation where the number of seats available in the higher professional and technical education and research multiply by many times. A huge expansion of capacity is expected even in low end courses like paramedical, nursing, hotel management, etc. etc. This will literally lead to a situation many economists forecast. India is to become the third major economic power only next to China and US by 2050, if not earlier. And India providing high end knowledge based professional services to the rest of the world. And again Indians also ruling the roost even in low cast services along with the Chinese who have a clear edge over India.

12. A scenario where opening up of the education sector is strangulated by out-dated political philosophies and sheer opportunistic caste/communal and other considerations are unthinkably horrific. Millions of eligible young Indians will be denied entry to technical, professional and high end education. The opportunities for Indians to go abroad and to fill in the world employment market will be scuffed. Legislations after legislations and litigation after litigation will mar the academic field leading to a total confusion and chaos where everybody is a looser.

The data of the studies conducted by Industry figures, Ma Foi, Nasscom, University of Petroleum and Energy Studies, Construction Industry Development Council, etal, shows that, in IT and IT enabled services industry, there could be a shortage of 5,00,000 professional by 2010, 4,25,000 in telecommunication, 15,00,000 healthcare, 1,00,000 in retail finance, 1,40,000 in hospitality and 2,00,000 each in real estate and retail. We need to increase the capacity and quality of our professional and technical educational institutions many times to meet the exponential requirements of the emerging economy, both quantity wise and quality wise. We would need 50 ‘IIMs’ instead of the 5 at present. 20 to 25 ‘AIMSs’ instead of the one at present.

13. The social inequities and the communal tensions which the governmental and other interventions could bring in are beyond anybody’s imagination. It is already there in the sight in Kerala. The recently elected left democratic government brought up a highly political if not populist Act to regulate professional education. The Act is christened as: The Kerala Professional Colleges or Institutions (Prohibition of Capitation Fee, Regulation of Admission, Fixation of Non Exploitative Fee And other Measures to Ensure Equity and Excellence in Professional Education) Act, 2006. It contemplates 82% reservation and merit a mere 18%. However, the enactment meant to please all has displeased everyone. The left, the right, the middle and the minority and majority. The minorities are up in arms alleging that it is destructive of the constitutional rights conferred on them under Article 30(1) of the Constitution. The majority, the Hindus, are vociferous in disputing their clamor. According to the Hindus, when 95% of all professional educational institutions are run by Christian and Muslims, protection against whom under Article ‘30(1)’ ? The profiteers are also unhappy because the Act provides for 50% reservation to OBCs, SCs/STs, etc. The NRI’s are also equally unhappy as they will have to virtually cross-subsidize education of the rest. The Act provides for fee regulatory committee headed by a retired Judge of a High Court. The committee has approved a fee for NRI’s 5 times higher than the rest. In short, if the colleges were to be run on fees alone as officially the case is, NRI’s would be bearing more than 50% of the fee burden. In actual practice, they bear greater burden because they are the ones on whom the highest demand of capitation fee is made.

14. The self-financing managements of various colors had challenged the validity of the Kerala Professional Colleges Act, 2006 before this Hon’ble Court by a Writ Petition. However, that Writ Petition was dismissed with a liberty for them to approach the High Court. The Writ Petition in challenge of said Act is pending before the Kerala High Court. It is to be assumed that many already in the field of professional education are into the field to make profits if not to profiteer. But, none of them have the courage to openly admit that they are into the field to make profits. For the word “profit” is still a taboo. Therefore, they have chosen to challenge the validity of the Act on grounds which are unrealistic and a make believe. They say they are into self financing colleges only out of their motive of selfless service. Nothing could be fartherer from truth than that. A greater hypocrisy and self deceit. Far away from the real grounds which is the laws of nature and market which ought to have shaped the real grounds for a challenge, if they were really forthcoming and frank about themselves. The grounds they have challenged are like the conflict of the Act with fundamental rights of the minorities and of the judgment of this Hon’ble Court in Inamdar’s case. Therefore, in the Writ Petition which are pending before the Kerala High Court, a plea for opening up of the education sector for private investment and removing all shackles are unlikely to be raised. Even if it is raised, it could be of little avail as the High Court of Kerala is bound by the judgment of this Hon’ble Court in TMA Pai’s case, which was followed again in Inamdar’s case on the question of capitation fee. Hence, the need for a review of the aforesaid judgments on the issue of far-reaching consequence of the need to open up the education sector right from primary school to technical and professional education and research and higher learning. In fact, in Inamdar’s case this Hon’ble Court has urged the central / state governments to come out with a well thought out legislation to regulate admission and fee structure. That observation of this Hon’ble Court is contrary to the emerging unanimity of impartial and informed opinion makers to recognize education industry, open it up for private investment with possibly no regulations at all.

If education sector is allowed to be opened up for private investment both domestic and foreign, individual, corporate and institutions without shackles, the country would be able to save $4 billion per annum spend by Indians for education abroad and further it would be able to attract world famous educational institutions like Harvard University, London School of Economics, Cambridge University and the like to setup campuses in India. India has the potential of replacing US, UK and Australia as the hub of education. There could be only one emerging situation with the opening up of education sector; millions of young men and women would be able to be professionally and technically qualified. The ever growing need of the domestic and international business and industry for man power will be met by those who so come out of professional and technical institutions. There would be no poverty as there are plenty of jobs available. In such a scenario, there possibly could be no clamour for reservation on communal and caste lines. The much controversial plea for minority protection under Article 30(1) could also become redundant like that has happened in the Kottayam and Pattanathitta District of Kerala where the Syrian Christians who never had the benefit of reservation faring far better than their brethren Latin Christians who had the benefit of reservation. Those Latin Christians who have the benefit of reservation ended up in being employed in low paying government jobs. Their cousins, Syrian Christians, on the other hand, went abroad, to Europe, America and Australia and even Gulf, worked as nurses, technicians and others and became economically far better off.

15.The Petitioner has not filed any other Petition before this Hon’ble Court seeking such similar relief as being sought in the present Writ Petition.

16.The Petitioner is desirous of filing the present Petition on the following amongst other -

G R O U N D S

A. It is almost a sacrilege to question the correctness of a judgment of the Eleven Judges Constitutional Bench of the Supreme Court in TMA Pai Foundation’s case. The said judgment was a water shed in so far as it for the first time accepted education as an occupation within the meaning of Article 19(1) (g). In other words, it meant opening up of the education sector for private investments. The Inamdar’s case which ensued further endorsed the role and need of private sector in education by holding that there should be least government interference in the affairs of the private educational institutions, and that too only in laying down standards. However, the definite finding of this Court that no capitation fee be permissible and the further observation of the Supreme Court in Inamdar’s case that the State can legislate to prevent capitation fee in practical terms severely restricted the scope of private investment in education sector. The Constitution (93rd Amendment) Act, 2005 empowering the State to make any special provision for the advancement of any socially and educationally backward class of citizens or for scheduled castes and scheduled tribes for admission to educational institutions including private educational institutions whether aided or unaided by the State other than minority educational institutions coming under Article 30(1), further nailed the scope of opening up of education sector for domestic and international private investment both individual, corporate and institutional.

B. Despite the pure politically motivated opposition to the private participation or investment in the education sector, there is a great amount of consensus among academicians, administrative and within the government. The 93rd Constitutional Amendment which is manifestly a populist measure and which is certain to divide the masses on communal and caste lines will deprive unless held unconstitutional by this Court opportunity for education and emancipation of the poorest of the poor.

C. In so far as the observation in the TMA Pai’s case that the capitation fee is impermissible and the further observation in Inamdar’s case that State can enact laws to prevent the practice of capitation fee, hold the field opening up of the education sector for private investment will remain a far dream. Further, legislations like Kerala Education Act, which provides for various quotas up to 82% of the total seats and brings about restrictions of the fee and donations which can be accepted from the students will remain difficult to be challenged as unconstitutional. Once this Court is pleased to clarify that there is no ban on capitation fee that would mean the opening up of the gateways for private investment in education sector which will benefit the poorest stat of the society more than anyone. The Petitioner foresee such an opening up leading to establishment of hundreds of world-class educational institutions in engineering, medicine, management and many other faculties and India becoming the hot hub of education worldwide.

P R A Y E R

It is, therefore, most respectfully prayed that this Hon’ble Court may graciously be pleased to :

a) Issue a writ of mandamus or any other appropriate writ or order directing the Respondents to open up the education sector for private investment both domestic and foreign, both private, corporate and institutional as also to declare ‘education’ as an ‘industry’ ;

b) issue a writ or order or direction to the Respondents to remove the various regulatory measures including statutes which hamper private investment both domestic and foreign in the education sector, and further seeking a declaration at the hands of this court that ‘education’ as an ‘industry’ if necessary ; and

c) pass such other order

DRAWN & FILED BY 
(MATHEWS J.NEDUMPARA)

Petitioner-in-person
New Delhi 
Drawn on : 
Filed on :

SYNOPSIS

The Petitioner is a citizen of India. He prefers this Writ Petition in public interest. The Petitioner is pained by the manner in which dogmatism has impinged the economic progress of the country. Socialism is a fine concept. However, the way it was implemented in India, rather than helping the poor, eradicating poverty and social inequalities, has only worsened the same. The public sector undertakings meant to achieve rapid economic growth has largely failed. They are the inefficient and corrupt monopolies which deny the citizens their basic amenities. Like manner, many of the social welfare legislations like Rent Control Act, Urban Land Ceiling Act, and many a Labor Laws far from being able to attain their laudable objectives, ended up in strangulating economic growth. The license and inspector raj made India one of the most corrupt and inefficient economies of the world with a physical infrastructure on the verge of collapse and a social infrastructure virtually non-existent. India attained the notoriety of one of the most difficult countries to do business and run enterprises.

The economic liberalization initiated fifteen years ago has worked wonders. It is there everywhere in sight. IT and IT enabled services is one social infrastructure which grew leaps and bounds without the government. And, may be because of that; because software industry was an invisible one. The engineering colleges which mushroomed in Karnataka during the 80s and 90s, mostly on the huge money generated by capitation fees, provided the large number of IT graduates, which the fast growing software industry needed.

India with 54% of its population less than the age of 25 is the youngest country in the world. Europe and Japan are already become gray. Even China with its mean age of 44 is fast graying. India with 1/6th of the world population is destined to provide high cast professionals from engineers to doctors, to lawyers, to cooks and to nurses, provided we are able to build our social infrastructure on a war footing. It is estimated that, by 2010, there could be a shortage of more than 15 lakh professionals in services sectors like IT and IT enabled services, telecommunications, real estate, retail, hospitality, healthcare, finance, etal. This great shortage of skilled man power cannot be met unless education is recognized as an industry and is opened up for private investment both domestic and international; individual, corporate and institutional. It is an undisputed fact that international venture capital funds, corporate, universities and institutions, high net worth individuals are willing to invest, nay, looking forward, provided education is accepted as an industry where profit could be legitimately the prime motive. If education sector is accepted as an industry and is liberated of all sorts of clutches like the various enactments passed by various State governments banning capitation fee and providing for reservations upto 82%, that will surely lead to the exponential development of the most important social infrastructure of the country, namely education. That will surely bring in 50 ‘IIMs’ of even better standards than the 5 at the moment. Like fashion, there would be dozens of ‘AIIMS’, hundreds of world class medical, engineering and nursing colleges, world class schools, research centres, etc.

However, the Petitioner humbly believes that the real green signal for the opening up of the education sector could be possible only at the hands of this Hon’ble Court as has been the case with many a wonderful reforms. It should be said to the credit of the Supreme Court that, for the first time in TMA Pai’s case, it was pleased to recognize education as an occupation. Further, in Inamdar’s case, SC was again pleased to observe that there could be only least interference in the administration of unaided educational institutions by the State. However, this Hon’ble Court was pleased to categorically ban capitation fee. This Hon’lbe Court did not, however, while holding so, discuss the economic reasons why capitation fee exists, namely the imbalance between the demand and supply. Capitation fee is nothing but taking contributions for an admission from whoever willing to pay. Many of the private unaided educational institutions could come up and expand only because of the monies they could so raise. In spite of the ban, the capitation fee undoubtedly exists. And it will continue to exist in so long as the economic reason for which it existed, continue. Capitation fee is bad, but it cannot certainly be eliminated by a law banning it like the Dowry Prohibition Act could not eliminate dowry. On the contrary, the opening up of education will wipe out capitation fee in the same manner as opening up of economy made smuggling non-existent. Therefore, the judgments of this Hon’ble Court in TMA Pai and Inamdar’s case holding that capitation fee is a bane need to be reviewed to enable opening up of the education sector for investment, both, domestic and international, individual, corporate and institutional. Those two judgments need to be reviewed to recognize education as an industry. Further, the observations contained in Inamdar’s case which enable the State governments to enact legislations to ban capitation fee and to enforce such a ban need to be reviewed. If education is declared as an industry and is opened up for 100% FDI, as the Ministry of Commerce is contemplating, that could lead to an exponential growth of the education sector and could give much greater fruits to the country and the common man than even the opening up of telecommunication, aviation, etc. could bring in. Opening up of education sector would produce millions of highly qualified engineers, scientists, doctors, etc. as also others like technicians, teachers, accountants, nurses, etal. It will remove the poverty from every home as there are plenty of jobs available. That will also be an end to all sorts of demands for reservations on caste, communal and on minority status. The end result could be an India emerging as No 3 economic giant only next to China and US. And may one day even excel them. Hence, the present Writ Petition.