State’s Authority to Regulate Private Unaided Schools’ Fee Structure during Emergencies

1. Introduction

This commentary examines the Uttarakhand High Court Judgment in “Welham Boys School Society Through Its Secretary v. State of Uttarakhand,” delivered on January 2, 2025. The dispute centered on government orders issued during the COVID-19 pandemic, wherein the State of Uttarakhand regulated how private unaided residential schools could charge fees for services that students did not or could not avail during lockdowns.

The parties to this proceeding comprised several well-known private unaided residential schools (collectively referred to as the Petitioners) and the State of Uttarakhand (the Respondent). The key legal question revolved around whether the State possessed the authority to limit the schools’ fee structures under its executive power, specifically when schools were forced to close their residential facilities and provide only remote or online learning.

The Petitioners sought the quashing of two Government Orders, dated January 15, 2021, and March 22, 2021, which restricted private unaided schools to charging only tuition fees while physical classes and in-person facilities remained unavailable to students.

In this Judgment, the Court delineates the boundary between the schools’ right to set fees and the State’s right (and obligation) to intervene. It clarifies that while private institutions enjoy autonomy in their financial decisions, they must not engage in profiteering or commercialization of education, particularly under extraordinary circumstances (like pandemic-driven lockdowns).

2. Summary of the Judgment

The Uttarakhand High Court dismissed the petitions filed by the schools and upheld the validity of the impugned government orders. The Court’s main conclusions are:

Private unaided schools cannot charge fees for services not actually utilized by students (such as hostel or boarding expenses) during lockdown or remote learning periods.
The State does possess the executive authority under Article 162 of the Constitution of India to regulate or restrict fees to prevent profiteering, protect public welfare, and ensure children’s education is not disrupted.
Regulating schools’ fee structures in extraordinary situations (e.g. pandemics) does not violate the schools’ rights to set their own fees, provided such regulations are reasonable and intended to protect parents/guardians from unwarranted financial burden.
The policy behind this restriction is formidable given the Constitution’s welfare obligations and the recognized principle that education is a charitable activity, not a commercial venture.

Consequently, the Court concluded that these government orders were a permissible and necessary policy measure responding to an emergency situation, and did not exceed constitutional boundaries.

3. Analysis

a) Precedents Cited

The Court engaged with a variety of precedents from the Supreme Court and past High Court rulings to clarify the extent of state power and the proper scope of judicial review regarding fee regulation in private educational institutions:

State of Bombay v. R.M.D. Chamarbaugwala (AIR 1957 SC 699): Recognized that educating students is essentially a public function and deemed a charitable activity.
Unni Krishnan, J.P. & Others v. State of Andhra Pradesh (1993) 1 SCC 645: Established that commercialization in education is impermissible, emphasizing that educational institutions operate on a “no profit, no loss” principle.
T.M.A. Pai Foundation & Others v. State of Karnataka & Others (2002) 8 SCC 481: Reiterated that while private educational institutions can set their fees, charging exorbitant or capitation fees is prohibited.
Islamic Academy of Education & Another v. State of Karnataka & Others (2003) 6 SCC 697: Permitted the constitution of regulatory bodies to ensure fairness in fee collection by private educational institutions, eliminating profiteering or exploitation.
Modern Dental College & Research Centre & Others v. State of Madhya Pradesh & Others (2016) 7 SCC 353: Reaffirmed that the existence of private educational institutions should not lead to commercial profiteering; they may generate a reasonable surplus but must remain true to charitable aims.
Indian School, Jodhpur & Another v. State of Rajasthan & Others (2021) 10 SCC 517: Confirmed that State Governments can intervene in private school fee structures to prevent profiteering, especially during extraordinary events.

b) Legal Reasoning

The Court anchored its reasoning in Article 162 of the Constitution of India, which endows the State with executive power in any sphere upon which the State Legislature can legislate. In the absence of specific contrary legislation, executive action may validly fill the gap, especially in times of emergency or when overriding public interest demands intervention.

Crucially, the Court underscored that educational activity is recognized as a charitable function, rather than a standard commercial endeavor. Relying on a line of Supreme Court decisions, it reiterated that private schools cannot charge beyond justifiable costs. When schools switched to online teaching, outlays such as boarding, transportation, and co-curricular facilities were neither utilized by nor available to students; therefore, any fees under these heads would effectively be profiteering.

The Court also emphasized that while schools have wide latitude in structuring their internal financial affairs, their autonomy is not absolute. If an extraordinary situation arises—for example, a pandemic forcing school closures—the State acts as “custodian of public good” to ensure that parents are not burdened unfairly, and children’s education remains accessible.

c) Impact

This Judgment solidifies the State’s power to regulate fee structures of private unaided schools under exceptional circumstances. The key takeaway is that schools must align fees with actual services provided, especially during crises. In the broader landscape of education law, the Judgment clarifies and affirms:

A heightened principle that the right to set fees is not unconditional when pandemic-related or other emergencies disrupt normal school operations.
Future litigations arising from similar public health emergencies or unforeseen calamities may look to this Uttarakhand High Court decision for support, thereby strengthening parents’/guardians’ arguments against paying for unavailable services.
Legislative or executive instruments at the state level (in the spirit of Article 162) are permissible to curb profiteering, ensuring fairness and welfare for both students and educational providers.

4. Complex Concepts Simplified

Several legal and constitutional principles appear throughout the Judgment. Below is a simplified explanation:

Article 162 (Executive Power of the State): This provision allows the State Government to issue policies or orders on matters where the State Legislature can create laws. If no law directly governs a crisis, the Government can act unilaterally, subject to constitutional limits.
Profiteering in Education: The Supreme Court has repeatedly stressed that education must be run as a charitable endeavor. Schools can make a reasonable surplus for development, but cannot exploit or overcharge parents and students.
Welfare State Principle: The Constitution envisions that the State ensures social and economic welfare; therefore, intervening in private transactions (e.g., school fee arrangements) can be justified to protect public interest.
“Quid pro quo” in School Fees: This concept means fees should only be collected for services actually provided or availed. If classes or facilities (like hostels) are not running, schools should not charge for them.

5. Conclusion

The Uttarakhand High Court’s decision in “Welham Boys School Society Through Its Secretary v. State of Uttarakhand” reaffirms the crucial role of State Governments in safeguarding public interest, particularly during times of crisis that impact the regular functioning of educational institutions. While private unaided schools enjoy considerable freedom in establishing their fee structures, that freedom is not unbounded; it must be balanced against constitutional mandates to avoid profiteering and protect families from undue financial strain.

Ultimately, this Judgment underscores that no institution, however autonomous, may act entirely without oversight if doing so runs contrary to the principles of welfare, fairness, and equity that underlie India’s constitutional framework. Through its analysis and reliance on long-standing precedents, the Court makes it clear that the relationship between schools, parents, and the State is one of mutual accountability—essential to preserving the integrity and charitable nature of education.

The Court’s endorsement of these state-level regulatory measures will resonate beyond Uttarakhand’s borders, providing future guidance on regulating fees during emergencies or other extraordinary events across India.