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Calcutta High Court Calls for Expenses Incurred by Schools during Pandemic

Case: Vineet Ruia vs. State of West Bengal [WP 5890(W) of 2020]

Forum: Hon’ble High Court of Calcutta (“CHC”)

Order delivered on: August 18, 2020

Substance of the Order: Establishment of a committee to ascertain the expenses incurred by schools during lockdown to determine if any concession in fees can be passed on to the students in view of the financial distress caused by the COVID 19 pandemic.

BackgroundThe CHC vide its order of August 18, 2020 directed setting up a committee of two members to look into the financial statements of the schools involved in the proceedings so as to ascertain the expenses incurred by schools during lockdown.

The CHC  directed the schools involved in the proceedings to submit financial statements for the period January 2020 to July 2020 along with the figures for the January 2019 to July 2019, in the indicative tabular format along with the heads of disclosure, subject to such modifications in the heads as required by the schools, as appended to the order of the CHC.

The format has been bifurcated into an ‘income’ section, which includes monthly fees, periodic session fees, tiffin charges, sports charges, laboratory charges, bus charges and other fees, and an ‘expenditure’ section which includes salaries of teaching staff, salaries of non-teaching staff, licence fee or rent, electricity, corporation tax, maintenance charges, conservancy charges, printing & stationery, transportation charges, loan repayment, monthly or Periodic instalments and other expenses.

Additionally, statements are also required to be given by the schools with respect to:

i.             that no teaching or non-teaching staff have been terminated (whether contractual or permanent). If the services of any staff have been terminated, the particulars of such staff and the consequential financial implication;

ii.             Pay-cuts, if any, and the consequential financial implication;

iii.             The heads for which no expenditure has been incurred by the school during the lockdown;

iv.             Additional expenses, if any, for online classes and online examinations (with break-up under various heads, if applicable).

The statements will need to be certified by the auditors of the school or chartered accountant who will be required to submit a declaration (in the format as appended to the order of the CHC) to this effect and an affidavit (in the format as appended to the order of the CHC) from the head of the school or such person conversant in the financial matters of the school is also required to be submitted.

Mandate of the Committee: The committee is required to vet the figures submitted by the schools and look into applicable laws, regulations and guidelines of the affiliating board and ascertain whether the figures are in consonance applicable laws, regulations and guidelines of the affiliating board. As the committee is required to inquire into the veracity of the figures and the permissibility of the quantum of fees or the heads in accordance with the regulations and guidelines of the affiliating board, the committee can appoint a firm of chartered accounts to support in the financial assessment of the information submitted by the schools.

Analysis: The CHC’s order while constituting the committee, neither prescribes any contours or details related to the roles and responsibilities of the committee nor the extent of powers, roles and responsibilities of the chartered accountant in the course of investigating the books of accounts of the schools and preparing and submitting its report to the CHC. Interestingly, there are no fee regulation laws or enactments in the state of West Bengal and the schools are free to fix fees commensurate with the facilities and services provided. Super imposition of such a committee in the absence of a fee regulation law during the pandemic with no right of representation to the schools before the committee is also being questioned. Only time will tell if the committee and the chartered accountants would assume certain investigation powers or not to the detriment of the schools but currently, the schools are anguished by this order as the committee has the power to assess the correctness of the expenses submitted and the revenue generated by the schools. Concerned with the continuing non-payment of fees by the parents but saddled with the obligation to pay teachers, staff and service providers and also provide on-line education, the order could not have come at a worse time for the schools in West Bengal.

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