AICTE's Regulatory Powers Upheld: Supreme Court Imposes Heavy Penalty on Management Institution

The case of Foundation for Organizational Research and Education (FORE) School of Management vs. The All India Council for Technical Education (AICTE) revolves around an unauthorized increase in student admissions by a management institute and the Supreme Court’s decision to uphold AICTE’s regulatory authority. The ruling reinforced the principle that educational institutions must adhere strictly to regulatory guidelines and cannot take the law into their own hands.

FORE School of Management, an educational institution offering management courses, applied for an extension of approval for existing seats and an increase in student intake for certain courses in 2016. However, while AICTE granted approval for existing seats, it did not approve the increase in intake. Despite this, the institution admitted students beyond the sanctioned number, prompting AICTE to impose a substantial financial penalty.

Background of the Case

FORE School of Management applied to AICTE on March 15, 2016, requesting an increase in seats for its management programs. AICTE, on April 25, 2016, granted approval for existing seats but did not address the request for an increase in intake. The institution proceeded to admit students in excess of its sanctioned capacity. Eventually, on June 22, 2016, AICTE formally rejected the request for additional seats.

The school, having already admitted students beyond its approved capacity, approached the Supreme Court, seeking to quash AICTE’s decision and allow the excess students to continue their studies without jeopardizing their future.

Petitioner’s Arguments

The petitioner, represented by senior counsel, put forth the following arguments:

The delay in AICTE’s response to the seat increase request forced the institution to admit additional students.
The institution had reasons to believe that AICTE would grant the requested approvals, given past trends.
The students admitted beyond the sanctioned capacity should not suffer due to administrative lapses.
The financial penalty imposed by AICTE was arbitrary and excessive.

Respondent’s Arguments

AICTE, represented by its legal counsel, countered with the following points:

AICTE follows a strict zero-deficiency policy, especially for institutions admitting students beyond sanctioned limits.
The petitioner institution should have waited for formal approval before admitting additional students.
The penalty was imposed in strict accordance with AICTE’s Approval Process Handbook (2016-2017).
Educational institutions cannot take the law into their own hands by assuming approval before receiving it.

Supreme Court’s Observations and Judgment

The Supreme Court, after reviewing all submissions, upheld AICTE’s regulatory authority and ruled against the petitioner. The Court made the following critical observations:

“Even assuming that the decision of AICTE was not correct, the petitioner institution had no business to admit students beyond the number permitted by AICTE.”

“The proper course of action for the petitioner would have been to approach the Court seeking appropriate relief instead of taking the law into its own hands.”

Financial Penalty and Regulatory Compliance

AICTE’s regulations clearly state penalties for unauthorized admissions. The Supreme Court upheld the penalty imposed based on AICTE’s Approval Process Handbook (2016-2017), which prescribes fines for excess admissions. The handbook specifies:

For every student admitted beyond sanctioned intake, the penalty is five times the total fees collected.
The petitioner institution charged each student Rs. 11,00,000 in fees.
Since 42 students were admitted beyond capacity, AICTE calculated the total penalty as Rs. 23,10,00,000 (23.10 crores).
AICTE had the discretion to impose additional penalties, such as withdrawal of approval, but opted only for a financial penalty.

Impact on Students

The Supreme Court acknowledged that the students who had been admitted in excess were not at fault. The Court ruled that their academic future should not be jeopardized, stating:

“We are not setting aside the admission of the students because that action would be too harsh upon the students who should not suffer for the totally illegal action of the petitioner institution.”

However, the Court directed the petitioner institution to pay the penalty while ensuring that the degrees of the affected students were awarded.

Key Legal Precedents Considered

The Supreme Court referred to previous judgments emphasizing the need for regulatory compliance in educational institutions, including:

Parshvanath Charitable Trust v. AICTE (2013) 3 SCC 385: Reinforced the importance of following AICTE’s approval process.
Modern Dental College & Research Centre v. State of Madhya Pradesh (2016) 7 SCC 353: Held that regulatory bodies have the authority to impose penalties on institutions violating norms.
Islamic Academy of Education v. State of Karnataka (2003) 6 SCC 697: Established that educational institutions cannot make unilateral decisions affecting students without regulatory approval.

Final Directions of the Supreme Court

The Supreme Court ruled as follows:

The financial penalty of Rs. 23.10 crores imposed by AICTE was justified and must be paid by the institution.
The amount of Rs. 4 crores already deposited by the petitioner shall be adjusted against the penalty.
The balance amount of Rs. 19.10 crores must be deposited with AICTE within 8 weeks.
The institution must award degrees to the affected students to prevent harm to their academic careers.

Implications of the Judgment

This ruling strengthens AICTE’s role as a regulator and establishes a strong precedent that educational institutions must strictly comply with approval processes before admitting students. The judgment has several key implications:

Ensures strict adherence to AICTE regulations for student admissions.
Prevents institutions from exploiting regulatory loopholes to admit students illegally.
Upholds the validity of financial penalties for non-compliance.
Protects students from being penalized for institutional misconduct.

Conclusion

The Supreme Court’s decision in this case reinforces the principle that regulatory compliance in educational institutions is non-negotiable. By upholding AICTE’s decision, the Court has sent a strong message to institutions that they must abide by approval processes before making changes to student intake. The ruling also ensures that students do not suffer for the administrative failures of institutions, balancing regulatory discipline with academic fairness.

Petitioner Name: Foundation for Organizational Research and Education (FORE) School of Management.
Respondent Name: The All India Council for Technical Education (AICTE).
Judgment By: Justice Deepak Gupta, Justice Surya Kant.
Place Of Incident: India.
Judgment Date: 21-06-2019.

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