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citation codes
Case Number
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  • s. 2(j) of the Industrial Disputes Act, 1947,
  • SOCIETIES REGISTRATION ACT 1860
  • grants.8. Rule 13 of the said Code
  • provisions of Rule 2 of the Code
  • Indian Companies Act, 1956,
  • Rule 37 of the Code.18.
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
  • s. 2(j) of the Industrial Disputes Act, 1947,
  • SOCIETIES REGISTRATION ACT 1860
  • grants.8. Rule 13 of the said Code
  • provisions of Rule 2 of the Code
  • Indian Companies Act, 1956,
  • Rule 37 of the Code.18.
Smart Summary

Structured Summary of the Opinion (Patel, J.)

Factual and Procedural Background

These three civil applications arose from the operation of the State Government's Grant-in-Aid Code for Secondary Schools. The matters concern (1) a Society at Anjansinghi (Special Civil Application No. 420 of 1966), (2) a Society at Shirkhed (Special Civil Application No. 421 of 1966), and (3) a Sakharkheda Society (Special Civil Application No. 694 of 1965). In the first two matters registered Societies applied for permission to open secondary schools (initially for Standard IX). Earlier applications by the Anjansinghi Society in 1963 and 1964 had been rejected; an October 30, 1965 application was refused by the Deputy Director of Education on 12 April 1966 on the ground that need had been fulfilled by permitting another Society to open a school. An appeal was dismissed. The Shirkhed Society's application (first made on October 29, 1965, and formally on November 3, 1965) was rejected for being after the prescribed date and for defects in registration; another outside Society had applied for the same village and a like threat was given. In the Sakharkheda matter a different Society (Mehkar Shri Shivaji Education Society) obtained permission to open Standards VIII and IX for 1965–66; the Sakharkheda petitioners challenged that grant as contravening the Government's rules. The petitioners in the first two matters also challenged provisions of the Grant-in-Aid Code (in particular sub-rules of r.3 and provisions of r.2).

Legal Issues Presented

  1. Whether the clauses (sub-rr. (1) and (2)) of Rule 3 of the Grant-in-Aid Code (regarding need in the locality and competency/reliability of management) are constitutionally valid.
  2. Whether the Grant-in-Aid Code rules (executive instructions) which require prior permission and allow non-recognition can lawfully prevent a Society from running a secondary school and thereby infringe fundamental rights under Article 19(1) (particularly clauses (c), (f), (g)) and Article 14.
  3. Whether a Society registered under the Societies Registration Act is a "citizen" for the purposes of invoking Article 19 and related fundamental-rights protections.
  4. Whether the rules are impermissibly vague/arbitrary or confer subjective unchecked discretion on the executive and thereby fail the test of reasonableness under Article 19.
  5. Whether procedural safeguards (natural justice / hearing) were required and, if absent, whether rejections of applications were invalid.
  6. Whether executive instructions (as opposed to statutory rules) can, by non-recognition, prevent students of an institution from being presented for Board examinations and thus effectively deny access to further education.
  7. Whether estoppel can prevent the petitioners from challenging the rules where they had applied for recognition under those same rules.

Arguments of the Parties

Petitioners' Arguments

  • The Grant-in-Aid Code rules (notably r.2 and sub-rr. (1) and (2) of r.3) are executive instructions without statutory force but operate to deny the petitioners the right to run schools and to send pupils to statutory Board examinations; those rules contravene Articles 19(1)(c), 19(1)(f) and 19(1)(g) and Article 14.
  • The clauses challenged are vague and do not provide standards or safeguards (e.g., definition of "need", "unhealthy competition", or "competent and reliable"), thus enabling arbitrary and discriminatory exercise of executive power.
  • The rules lack procedural safeguards such as the right to be heard; petitioners were not heard and decisions appear to have been taken on one-sided inquiries.
  • The effect of non-recognition (including blocking Board recognition and examination eligibility) effectively prevents access to university education and therefore has severe discriminatory consequences.
  • Estoppel should not bar challenge to the rules, especially since the challenge concerns fundamental rights.

Respondents' Arguments (as presented in the opinion)

  • Mr. Dharmadhikari contended that a registered Society is not a "citizen" and therefore cannot invoke Article 19; he relied on State Trading Corporation and Tata E. & L. Co. Ltd. decisions applying the "lifting the veil" doctrine.
  • It was argued that opening an educational institution is not "business" in the sense used in some statutes (relying on University of Delhi v. Ram Nath) and thus may not fall under Article 19(1)(g) in that sense.
  • The State justified the rules on budgetary and public-interest grounds: limited grant resources require regulation of the number of aided schools; rules aim to prevent unhealthy competition, malpractices, pressure on students/parents, and to safeguard interests of students, parents, institutions and the Department.
  • The State said the challenged rules are administrative instructions (executive in nature) and not statutory rules, and that committees and circulars guide inquiries into applications (naming an enquiry committee of specified officials).
  • Reliance was placed on authorities (e.g., Sidhrajbhai, Ram Jawaya) to support the position that executive/state action in areas of State activity may have effects on private enterprise or institutions without necessarily violating Article 19.
  • It was urged that estoppel and prior conduct (having applied under the rules) could affect the petitioners' ability to challenge the rules.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court (as stated in the opinion)
Dwarka Nath v. Bihar State [1959] A.I.R. S.C. 249 Held that rules made by Grant-in-Aid Code are executive instructions without statutory force. The opinion notes this holding and accepts that such rules may be executive instructions, but observes that because they can operate to deprive societies of legitimate activities, they must satisfy constitutional tests (reasonableness, non-discrimination) and may be invalid if they do not.
S.T. Corporation of India v. Commercial Tax Officer [1963] A.I.R. S.C. 1811 Doctrine of lifting the veil; a company is not a "citizen" under Article 19. Respondents relied on this to argue a Society is not a citizen; the Court distinguished that case and held it inapplicable to Societies registered under the Societies Registration Act, which are associations of persons and can sue on behalf of their members (who are citizens).
Tata E. & L. Co. Ltd. v. State of Bihar [1965] A.I.R. S.C. 40 Related to lifting the veil and limitations on companies invoking Article 19 rights. Relied on by respondents; Court held these authorities do not apply to registered Societies that represent associations of citizens suing through an officer.
Servants of India Society v. Charity Commissioner [1962] A.I.R. Bom. 12 Perspective that a Society under the Societies Registration Act is an association of persons (not a corporation) and sues on behalf of members. The Court relied on this decision to hold that a Society's petition is to be treated as one on behalf of its members (citizens), making Article 19 rights available to the petition.
Board of Trustees v. State of Delhi [1962] A.I.R. S.C. 458 Affirmation that a registered Society is an association of persons for certain purposes. The Court cited this as confirmation of the Servants of India Society position and to reject the contention that the Society itself cannot invoke Article 19.
University of Delhi v. Ram Nath [1963] A.I.R. S.C. 1873 Held that imparting education by a university/college was not "industry" under s.2(j) of the Industrial Disputes Act. The decision was considered but the Court held it was not authority for the proposition that education cannot be a "profession, occupation or business" under Article 19(1)(g); the Court treated the words as of wide import.
State of Madras v. V.G. Row (Bow?) [1952] S.C.R. 597 Tests for reasonableness of restrictions under Article 19. The Court invoked this authority as part of the framework for assessing whether the challenged rules were reasonable in substance and procedure.
Virendra v. The State of Punjab [1957] A.I.R. S.C. 896 Principles on reasonableness of restrictions on Article 19 rights. Used by the Court as part of the set of authorities formulating the reasonableness test to be applied to the challenged rules.
N.B. Khare (Dr.) v. State of Delhi [1950] S.C.R. 519 Need to consider substantive and procedural aspects when assessing reasonableness. Cited by the Court as part of the jurisprudential background on testing restrictions under Article 19.
Gurbachan Singh v. The State of Bombay [1952] S.C.R. 737 Authority on reasonableness of restrictions under fundamental rights. Included by the Court in the catalogue of cases providing tests applicable to the challenged Code rules.
Thakur Baghubir Singh v. The Court of Wards, Ajmer [1953] S.C.R. 1049 Subjective satisfaction of executive regarded as prima facie unreasonable. The Court cited this to underline that rules conferring unfettered subjective discretion are suspect under Article 19.
Messrs Dwarka Prasad v. State of U.P. [1954] A.I.R. S.C. 224 Where rights are curtailed without opportunity of being heard, the restriction cannot be sustained. The Court relied on this to emphasise the procedural requirement (hearing) where rights are curtailed by administrative action.
State of Assam v. Ajit Kumar Sarma [1965] A.I.R. S.C. 1196 State may prescribe conditions of grants by executive instructions; such instructions may not have force of law but can govern grant-in-aid. The Court accepted the observation that grants conditions can be executive instructions, but held that where such instructions operate to prevent legitimate activities of citizens and fail constitutional tests they must be invalidated.
Narayana v. State of Andhra [1959] A.I.R. A.P. 471 Rule of estoppel invoked under certain statutory contexts (as relied on by respondents). The Court observed that estoppel cannot apply in respect of fundamental rights and cited Behram Khurshid Pesikaka in that connection.
Behram Khurshid Pesikaka v. State of Bombay [1955] A.I.R. S.C. 123 Rule that estoppel cannot be invoked to deny fundamental rights. Applied by the Court to reject the respondents' contention that petitioners are estopped from challenging the rules.
Sidhrajbhai v. State of Gujarat [1963] A.I.R. S.C. 540 Consideration of whether non-recognition equates to infringement of Article 19 rights. Relied on by respondents; the Court distinguished that case because the examinations there were executive activities, whereas Board examinations here are under statutory Regulations, so deprivation by executive instruction could not be sustained.
Ram Jawaya v. State of Punjab [1955] A.I.R. S.C. 549 Government may carry on business by exercise of executive power; private parties affected need not succeed in challenging such State activity. The Court held the case inapplicable: the present situation involved statutory Board examinations (not purely executive business) and the State itself disclaimed statutory effect of the Code rules.
King-Emperor v. Sibnath Banerji [1945] L.R. 72 I.A. 241 Judicial Committee view that "executive power" includes making decisions as well as carrying them out. The Court acknowledged the wide view of executive power but held that executive power cannot supplant the need for legislation to affect citizens' legitimate activities; Article 358 and executive power did not validate the challenged rules.

Court's Reasoning and Analysis

The Court proceeded in a sequence of legal determinations, applying constitutional tests and cited authorities as follows:

  1. Status of the petitioning Societies: The Court accepted authorities (Servants of India Society; Board of Trustees v. State of Delhi) that a Society registered under the Societies Registration Act is an association of persons (not a corporation for this purpose) and thus the suit is regarded as brought on behalf of its members (who are citizens). Consequently the Societies could invoke Article 19 rights.
  2. Scope of Article 19(1)(g) and whether education can fall within it: The Court rejected the narrow reading that because imparting education is not "industry" it cannot be an occupation, profession or business for Article 19(1)(g) purposes. It held the terms are of wide import and education-related activities may fall within protection of Article 19(1)(g).
  3. Nature of the Grant-in-Aid Code rules: The Court acknowledged that earlier decisions (e.g., Dwarka Nath; Ajit Kumar Sarma) treat such rules as executive instructions without statutory force. The State's affidavits conceded these rules are administrative instructions. The Court nevertheless emphasized that whether statutory or executive instructions, where such rules operate to deprive citizens of legitimate activities they must satisfy constitutional tests (reasonableness under Article 19 and non-discrimination under Article 14).
  4. Reasonableness and Vagueness: Applying the established tests for restrictions on Article 19 rights (State of Madras v. V.G. Row, Virendra, N.B. Khare, Gurbachan Singh and related authorities), the Court found sub-rr. (1) and (2) of Rule 3 to be vague and lacking intelligible standards. "Need in the locality", "unhealthy competition", and "competent and reliable" were too indefinite, with no provision requiring a reasoned inquiry or compliance with principles of natural justice. Such vagueness affords unfettered executive discretion and potential for arbitrary patronage.
  5. Procedural safeguards and hearing: The Court found that no obligation to hear applicants was laid down and that petitioners were not heard; inquiries appear one-sided. Authorities (e.g., Dwarka Prasad) stress that where rights are curtailed a hearing is required. The lack of hearing and one-sided inquiry undermined the validity of the exercise of power.
  6. Effect on statutory Board recognition and further education: The regulations of the Maharashtra Secondary Education Boards make Board recognition contingent on recognition by the Education Department under the Grant-in-Aid Code. Therefore non-recognition under the Code effectively prevents schools from being recognised by the Board and students from appearing for Board examinations — in turn blocking access to university education. The Court held that using executive instructions to produce this chain of consequences offends Article 14 (discrimination) and cannot be sustained where rules are vague and lack safeguards.
  7. Distinguishing contrary authorities: The Court distinguished cases relied upon by respondents (Sidhrajbhai, Ram Jawaya). For Sidhrajbhai the Court noted the Government action there concerned executive activities, whereas here Board examinations were governed by statutory Regulations and could not be nullified by mere administrative fiat. Ram Jawaya's principle that the State may enter business did not assist because the State had acknowledged the Code rules were only administrative instructions and there was no statutory authority enabling the executive to prevent citizens' legitimate activities in the manner complained of.
  8. Emergency / Article 358: The Court observed that Art. 358 suspends restrictions in Article 19 only insofar as the State makes law or takes action it could otherwise do; but here the State had not enacted law and relied on executive power. The Court concluded Article 358 could not validate the challenged rules.
  9. Estoppel: The Court referred to the limits on invoking estoppel against fundamental rights, citing Behram Khurshid Pesikaka, and held that estoppel cannot bar the petitioners from challenging the constitutionality of the rules.

Holding and Implications

The Court's disposition and the legal consequences are:

Primary Holding:

  • The Court declared sub-clauses (1) and (2) of Rule 3 of the Grant-in-Aid Code invalid. The Court found these provisions vague, lacking standards and procedural safeguards, and constitutionally defective under the tests applied.

Direct Consequences for the Parties:

  • The Court held that the applications of the first two Societies (Anjansinghi and Shirkhed) had been wrongly rejected. The rule was made absolute directing that they be granted permission to start the school.
  • With respect to the third petition (Sakharkheda), because the State had already granted permission to respondent No.3 and because the Court's ruling invalidates the challenged parts of the Code relied upon to attack that grant, the petition by the Sakharkheda Society failed and the rule in that petition was discharged (i.e., challenge to granting permission to respondent No.3 was unsuccessful).
  • The Court ordered that there should be no order as to costs.

Broader Implications (as stated in the opinion):

The opinion emphasises constitutional limits on executive administrative instructions when they have the effect of denying citizens' legitimate activities and access to statutory benefits (such as Board examinations). It stresses the need for intelligible standards and procedural safeguards in rules that curtail rights. The Court did not expressly state that it was laying down a new binding precedent beyond the invalidation of the specific Code provisions challenged; the immediate consequence was the grant of permission to the first two Societies and dismissal of the third petitioner's challenge.

    The Sakharkherda Education Society v. The State Of Maharashtra

    Patel, J.:— These three civil applications arise out of the action of the State Government under the Grant-in-Aid Code for Secondary Schools.

    Special Civil Application No. 420 of 1966.

    2. Petitioner No. 1 is a Society registered under the Societies Registration Act of 1860 at Anjansinghi, Taluka Chandur, District Amravati, and petitioner No. 2 is its President. This Society made an application for permission to open a Secondary School, and it was proposed to start in the first year 9th class, as there was sufficient arrangement in the village for education up to standard VIII in the Zilla Parishad schools. First such application was made in 1963, which was rejected by respondents Nos. 1 and 2. Second was made in 1964 which met a similar fate. The Society made another application on October 30, 1965. It appears that respondent No. 3, which is another educational society which operated in Ashok Nagar, about 6 miles away from this village, also applied for permission to open a Secondary School at this village and in the first year to open class IX. The Deputy Director of Education, Nagpur, by order (Annexure 3) dated April 12, 1966, informed the petitioners that their request cannot be granted because the need of the place had been fulfilled by permitting another Society to open a school at the place. It also contained a threat that in case a school were started though permission was not granted and pupils were admitted, serious view would be taken by the Department. Appeal made by the petitioners to the State Government was dismissed, as shown by Ann fixture 5. The petitioners seek to challenge this order on several grounds.

    Special Civil Application No. 421/1966.

    3. Petitioner No. 1 is a Society registered under the Societies Registration Act and started by the residents of village Shirkhed, taluka Morshi, District Amravati. Petitioner No. 2 is its President. As in the case of the first Society, this Society also applied to start a school. An application was made on November 3, 1965, as required by the Act, though the first application was made on October 29, 1965, Annexture No. 1, but it was not in the prescribed form. Respondent No. 3 which is another Society at Lehgaon also made an application to start a school at Shirkhed which was an outside agency. The petitioners' application was rejected on the ground that the application was made after the prescribed date and that the Society was not registered. It also contained a similar threat as in the other case.

    Special Civil Application No. 694/1965

    4. This application is made by Sakharkheda Society, operating at Sakharkheda and is registered under the Societies Registration Act, 1860. The total number of the students of the schools from standard V to standard X in 1954 appeared to be 435. The Zilla Parishad runs a middle school in this village and the students number approximately 150. After passing the middle school examination, the boys join the petitioners' school. An application was made by Mehkar Shri Shivaji Education Society to open another school at this village but the permission was refused. It appears, the President of this Society, one S.V Deshmukh, a Pleader, is a Member of the Legislature and on March 9, 1965, he tabled certain questions in the Legislative Assembly. The questions and answers are (1) If it was the policy of the Government not to grant permission to open another High School, if in a village there is already a High School, and the answer, “Yes, taking into account the population of the village and also of adjoining area”. (2) If so, why was such permission granted to open High School at Lonar and why not at village Sakharkheda?

    “Answer: In village Sakharkheda permission to open a new High School was refused in 1964-1965; for Lonar, the permission was given by Madhya Pradesh Government in 1953.”

    5. Respondent No. 3, the Mehkar Society, then made an application for opening a school at this village. The Government seems to have granted permission to that society to open Standard VIII and IX for 1965-1966 and the petitioners seek to challenge this order on the ground that it contravenes the rules made by the Government for grant of such permission. In the first two petitions, the rules of the Grant-in-Aid Code are challenged on various grounds.

    6. The rules of the Grant-in-Aid Code are not framed under any particular statute. These rules purport to be framed under the Rules of Business under art. 166 of the Constitution and enable the State Government to utilise funds allocated in the Budget for educational purposes. Rule 2 provides for an application for starting and recognition of a school. It provides that an application shall be made in the form given in Appendix 1(1). It further provides that the reply must be made by the Deputy Director within three months of the receipt of the application or the subsequent date on which complete information is furnished. School should not be started unless previous permission has been granted and a school started without such previous permission shall not ordinarily be considered for recognition. Of importance is rule 3 which prescribes conditions for recognition of a school. These are:

    “(1) The school is actually needed in the locality and it does not involve any unhealthy competition with any existing institution of the same category in the neighbourhood.

    (2) The Management is competent and reliable and is in the hands of a properly constituted authority or managing Committee.

    (3) Its financial stability is assured.

    (4) Its premises are sufficiently healthy, well lighted and Ventilated..”

    7. There are about in all sixteen clauses with which we are not at present concerned. Challenge is made to sub-rr. (1) and (2) since nothing can be urged apparently against the other clauses which are intended to achieve certain specified objects, such as the existence of proper premises which ensures the health and well-being of the boys and the girls, satisfactory standard of education, obedience to directions regarding scales of fees and other matters, well-being of the staff, maintenance of proper records, proper discipline in the school etc. These can be regarded as reasonable conditions for the making of grants.

    8. Rule 13 of the said Code relates to grants, r. 86 defines the kind of grants and r. 87 lays down what amount of grant is to be given in proportion to the expenditure incurred by the school.

    9. Closely connected with these are the Maharashtra Secondary Education Boards Regulations, 1966, and more particularly under item 19, which is headed ‘Procedure for Recognition of Institutions by Division Boards’. Clause (2)’ is as follows:

    “(2) An application for recognition shall set out in full details the following particulars and, shall be submitted in triplicate:

    (iv) Whether the school has been recognised by the Education Department and if so the Standards for which it has been permitted to make provisions and the academic year in which it proposes to establish or has established the several Standards. (This is one matter amongst others that has to be mentioned)…

    (6) No secondary school which is not recognised by the Divisional Board concerned shall be permitted to present candidates for any final Examination conducted by it.

    (7) No secondary school shall be recognised or continued to be recognised by a Divisional Board unless it fulfills the following requirements, namely,

    (i) The standards V, VI and VII attached to the secondary school, if any, continue to be recognised by the Education Department…

    (xvi) The school shall comply with the provisions of the Secondary Schools Code of the State Government in so far as they are not inconsistent with the provisions of the Act and the Regulations.”

    10. The effect of these regulations is that if a school is not recognised by the Education Department under the Grant-in-Aid Code, the Secondary School Board cannot recognise it and no student taking education in such a school could appear for the S.S.C school leaving certificate examination held by these Boards.

    11. It has been held that rules made by the Grant-in-Aid Code are merely executive instructions or directions and have no statutory force, in Dwarka Nath v. Bihar State . [1959] A.I.R S.C 249.. In this case it was held that being the position, such rules cannot be saved and cannot, therefore, deprive the appellants of their rights in the properties of the school under its management. It is, therefore, argued that the rules contravene provisions of art. 19(1)(c), 19(1)(g) and 19(1)(f) on the ground that the petitioners have fundamental right to form an association, to carry on or to undertake legitimate activity of running secondary school at Anjansinghi and the rules which enable the State Government to refuse recognition are not saved by cl. (4) as they do not contain any guidance to the authorities concerned in the matter of refusing permission to start a school and they have no connection with public morality etc. and hence are void. During argument it was also contended that the rules were arbitrary and intended to enable discrimination between institution and institution and were hit by art. 14.

    12. The first objection of Mr. Dharmadhikari is that the Society is not a citizen as it is a registered body, and, therefore, it has no right to make an application claiming rights under art. 19 which are available only to citizens. He relies upon the decisions in S.T Corpn. of India v. Commercial Tax Officer . [1963] A.I.R S.C 1811. and Tata E. & L. Co. Ltd. v. State of Bihar . [1965] A.I.R S.C 40. where the Court adopted the doctrine of what is called lifting the veil. In the first case it was held that the State Trading Corporation, a Company registered under the Indian Companies Act, 1956, is not a citizen within the meaning of art. 19 of the Constitution and cannot ask for the enforcement of fundamental rights guaranteed to citizens under the said article. In the latter case, it was held that if the Company itself cannot make an application for enforcement of fundamental rights shareholders cannot be permitted to do so, by permitting the lifting of the veil. In our view, these decisions have no application. In Servants of India Society v. Charity Commr. . [1962] A.I.R Bom. 12, S.C 63 Bom. L.R 379. it was held by this Court that a Society registered under the Societies Registration Act, 1860, is not a corporation, but is merely an association of persons, though for certain purposes it is recognised as an entity. This view has been later affirmed by the Supreme Court in Board of Trustees v. State of Delhi . [1962] A.I.R S.C 458.. Though, therefore, such a Society can sue through its President by reason of the provisions of the Act, the suit must be still regarded as being on behalf of the members who constitute the Society. It is indeed not every association of persons who do business or carry on trade that can be regarded as falling within the decision of the Supreme Court in the State Trading Corporation case referred to above. To extend it to such associations would mean that it would extend to a partnership or even a joint family inasmuch as a partnership can sue in its partnership name and the joint family can sue through its Karta. The petition must be regarded as one made on behalf of the members of the Society who are all citizens of India and it is, therefore, tenable.

    13. Second objection of Mr. Dharmadhikari is that opening of an educational in stitution cannot be regarded as business and in support reliance is placed on University of Delhi v. Ram Nath . [1963] A.I.R S.C 1873.. The question in the said case was whether the work of imparting education conducted by the educational institution like the University of Delhi and the college run by it was industry within the meaning s. 2(j) of the Industrial Disputes Act, 1947, and the Court held that it was not. This is no authority for the proposition that it is not a profession, or occupation or business. These are words of wide import and whether or not gain is made by an institution, it cannot cease to be business. A contention was also made that inasmuch as art. 30(1) refers especially to educational institutions, art. 19(1)(g) could not be intended to include such institutions. The scope of art. 19(1)(g) and art. 30 very much differ. Article 19(1)(g) is a general guarantee of a particular kind of fundamental right in wide words, while art. 30 is intended to guarantee certain rights to minorities and unless in the enumeration of the rights, the right of education were mentioned, probably it would have been excluded. The difference in wording, therefore, cannot support this contention.

    14. Mr. Deshpande contended first that the right to form association carried with it the right to carry on all activities of an association and since the rule prohibited the Society from running the school it must be held to be invalid. The rule does not prevent the formation of an association. It may have the effect of not allowing the Society to run the school and this is clearly the subject-matter of art. 19(1)(g).

    15. Under art. 19 reasonable restrictions can be imposed in the interest of general public. The test of reasonableness has to be applied to each individual provision. In doing so, the Court must consider the nature of the right infringed, the underlying principle of the restrictions, the extent and the urgency of the evil sought to be remedied thereby, the disproportion of the imposition and the prevailing conditions. See State of Madras v. V.G Bow . [1952] S.C.R 597. and Virendra v. The State of Punjab . [1957] A.I.R S.C 896.. The restriction must be also reasonable from substantive as well as procedural points of view. N.B Khare (Dr.) v. State Of Delhi . [1950] S.C.R 519. and Gurbachan Singh v. The State of Bombay . [1952] S.C.R 737. Restriction of the right based on the subjective satisfaction of the executive is regarded as prima facie unreasonable. See Thakur Baghubir Singh v. The Court of Wards, Ajmer . [1953] S.C.R 1049.. If the right is curtailed without there being an opportunity of being heard, restriction cannot be sustained. Messrs Dwarka Prasad v. State of U.P . [1954] A.I.R S.C 224.

    16. It is true that some times even subjective satisfaction may be regarded as reasonable provided it is otherwise controlled by proper safeguards as by prescribing the conditions for the exercise of them. In deciding the reasonableness of the restriction the Court indeed is not concerned with the policy or the likelihood of its abuse. The tests however formulated above must be satisfied.

    17. Clause (1) of r. 3 is too vague to afford any standard whatsoever both as to need in the locality and also as to unhealthy competition with existing institution. Clause (2) is also equally vague as competency and reliability of the management without any standard is meaningless. Again, there is no provision that any particular authority shall make a reasonable inquiry into each of these matters and thereafter impartially determine each of the elements necessary to be considered. These rules, therefore, cannot be regarded as reasonable or reasonably necessary. The question as to whether they are in the public interest must also be considered in this connection. It is well-known that the schools are very much congested and every sensible person will wish that the number of students in each class are limited so that the teacher could easily attend to all the students and impart proper instruction. The public is realising the fruits of monopoly businesses. It is well experienced that it is only competition that induces efficiency. If there are two or three institutions in a locality, those who want to study have got a choice and they would necessarily select the institution where the standard of education imparted is very high. In para. 2 of the affidavit on behalf of the first two respondents made on August 19, 1966, in justification of this rule, it is said:

    “Every year provision is made in the Budget-estimate for payment of grant-in-aid to the secondary schools. Having regard to the funds available, it is necessary to regulate the number of secondary schools to be opened every year and the payment of these grants. The Code contemplates giving of certain benefits and facilities by the Government to the secondary schools and the grants are paid in accordance with Rule 37 of the Code.”

    18. In para. 4, it is said:

    “The provisions in the Code are made in the interest of the students and the institutions for serving the cause of education. They are also made to duly safeguard the interest of the Department and also of the parents and guardians. The provisions of the Code have been made for securing a healthy system of imparting education for the coming generation of the citizens.”

    19. In para. 5, it is said:

    “The provisions of Rule 2 of the Code are made in order to ensure the excellence of the institution to be permitted, recognised and aided….. Therefore, it is in the public interest and also in the interest of the institution, parents and students to have a check at the very inception…. It is not difficult to perceive that the said rule is in the public interest and is designed to prevent, apart from other things, unhealthy competition in the field of Education which itself indirectly would have deleterious influence on the general public… The grant-in-aid which is given by the Government to a recognised school is on a percentage basis of admissible expenditure regulated by the provisions of Chapter 13 read with Schedule A of the Code.”

    20. In para. 6 unhealthy competition is explained by saying,

    “There is ground to believe that pressure is brought upon the students as well as their guardians in one way or the other for leaving one school to join the other Mostly without consideration of the quality of Education imparted. Many times the Authorities have received complaints that schools are opened by persons with the ulterior motive which has got many times group rivalries as its genesis.”

    21. It also refers to certain malpractices.

    22. It is hardly possible for any person to subscribe to the view that merely because there have been malpractices in the past, the very opening of an institution should be prevented in the expectation that every institution, that is started will commit malpractices. The prevention of unhealthy competition i.e undue pressure either on students or on parents can be prevented by appropriate rules and not by refusing to recognise a school altogether in its inception. Though justification is sought to be made for this rule, the facts of the third petition clearly indicate that merely because some influential person asked a question in the Legislature, permission was granted within a very short time to start a school, though conditions were not fulfilled and it would result into competition as complained by Sakharkherda Educational Society. Regarding the competency of the management, no standards are laid down and in the affidavits submitted no particular reason is given for making such a provision. Originally, cl. (2)(ii) of r. 2 provided that a management intending to start Standards V, VI, VII and VIII must deposit a sum of not less than Rs. 3,000 in cash and for each subsequent standard must deposit additional sum of Rs. 1,000 in cash. Financial stability can be assured by some such provision. Competency and reliability can be assured by proper rules in this connection. Such vague and undefined standards cannot be used for refusing to recognise certain schools and recognise others. Such vague terms afford the executive opportunity to confer patronage.

    23. As to the availability of funds in the budget it can hardly be accepted that refusing permission to start a school is the remedy. Instead of giving a sum in proportion to the allowable expenditure of a school, the grant could be based on be much percentage per student on the basis of such number of students in a class. In such a case all schools would be treated fairly and equally.

    24. As to the enquiry, on behalf of the State it was urged that a Committee was constituted consisting of (1) Chairman, Education Committee of Zilla Parishads, (2) Parishad Education Officer, Zilla Parishad and (3) a member of Secondary School Certificate Examination Board. It was also said that a circular was issued which laid down certain principles for the guidance of these authorities. No provision, however, is made anywhere requiring compliance with rules of natural justice i.e of being heard in the matter. No obligation is laid upon the authority to hear the matter and decide impartially. These instructions are again not adequate and cannot serve the purpose. There is justification in the grievance. Admittedly the petitioners were not heard. Some sort of enquiry was made behind their back, probably from respondent No. 3 as alleged in their reply. This was wholly one-sided. There is no record of the same and there are no findings based on proper material.

    25. In para. 5 of the same affidavit referred to above, it is stated, in days when no permission was needed, some schools were started and they never fulfilled conditions prescribed for recognition. Ultimately, students who went to such schools, their parents and teachers all suffered, including the general public. It is, therefore, said that these rules are necessary. This can be assured by proper rules. Merely because, in few cases there was cause for complaint such vague rules are not a remedy. It is not unknown that every great institution of today in the field of activity rose from very humble beginnings and as time went, it prospered and grew into a fine educational institution. In the beginning each one of these had also to struggle and by maintaining proper standards of education to attract students. Our attention is invited to the decision in State of Assam v. Ajit Kumar Sarma . [1965] A.I.R S.C 1196. where Mr. Justice Wanchoo says (p. 1199);

    “…What grants the State should make to private educational institutions and upon what terms are matters for the State to decide. Conditions of these grants may be prescribed by statutory rules; there is however no law to prevent the State from prescribing the conditions of such grants by mere executive instructions which have not the force of statutory rules.”

    26. Having observed as above, the Court held that (p. 1200):

    “…Such conditions and instructions as to grant-in-aid confer no right on the teachers of the private colleges and they cannot ask that either a particular instruction or condition should be enforced or should not be enforced.”

    27. The said observations of the Supreme Court contained a truism and cannot but be accepted. Those rules related to grants only and had other effect. The decision, therefore does not affect the present question, though even the State in the affidavit above referred to has said that these directions are mere executive instructions and do not have the effect of law. The fact remains that by these executive instructions, by non-recognition, the Government is able to prevent the Societies in the first two petitions from carrying on any of their legitimate activities of running their school, and though, therefore, they are executive instructions, because they have this effect, as they do not satisfy the test of reasonableness in public interest, they must be held to be invalid.

    28. It was also argued that the Societies having made applications for recognition under the self-same rules must now be estopped from challenging the rules. In support reliance is placed on the decision in Narayana v. State of Andhra . [1959] A.I.R A.P 471. Whatever may be the position under other statutory provisions, rule of estoppel cannot apply in respect of fundamental rights as held in Behram Khurshid Pesikaka v. State Of Bombay . [1955] A.I.R S.C 123, S.C 57 Bom. L.R 575..

    29. Mr. Dharmadhikari relied upon the decision in Sidhrajbhai v. State of Gujarat . [1963] A.I.R S.C 540. in support of his contention that whatever may be the result of nonrecognition, the matter cannot fall within art. 19. In this case, the petitioners who were Christians belonged to the United Church of Northern India. They were conducting in the State of Gujarat 42 primary schools and a training college for teachers at Borsad. The teachers trained in this institution were absorbed in the Society's primary schools and those not so absorbed were employed by other Christian Mission Schools conducted by the United Church of Northern India. It was receiving grant-in-aid from the Government. This college was recognised by the Government of Bombay for training students for examination held by the Educational Department for granting certificates for trained teachers. In 1952, the Government ordered all private training colleges in the State to reserve 60 per cent of seats for training Municipal Boards' School teachers nominated by the Government. The Society protested against the order as a result of which there were some negotiations. In 1955, the Government directed that the reserved seats should be 80 per cent. As the Society refused to admit the quota of 80 per cent of teachers in its school, the Government informed the Society that if the Society failed to communicate its willingness to comply with the requirement within seven days, the Government would be constrained to withdraw recognition accorded to the first year training college under r. 11. The Society moved the Supreme Court for a writ of mandamus against the Government. The Society contended that their fundamental rights guaranteed by art. 30(1) and art. 26(a) (b)(c) and (d) and art. 19(i), (f) and (g) were violated. It appears that the Government held examinations for granting certificates to successful candidates as trained teachers and the scholars receiving training in recognised institutions alone were entitled to appear at the examination. In the absence of recognition by the Government, the training in that college would have little practical value and without the grant of the Government, it would be very difficult for the institution to function. The Court, while holding that r. 5(2) made by the Bombay Government for Primary Training College and rr. 11 and 14 for recognition of private training institutions in relation to reservation of seats violated the fundamental freedom guaranteed to the petitioners under art. 30(1), observed (p. 544):

    “…No attempt is made by the order of the State to deprive the petitioners of their right to property, and fundamental freedom guaranteed by Art. 19(1)(f) of the Constitution is therefore not violated. Nor is the right of the petitioners to practise any profession, or to carry on any occupation, trade or business guaranteed under art. 19(1)(g) of the Constitution infringed by the impugned rules and directions.”

    30. In our judgment, this decision cannot be regarded as an authority for holding that if the effect of the rule is such as to deprive the petitioners of their right to conduct the school, art. 19(1)(g) cannot be violated. In that case, the Government was conducting examinations not under any statutory provisions, but in exercise of its executive powers. The School Board Examinations are held under the Maharashtra Secondary Education Boards Regulations and, therefore, by mere executive action, under the rule framing power, the Government cannot deprive the petitioners of their right to conduct the school and send pupils for the said examination.

    31. Mr. Dharmadhikari relied upon the decision in Ram Jawaya v. State of Punjab . [1955] A.I.R S.C 549. in support of his contention that in exercise of its State functions, the Government would be entitled to carry on business which may have the effect of preventing others from doing similar business because of the nature of the business, and cannot be said to infringe the fundamental right guaranteed under art. 19(1)(g). He says, if the Code is made in exercise of the executive function of the State, then it must be regarded as law. The above decision has no bearing on the point sought to be made. The State itself in its affidavit has recognised in para. 12 of the affidavit dated July 4, 1965, that these are executive instructions being administrative in nature and have no statutory force. The above decision cited cannot apply because it merely held that the Government is entitled without any specific legislative sanction to do the business of printing and publishing school text-books and the mere fact that the private publishers who were till then supplying such books could not sell their books did not give them a right to question the business of the Government. In the present case, S.S.C Boards examination is not something that is being privately done by the Government in its executive power. The examinations are held by a statutory Board and the Government cannot by mere framing of rules in such a way prevent boys taught in unrecognised schools from appearing only on the ground that it is not recognised by Government.

    32. There is another way of looking at the matter. Even if the rules framed in the grant-in-aid Code are mere executive instructions, only for the purposes of making grants available to schools, and the Government could prescribe conditions for making the grant, one cannot forget that the Government is dealing with public funds. It is not as in ancient days where the grant made by the Government in aid of educational institutions was regarded as a bounty. While distributing the grant, it must comply with the fundamental requirements of the constitutional law, one of them being the requirements of art. 14 of the Constitution, which provides against discrimination of any kind. The effect of these rules is that schools which are not recognised, cannot be recognised by the Secondary School Boards, and, boys taught in such schools can-pot appear in examinations held by the Board. This examination is the foundation for University Education and the net result of these rules is that these boys cannot also take University education. These rules, therefore, offend art. 14, and must also be regarded as invalid.

    33. It has not been argued before us that the fundamental right guaranteed by art. 19 is not available, because Proclamation of Emergency is in operation and art. 358 of the Constitution provides against it. In our view, even if it had been argued, prima facie it would not have made any difference to the result in the present applications. Article 358 says,

    “While a proclamation of emergency is in operation, nothing in article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in that Part be competent to make or to take…”

    34. The rest is not material to the present discussion. It is apparent at once on the plain reading of the article that the restrictions contained in art. 19 would not affect the power of the State to make a law or to take any executive action if it is otherwise in its power. It is admitted in the present case that the State has not made any law as such and what is done is sought to be justified only under its executive functions under Rules of business. Rules of business provide for disbursing the funds set apart for giving aid to educational institutions. Under art. 162 of the Constitution, the executive power of the State extends to the matters with respect to which the Legislature of the State has power to make laws. But the said power is subject to and limited by the executive power expressly conferred by the Constitution or by any law made by Parliament upon the Union or authorities thereof. There is no statute under which the executive is entitled to act—and act to prevent legitimate activities of the citizens. It is true that in King-Emperor v. Sibnath Banerji . 1945 L.R 72 I.A 241. the Judicial Committee held that the term “executive power” is wide enough to include not only the carrying out of the decisions but making of the decisions and in Ram Jawaya v. State of Punjab, the Supreme Court held that the power extends to doing business without specific authority from the Legislature. Even so, it is hardly possible to contend that by relying on the article the executive can do away with legislation altogether and do what it likes in matters affecting citizens. This being so, as there is no basis enabling the executive to prevent by such a fiat a legitimate activity of the Society, such rules in this respect, which have that effect, cannot be held to be within the powers of the Government. Article 358, therefore, prima facie, cannot save the said rules.

    35. A grievance was also made by the petitioners that they were not even heard when their applications were rejected. In the third petition, the petitioner has urged that it was not even heard even though opening of another school would have affected it. There is justification for the grievance. But in view of what we have already said, it need not be considered further. The result is, cls. (1) and (2) of r. 3 of the Grant-in-Aid Code must be held to be invalid. It must further he held that the applications of the first two Societies were wrongly rejected. In their case, therefore, we make the rule absolute, direct that they be granted permission to start the school. In view of our judgment, the petitioner in the third case cannot make any grievance for the granting of permission to respondent No. 3 therein to start a school. The only way for it to attract students is to maintain better standards of education and better atmosphere. Its application, therefore, must fail and the rule must be discharged.

    36. Having regard to all the circumstances, in our view, there should be no order as to costs.

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    The Sakharkherda Education Society v. The State Of Maharashtra
    (Dec 2, 1966)