1. These writ petitions (except WP(C) No. 29443/2019) concern a common question, wherein the petitioners who are conducting Self Financing Medical Colleges in the State of Kerala have challenged the orders passed by the Fee Regulatory Committee for Medical Education in Kerala (hereinafter referred to as the Committee) inter alia contending that the Committee had not properly determined the fee for the respective academic years starting from 2017-18 onwards.
2. In fact, by an interim order dated 14/1/2020, having found that the Committee had passed the order without application of mind, we called upon the petitioners to file statements in order to ascertain whether a further enquiry is required in the matter. The said interim order was challenged by some of the contesting respondents in SLP(c) Nos.4662- 4678/2020 and the Apex Court by order dated 6/3/2020 held as under:-
“Permission to file Special Leave Petition(s) is granted.
It has been submitted by Mr. V. Giri and Mr. Jaideep Gupta, learned senior counsel appearing for the petitioners that the interim order has been questioned on many fold grounds. The High Court has wrongly observed that order passed by the Admission and Fee Regulatory Committee is unsustainable and without hearing the case finally. Thereafter the High Court has asked for furnishing of informations/documents from the institutions. The exercise has been objected inter alia on the ground that the High Court has no jurisdiction to fix the fee. The High Court cannot collect the material which was not before the Admission and Fee Regulatory Committee and take a decision for the first time on that.
It was pointed out by Mr. Ranjit Kumar, learned senior counsel appearing for the respondents, that the matter has been remitted twice and that is why, the High Court has called for information to be furnished.
We do not want to comment on the merits of the aforesaid rival submissions at this stage, but at the same time, we are compelled to observe that the findings recorded by the High Court in the impugned order shall not be treated as final, binding and conclusive as the High Court has to hear the matter and decide it finally. Before deciding the matter finally, the High Court has to take a call whether it can decide the fee and on various other submissions. All the questions are kept open, to be examined by the High Court. The High Court shall not be influenced by the impugned order in any manner whatsoever while deciding the case finally in accordance with law by a reasoned order.
With the above observations, the Special Leave Petitions are disposed of.
Pending interlocutory application(s), if any, is/are disposed of".
3. We heard the learned counsel appearing on either side including some of the students who have already been impleaded in the case. The petitioners have filed statements as directed by us in our interim order dated 14/1/2020.
4. In fact, the orders passed by the Committee earlier was under challenge before this Court, and a Division Bench in Principal, KMCT Medical College and Others v. Fee Regulatory Committee and Others (2019 (2) KLT 1027) had set aside the said orders and the following directions had been issued.:-
“26. What the above provisions provide is only that no act or proceedings of the Committee shall be invalid for the reason of any defect or irregularity in its constitution. Here, there is no irregularity in the constitution of the Committee and therefore, the said provision can have no application here. Sub-section (7) empowers the Committee to regulate its procedures for the conduct of its business. The said provision also cannot replace the provision stipulating the quorum. The said provision would entitle the Committee only to regulate its own procedure. In view of the above, we are not satisfied that the above provisions are sufficient to cure the defects of the impugned orders. The judgment of the Division Bench referred to above has become final and binding. Therefore, the impugned orders not having been passed by the AFRC with its full quorum cannot be sustained. In the result all these writ petitions are allowed with the following directions:
(a) The impugned orders passed by the Admission and Fee Regulatory Committee in these Writ Petitions are all set aside.
(b) The Admission and Fee Regulatory Committee shall pass fresh orders in the matter in accordance with law, as expeditiously as possible and at any rate within a period of two months of the date of receipt of a copy of this judgment.
(c) The fee fixed by the Admission and Fee Regulatory Committee as per the impugned orders in these Writ Petitions shall continue to be in force as provisional fees until fresh orders are passed by the Admission and Fee Regulatory Committee fixing the fees of the respective colleges in accordance with the above directions. There shall be no order as to costs”.
5. Once the said orders had been set aside, it was not open for the Committee to cling on to the said order to fix the fee, in the respective cases. A fresh consideration was required in the matter, which has not been done. For that reason itself, the impugned orders in these batch of cases are to be set aside.
6. In our interim order dated 14/1/2020, we have called upon the colleges to furnish statements taking into account the parameters specified u/s 11 of the 2017 Act. Paragraphs 16 and 17 of the said order reads as under:-
“16. Section 11 of the 2017 Act, has provided certain guidelines for fixing the fee. It would only be appropriate to analyse to what extent it will be useful. The location of the private medical educational institution and the nature of the medical course may not be relevant as we are only concerned with MBBS course and in a place like Kerala, location of the college may not make any difference. Though an attached hospital is mandatory for the college, the income and expenditure of the hospital cannot be factored in for fixing the fee. Hospital has to be treated as a separate establishment of the college, and it's profit or loss cannot have any bearing on the fee payable by the students. To have a clear understanding of the investment and expenditure of the college the following factors become relevant:
(a) The cost of land and building. It depends upon date of acquisition of land and construction of building. But the entire cost of land and building cannot be factored for determination of the fee. The return of investment to the Management should be in a phased manner, for example over a period of twenty five or thirty years. Hence a small percentage of the investment in land and building can be factored in.
(b) As far as infrastructure is concerned it is similar to land and building, since it is a one time investment and the cost could be recovered only in a phased manner. Hence a small percentage of the value of infrastructure alone can be factored.
(c) With regard to equipments, the expenditure has to be factored, but spread over for a specified number of years, probably the life of equipments.
(d) The salary and allowances paid to the teaching and non-teaching staff are to be taken at actuals.
(e) The expenditure on administration and maintenance of the medical educational institution have to be computed at actuals.
(f) If there is any other expenditure it has to be specified by the Management.
17. Once these figures are available, and ascertained, the actual expenditure that would be incurred by the College during the concerned academic year can be ascertained. A reasonable percentage can be added to the aforesaid figure as surplus for future development. This will give a clear idea of the total expenditure the college may have to incur, and when divided by the number of students, it should be the fee that could be fixed. If such a method is adopted, it would give a clear indication that the college is not profiteering or the fee would be non exploitative and reasonable.
In the light of the aforesaid discussion the following interim order is passed:
Petitioner colleges shall provide a statement containing the following particulars for each academic year, accompanied with an affidavit swearing to the correctness of the statement, within a period of three weeks from today. A list of documents in support of the statement shall also be furnished.
(a) The cost of land and building with date of acquisition of land and construction of building.
(b) List and value of infrastructure.
(c) List of equipments, it's value and approximate life.
(d) The salary and allowances paid to the teaching and non-teaching staff.
(e) The expenditure on administration and maintenance of the medical educational institution.
(f) Any other expenditure.
(g) Surplus for future development.”
7. In the statements so filed, the petitioners had given detailed estimate of the expenditure incurred by them on all the incidents of expenditure, based on their audited statement of accounts for the academic years 2017-18 and 2018-19 and the estimation made for the academic year 2019-20.
8. The Committee had been constituted in terms of S.3 of the Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act, 2017 (hereinafter referred to as the '2017 Act') and the powers and functions are determined u/s 8. One of the functions of the Committee is to determine the fee that may be charged by the institution in respect of each medical course. The fee is to be determined in terms of S.11, which reads as under:-
“11. Factors for determination of fee. - (1) The Committee shall determine the fee that may be charged by a private medical educational institution in the manner as may be prescribed, considering the following factors, namely:-
(a) the location of the private medical educational institution;
(b) the nature of the medical course;
(c) the cost of land and building;
(d) the available infrastructure, teaching and non-teaching staff and other equipments;
(e) the expenditure on administration and maintenance of the medical educational institution;
(f) a reasonable surplus required for growth and development of the medical educational institution;
(g) any other relevant factor.
(2) The Committee shall, before fixing any fee, give the institution a reasonable opportunity of being heard:
Provided that no such fee as may be fixed by the Committee shall amount to profiteering or commercialization of education.
9. An appeal is provided in terms of S.12 of the Act, which reads as under:
“12. Appeal. - Any person aggrieved by an order of the Committee, may prefer an appeal, within thirty days from the date of such order, before the High Court."
By an order dated 28/11/2017, a Division Bench of this Court while considering certain unnumbered appeals held that though no specific rules have been framed for preferring an appeal u/s 12, it would only be appropriate to number the appeal as writ petition. It was held at paragraphs 5 and 6 as under;
“5. The learned Government Pleader submits on instructions obtained from the Principal Secretary, Health and Family Welfare Department, that necessary Rules under the Act would be framed within 30 days. There cannot be any vaccum till the Rules are framed. In the said circumstance, before considering the matters as 'Appeals' in terms of Section 12, this Court finds it fit and proper to have the matters filed as 'Writ Petitions' as it was being done earlier, satisfying appropriate court fee, which however shall be subject to the proper court fee to be paid, if it were to be an appeal, once the rules are framed and finalised. This is more so, since, even if a statutory remedy is available, it is of course possible for this Court (in appropriate circumstances) to entertain Writ Petition, invoking the power and jurisdiction as provided under the Constitution of India. It is ordered accordingly. This arrangement will continue, till proper Rules are framed and brought into existence.
6. In the above circumstance, the Registry is directed to return the above proceedings to the appellants, to have the same present in the form of 'Writ Petitions'. While filing the Writ Petitions as above, the proceedings now returned by the Registry shall be attached along with that, as part of the records and the petitioners will be at liberty to proceed with the matter, based on the 'vakalath' already filed (where the entry could be corrected by the Registry as to the nomenclature).”
Therefore, according to the petitioners, all the above writ petitions are in the form of an appeal and this Court while exercising the power of an appellate authority is entitled to interfere with the orders passed by the Committee and fix the fee.
10. We have gone through the orders passed by the Committee in all these cases. In fact, in all the cases impugned by the management, the Committee was considering the determination of fee for the second time. But what we find from the records is that all these orders were set aside by a Division Bench of this Court in KMCT Medical College's case (supra) and the matter was remitted back for fresh consideration.
11. Perusal of the impugned orders would show that the Committee did not consider the same afresh whereas the Committee gave notice of hearing for each of the managements and thereafter concurred with the view expressed by them earlier and no modification was made.
12. When an order had been set aside by this Court, it was incumbent on the part of the Committee to have considered the determination of the fee afresh rather than confirming their earlier view. Committee apparently proceeded on the basis that the earlier orders were set aside only on account of the fact that there was no proper quorum. In fact, the challenge made by each of the petitioners/managements was that the Committee had excluded various items of expenditure without any basis. Perusal of the earlier orders passed by the Committee also would indicate that they have not followed a proper method to analyse and determine the fee. That apart, all the managements, 19 in number were given notice for hearing on 3/7/2019 with an interval of 15 minutes, which itself would justify the contention of the writ petitioners that they were not properly heard in the matter. We are of the view that when a statutory authority is enjoined with the power to undertake a quasi judicial function, definitely the parties should be given a fair opportunity to justify their claim. In the cases on hand, it is quite clear that the Committee failed to give sufficient opportunity to the management for a hearing, which would amount to violation of the principles of natural justice, and on that ground also, the impugned orders are liable to be set aside.
13. Determination of fee for self financing institutions have been the subject matter of a large number of judgments and in fact, a Division Bench of this Court has crystallised the earlier judgments of the Apex Court in Kerala Self Financing Dental College Managements Consortium v. State of Kerala and another (2017 (4) KLT 809). In the above case, this Court considered the judgment in TMA Pai Foundation v. State of Karnataka [(2002) 8 SCC 481], P.A. Inamdar and others v. State of Maharashtra and Others [(2005) 6 SCC 537], Modern Dental College and Research Centre and others v. State of Madhya Pradesh and Others [(2016) 7 SCC 353] and it is held at paragraphs 39 to 43 as under:
“39. From the aforesaid series of decisions of the Apex Court what we understand is that such institutions being unaided private medical colleges have their fundamental rights under Article 19(1)(g) of the Constitution as they are carrying on an “occupation” and that right includes right to fix fee which can only be regulated in terms of Article 19(6) to the extent of authorising the State to check for profiteering and capitation fee alone while ensuring reasonable profit/surplus. The judgments don't authorise the State to either control the occupation of these colleges much less fix the fee. In other words, the State cannot, through the Committee set up under the Ordinances or the Act, start dictating to the institutions as to what would be reasonable expense and what would be an unreasonable expense; what expense can be allowed to be part of the fee and what expense cannot be a part of the fee. The State before disallowing whole or part of any expense would have to point out the reasons that why allowing such an expense would be profiteering or allowing capitation fee.
40. In our view, whether an institution considers an expense as legitimate for the proper conduct of the college and education, it has to be left to them and cannot be controlled, reduced or disallowed by the Committee under the garb of fee fixation and/or regulation. The Apex Court has repeatedly held that there has to be financial autonomy, which is an integral part of the right to set up an institution and thus, an integral part of the right under Article 19(1)(g) of the Constitution. Viewed in this light, we do not find any warrant for reading the decision in the Modern Dental College & Research Centre's case (supra) as in anyway, now authorising or giving the State a carte blanche to fix the fee. While the decisions have consistently held that the enquiry, as authorised, would be limited to two points of profiteering and capitation fee, what is suggested by the learned Advocate General is just the opposite as to what, in the opinion of the Committee, should be reasonable fee. We cannot accept this and will show how the provisions of the 2006 Act have been changed in the Ordinances and the 2017 Act, to achieve, what is submitted by the learned Advocate General and what is not there in the decisions aforesaid, rather the provisions of the Ordinances and the 2017 Act if so read, as suggested by the learned Advocate General, are in teeth of the judgments.
41. In fairness to the learned Advocate General, we must note his stand. It was his submission that, while the Apex Court in the decision of Modern Dental College & Research Centre’s (supra) now fully authorised the State to fix the fee as it thought reasonable, in respect of admissions to private unaided medical colleges, which was, as noted above, is the inspiration for series of Ordinances and the 2017 Act that followed in the State. The Apex Court had upheld the provisions of the Madhya Pradesh Act of 2007, which is similar to the Ordinances and Kerala Act 15 of 2017, and that being so, it was futile to challenge the validity of the 2017 Act or any provision thereof. Having considered the matter, we do not think that the submission of the learned Advocate General is correct.
42. Very briefly stated, the Kerala Act of 2006 follows the principles as laid down in the series of judgments starting from T.M.A.Pai Foundation's case (supra) to P.A. Inamdar's case (supra) where emphasis was on the financial autonomy of such colleges to fix their admission fee and the scrutiny by the State under its regulatory power was then limited to finding out and deleting financial consideration amounting to profiteering and capitation fee, but leaving a reasonable surplus. Whereas, in the present Ordinance and the Act 15 of 2017, this has been given a total go by. The provisions would show that now it would be Admission-cum-Fee Regulatory Committee that would fix the fee taking into consideration various aspects, which fee as fixed by the Committee would not allow profiteering or charging of capitation fee. The whole concept of financial autonomy of the medical colleges and its primacy has been deleted. The entire focus has been changed, virtually restoring the position which prevailed after the decision of Unni Krishnan (supra) and was disapproved in T.M.A. Pai Foundation's case (supra).
43. As noted earlier, there is similarity in the provisions of the Ordinances and the 2017 Act of this State with the Madhya Pradesh Act of 2007, but even so, the Apex Court in Modern Dental College & Research Centre (supra), while dealing with the 2007 Madhya Pradesh Act has clearly held that the financial autonomy of colleges have to be maintained and the State Committee will have a limited role to scrutinize the fee proposed for its exploitations alone. It virtually read down and explained the provisions of the Madhya Pradesh Act of 2007 accordingly, as earlier noticed.”
14. Still further, yet another Division Bench of this Court while remitting the above matters to the Committee in KMCT Medical College's case (supra), held at paragraphs 16 and 18 as under:-
“16. Though it was held by the Division Bench in the passages extracted above that the only two grounds on which the fee suggested by the educational institutions could be scruitinized by AFRC are to see whether it was tainted with the element of profiteering and capitation fee, we are of the opinion that in addition the AFRC would also have to examine whether the proposed fee was reasonable, whether it was non exploitative and also whether the reasonable surplus generated was proposed to be used for the benefit of the institution itself. The above parameters as evident from the law laid down by the Apex Court in the decisions commencing from TMA Pai (supra) to the decision in Modem Dental College (supra) cannot be lost sight of or ignored. Therefore, we hold that in addition to the considerations to which the Division Bench in K.S.F.Dental College Managements Consortium v. State of Kerala (supra) has adverted to, the other parameters stipulated by the Apex Court would also have to be made part of its scrutiny by the AFRC.”
“18. To sum up therefore, the AFRC would have to subject the fee suggested by an educational institution to a close scrutiny to ascertain whether the fee was reasonable, whether there were elements of profiteering or capitation fee therein and also to see whether the proposed fee was non exploitative. Though the fee is expected to vary from college to college there cannot be a variation that is beyond reasonable proportions. This is because for the conduct of an MBBS course, the requirements would normally be identical, though the expenditure may vary marginally depending on the location of the college, the infrastructure provided as well as the facilities offered. Therefore, the conclusion as to whether the fee fixed is reasonable or not would also depend on a comparison of the fee charged by other colleges under similar circumstances. Such an examination also would be necessary in order to ensure that the fee charged is reasonable. The fact that it is the students and their parents who have to bear the fee that is stipulated, that it is they who are likely to be the victims of the exploitation and profiteering at the hands of the medical institutions are also facts that would have to be borne in mind, while scrutinizing the legitimacy of the proposed fee. While, the AFRC can only regulate the fee charged, going by the dictum in P.A.Inamdar v. State of Maharashtra (supra) where the proposed fee is found to be exploitative, a reasonable fee could be fixed by the AFRC, placing reliance on the materials produced before it. The said power is inherent in the power to regulate the right of a medical educational institution to fix its fee, such regulation would include the power to exclude the elements of profiteering, capitation fee, unreasonableness and exploitative factors and to confine the fee within permissible limits. Unless such a power is conceded, it would be futile to say that the right to fix fee of an educational institution is subject to regulation by the AFRC.”
15. Of course, in terms of S.11, no rules have been prescribed. But while determining the fee of a private medical Institution, S.11 lays down certain parameters which are required to be taken note of, before finalising the fee. We have made an attempt by calling upon the respective colleges to provide the details of the expenditure incurred by the college while taking into account the stipulations in S.11 and in our interim order dated 14/1/2020. We have specifically requested them to exclude the income and expenditure of the hospital. Some of the petitioners have provided such a statement, whereas some of them had given a consolidated income and expenditure including that of the hospital taking into account the fact that it is not separable. We do not think it appropriate for us to fix the fee ourselves by engaging a Chartered Accountant as it would only be proper that the Committee itself examines the claims and give a reasoned order.
16. While undertaking such an exercise, the Committee shall consider whether the expenditure mentioned by the respective institutions are allowable or not. We have specified certain parameters in paragraphs 16 and 17 of our interim order dated 14/1/2020, which we have already extracted above. The petitioners shall file appropriate statement before the Committee justifying the fee structure for the respective years and on that basis, the Committee shall verify the same and if any exclusion is to be made, the same has to be specifically indicated and thereafter, the fee can be fixed. While fixing the fee, two factors are required to be considered. One is whether the estimate of expenditure specified by the respective institutions are in accordance with the audited balance sheet and in the absence of audited balance sheet, whether the estimation is based on provisional profit and loss account. Secondly, it has to be verified whether any expenditure mentioned by the college has to be excluded from the estimate. If the figures are given based on audited balance sheet, the only aspect to be considered
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is whether any of the expenditure is to be excluded or not. If the audited balance sheet is not available, provisional profit and loss account could be verified and the expenditure ascertained. Once the exclusion is complete, it may not be difficult to arrive at the fee structure taking into account the number of students. The fee structure of each of the institutions may vary, depending upon the expenditure incurred by them. It may not be possible to have a uniform fee structure for every college. Some colleges may provide more facilities and incur more expenditure. We cannot insist that all the colleges should function only with the basic amenities, faculty, staff etc. However, if a fee structure has been fixed for a college in an academic year, it could have a bearing for fixing the fee structure for future years, unless there is change in circumstances, by way of income and expenditure. 17. While doing so, the Committee shall not have regard to any of the earlier orders passed by them and independent orders may be passed after giving a fair opportunity to the petitioners to explain the expenditure and any deficiency in their statements. The petitioners shall also file statements in the manner prescribed by us, before the Committee and the Committee shall after examining the same, pass a reasoned order with all details. The entire exercise shall be completed within a period of six months from the date of receipt of a copy of this judgment. Until such time, the fee fixed by the Committee shall be treated as provisional. 18. Yet another contention urged by the management is regarding the direction by the Committee to pay 5 lakhs from 20 lakhs collected from NRI category students, to the corpus fund for awarding scholarship to BPL category students. Though the Committee has the power to fix the fee to be collected from NRI category students, there is no power conferred on the Committee to pay portion of the said amount for any other purpose. Section 8 of the 2017 Act, which regulates the functions of the Committee does not provide any such power. Hence, the said directions in the impugned orders are liable to be set aside. 19. WP(C) No. 29443/19 has been filed by a student who has joined the first year MBBS course in D.M. Wayanad Institute of Medical Sciences. He has challenged the order passed by the Committee on 6/7/2019 fixing the fee for the academic year 2019-20 at 6,58,900/-. The very same impugned order has been challenged by the management in WP(C) No. 20277/2019. Since we have already set aside the impugned order, nothing further survives to be decided in this case. Writ petitions are therefore allowed, setting aside the impugned orders, and the Committee is directed to consider the matter afresh in the light of the aforesaid observations and after affording sufficient opportunity to the petitioners to explain their statements.