Private Institutes Can’t Deny Fee Refunds: Court

Court says it’s unfair for Private Institute to refuse for refund of fees and cannot retain advance fee.

Case Analysis: FIITJEE Ltd. vs. Mr. Rajeev Luthra

Background of the Case

The dispute arose when Mr. Rajeev Luthra’s daughter enrolled in FIITJEE’s two-year classroom program for CAT preparation but discontinued after two months. The reason cited was her inability to manage the intense schedule of school and coaching, resulting in academic pressure. Mr. Luthra requested a refund of ₹1,34,015, which was the entire course fee paid in advance. FIITJEE denied the refund, referring to specific clauses in the enrollment agreement stating that fees once paid were non-refundable.

Key Issues

1. Was FIITJEE justified in retaining the entire two-year course fee despite the student discontinuing after two months?
2. Whether the non-refundable fee clause in the enrollment agreement constituted an unfair trade practice?
3. Did FIITJEE comply with the directions set by the Supreme Court Islamic Academy of Education and another versus State of Karnataka 2003(6) Supreme Court cases (SCC) 697
   regarding advance fee collection?

Arguments by Mr. Rajeev Luthra (Complainant)

1. FIITJEE’s collection of the entire two-year course fee in advance was arbitrary and contrary to the law.
2. The refund denial was an unfair trade practice, as the complainant did not avail services for the full course duration.
3. He relied on judgments that deemed such clauses “unconscionable and voidable.”
   

Arguments by FIITJEE

1. FIITJEE relied on clauses in the enrollment agreement, which explicitly stated:
   • Fees once paid would not be refundable, irrespective of the reason for discontinuation.
   • The complainant had agreed to these terms when enrolling.
2. FIITJEE claimed that a two-year seat remained vacant due to the student’s withdrawal, causing financial loss.
3. FIITJEE cited precedents, including Islamic Academy of Education vs. State of Karnataka and other judgments, to justify its policy.

Judgment by the District Commission

1. The District Commission ruled that charging the entire two-year course fee in advance was against the precedent set by the Supreme Court (Islamic Academy of Education vs. State of Karnataka). Educational institutions cannot charge fees for the entire course at once; only semester/year-wise fees can be collected.
2. FIITJEE failed to prove compliance with the Supreme Court’s directions to deposit unused fees in a nationalized bank.
3. The non-refundable clause was deemed unfair, as it allowed FIITJEE to retain consideration for services not provided, constituting an unfair trade practice.

The District Commission directed FIITJEE to:

• Refund ₹60,750 (50% of the course fee after deducting service tax).
• Pay 6% interest from the date of filing the complaint until realization.
• Pay ₹20,000 as compensation for inconvenience caused to the complainant.

Appeal Before the State Commission

FIITJEE appealed the District Commission’s decision, arguing that the complainant agreed to the non-refundable clause. However, the State Commission upheld the District Commission’s ruling. It noted:

1. FIITJEE’s terms were contrary to public policy and Supreme Court directions.
2. The advance fee policy and denial of refund were unjustified, constituting an unfair trade practice.
3. FIITJEE failed to provide evidence of compliance with Supreme Court guidelines on advance fees.

The appeal was dismissed, and the District Commission’s order was upheld.

Key Takeaways and Conclusion

1. Non-Refundable Fee Clauses: Clauses stating “fees once paid are non-refundable” are invalid if they allow institutions to retain fees for services not provided.
2. Advance Fee Collection: Educational institutions can only collect fees for a semester or year, as per the Supreme Court’s ruling. Advance collection for the entire course is illegal unless unused fees are deposited and refunded.
3. Consumer Protection: Students or parents can seek legal remedies if institutions adopt unfair trade practices like retaining unutilized fees.

Conclusion:
The case emphasizes consumer rights in the education sector, safeguarding students and parents from unfair practices by coaching institutions. FIITJEE’s non-refundable fee policy and advance fee collection for two years were deemed illegal, ensuring a partial refund and compensation to the complainant.