Capitation Fee is illegal : Supreme Court

Capitation Fee : In a landmark judgement, the Supreme Court of India on Monday in Modern Dental College And Research Centre Vs. State of Madhya Pradesh ruled that commercialization and exploitation is not permissible in the education sector and institutions must run on ‘no-profit-no-loss’ basis.

A five-judge Constitution bench of Justices A R Dave, A K Sikri, R K Agrawal, A K Goel and R Banumathi said the objective of setting up educational institutions must not be to make profit and the government must step in to regulate the sector to promote merit, curb malpractices and secure merit-based admission in a transparent manner.

The bench observed that it was impossible to control profiteering/charging of capitation fee unless admission was on merit.

The history of the dispute regarding Government control over the functioning of private medical colleges is quite old now but the tug of war continues.

There seems to be some conflict of interest between the State Government and the bodies that establish institutions and impart professional medical education to the youth of this country.

While on the one hand the State Governments want to control the institutions for sociopolitical considerations and on the other the people who invest, set up and establish the institutions have a genuine desire to run and exercise functional control over the institution in the best interests of the students, it cannot be disputed that the State does not enjoy monopoly in the field of imparting medical education and the private medical colleges play a very significant role in this regard.

The State lacks funds that is imperative to provide best infrastructure and latest facilities to the students so that they emerge as the best in their respective fields.

In the modern age, therefore, particularly after the policy of liberalization adopted by the State, educational institutions by private bodies are allowed to be established.

There is a paradigm shift over from the era of complete Government control over education (like other economic and commercial activities) to a situation where private players are allowed to mushroom.

But at the same time, regulatory mechanism is provided thereby ensuring that such private institutions work within such regulatory regime.

When it comes to education, it is expected that unaided private institutions provide quality education and at the same time they are given ‘freedom in joints’ with minimal Government interference, except what comes under regulatory regime.

Though education is now treated as an ‘occupation’ and, thus, has become a fundamental right guaranteed under Article 19(1) (g) of the Constitution, at the same time shackles are put insofar as this particular occupation is concerned which is termed as ‘noble’.

Therefore, profiteering and commercialisation are not permitted and no capitation fee can be charged.

The admission of students has to be on merit and not at the whims and fancies of the educational institutions.

Merit can be tested by adopting some methodology and few such methods are suggested in T.M.A. Pai Foundation, which includes holding of CET.

It is to be ensured that this admission process meets the triple test of transparency, fairness and non-exploitativeness.

Capitation Fee

In P.A. Inamdar case, it was held as under :

Capitation fee cannot be permitted to be charged and no seat can be permitted to be appropriated by payment of capitation fee.

“Profession” has to be distinguished from “business” or a mere “occupation”.

While in business, and to a certain extent in occupation, there is a profit motive, profession is primarily a service to society wherein earning is secondary or incidental.

A student who gets a professional degree by payment of capitation fee, once qualified as a professional, is likely to aim more at earning rather than serving and that becomes a bane to society.

The charging of capitation fee by unaided minority and non-minority institutions for professional courses is just not permissible.

Similarly, profiteering is also not permissible.

Despite the legal position, this Court cannot shut its eyes to the hard realities of commercialisation of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends.

If capitation fee and profiteering is to be checked, the method of admission has to be regulated so that the admissions are based on merit and transparency and the students are not exploited.

It is permissible to regulate admission and fee structure for achieving the purpose just stated.