Written by Vinodini Srinivasan and Dhruva Gandhi
The Supreme Court judgment in Indian School Jodhpur v State of Rajasthan (May 3, 2021) dealt with a set of appeals concerning the validity of a circular issued by the Director of Secondary Education, State of Rajasthan. This circular reduced school fees for the academic year 2020-21 for schools affiliated with the Central Board of Secondary Education by 30 per cent, and for schools affiliated with the Rajasthan Board of Secondary Education by 40 per cent.
The Supreme Court struck down this circular on the grounds that the state government does not ordinarily have the power under the Disaster Management Act, 2005 (“DMA”) to regulate commercial transactions between two private individuals while mitigating the effects of a disaster. The mitigating measures which the Act contemplates must be “aimed merely for reducing the risk/impact or effects of a disaster or threatening situation”.
According to the Court, there is not even a “title of indication” that the mitigation efforts can extend to the economic aspects of private contracts. Mitigation efforts could extend thus far only if there is a “causal connection” between the transaction and the management of the pandemic. However, while holding that the state government could not regulate economic relations in the name of the pandemic, the Court exercised the very same power and directed all private unaided schools to reduce their fees by 15 per cent for the previous academic year.
We worry that the Court’s decision may tie the hands of governments in dealing with the economic fallout of the pandemic. In the aftermath of the nationwide lockdown, state governments have resorted to various measures to afford economic relief. In April 2020, Maharashtra had directed landlords to defer rent collection by three months.
Around the same time, Delhi had issued a similar direction asking landlords to not demand rent from migrant workers and students. States had also passed orders directing employers to continue paying wages to daily wage labourers. All such measures, including any measures that may be introduced due to a fresh spate of lockdowns across the country, are now vulnerable to being struck down for interfering in the domain of private commerce/contracts.
Unlike countries such as the UK and Singapore, which passed Covid-specific legislations, India has employed the DMA as the foundation for its pandemic-related mitigation measures. Till last year, it was not within the realm of contemplation that “disaster” under the DMA would include an epidemic or that the powers conferred by the Act could be used to impose a nationwide lockdown.
However, to deal with a crisis of unforeseen magnitude, both the central and the state governments resorted to the spirit of the legislation and interpreted it in a purposive manner.
The Supreme Court’s decision is seminal, as it is one of the few cases where this interpretation has been tested in Court. The Court, however, held that economic aspects can only be regulated when there is a “direct causal connection”. What though is a “direct causal connection”? Unfortunately, the Court does not tell us that.
In fact, it is hard to imagine how the complete shut-down of schools is not a direct fallout of the pandemic and the consequent social distancing measures. The fee structure fixed by the schools was obviously for a time when the students could enjoy the full benefit of school education. This has now been completely upended.
While on the one hand, schools have to continue incurring costs like salaries, students do not have the benefit of school infrastructure or even, of education in the manner contemplated. The risk — of who bears the costs of the pandemic — has to be allocated between two parties.
It is hard to see why the state must not step in to provide a fair mechanism for such risk-sharing. In fact, if the state does not interfere, the entire risk will fall on students, who have to continue paying full fees for half the service. While the Court says that regulating fees “robs Peter to pay Paul”, doing nothing robs Paul to enrich Peter.
The language of the DMA itself contemplates such economic intervention measures. Section 24(j) of the DMA allows the State Executive Committee to ensure that “non-governmental institutions carry out their duties in an equitable and non-discriminatory fashion”. According to us, “non-governmental” institutions are broad enough to include private organisations, of various shapes and forms.
If that be so, capping fees certainly goes towards ensuring that private schools provide education (a public good) in an equitable manner. Moreover, sub-section(l) allows for such steps to be taken as are warranted by the threatening disaster situation. Section 38 of the same Act is also very broad and empowers the state government to take “such other matters as it deems necessary or expedient for the purpose of securing effective implementation of provisions of this Act”.
While Section 24 was not brought to the attention of the Court, the point remains that the other provisions are broad enough to deal with all aspects of a pandemic. There is no reason why the economic aspects of a disaster stand on a different footing, and cannot be regulated by the state government.
The Court itself does not provide any reasons for this distinction between economic and other consequences. The Court ought to have read the economic fallout of the ensuing lockdowns/business restrictions as a part of the “effects of a disaster” because the lockdowns and the pandemic are deeply intertwined and to divorce the two is tantamount to brushing aside the complete reality of this disaster.
It is perhaps in acknowledgment of the grim reality, that the Court stepped in to state that the school was not entitled in law to collect fees in respect of activities and facilities which are not provided to students due to circumstances beyond their control. If this is indeed the law, it is hard to understand why the Court completely denuded the state of the power to enforce this “law”. Would not the state have been best placed to determine what is the value of activities and facilities that students cannot avail of, and accordingly provide relief to that extent?
Instead, we have been left with a situation, where the Court took it upon itself to ascertain the value of these services. Even this was done on a mere assumption that “at least 15 per cent of the annual school fees would be towards overheads/expenses saved by the school management”. We are not even told what material was considered to arrive at this assumption. On all counts, it appears as though this was a decision best left to the state.
The writers are lawyers practising in Bombay High Court