The Delhi High Court yesterday upheld the claim of the AICTE that the CFA Institute offers “Technical Education” and hence must subject itself to the jurisdiction of the AICTE. The implication of this verdict is that Indian students who wish to complete the CFA program offered by the CFA Institute (as opposed to its local clone offered by the so called ICFAI University of Tripura – undoubtedly the “capital” of finance knowledge the world over)are currently barred from obtaining this qualification.
First let us look at the background of this case. The CFA designation from the CFA Institute (formerly AIMR) is undoubtedly one of the premier qualifications in finance the world over. In the early 1990s, ICFAI started offering the CFA program in India, initially under license from the CFA Institute (if I am not mistaken). The tie up quickly ended, but ICFAI continued to offer its programs bearing the CFA designation. As an MBA student in the mid 1990s, I too considered taking up the ICFAI program, but decided to skip it once I discovered from colleagues in the US that the local qualification was not recognized by international financial institutions. Towards the late 1990s, with the liberalisation in exchange controls, a number of Indian students started enrolling for the CFA Program offered by the CFA Institute, paying for the materials with international credit cards, and going to centres like Singapore to take the exams. Subsequently, the CFA Institute started offering its examinations in India – and a large number of Indian professionals were able to obtain the CFA qualification in this manner. In the meantime, the CFA Institute continued to litigate against ICFAI to prevent it from using the CFA designation. For a while it looked like the CFA Institute would win, with the Delhi High Court barring ICFAI from using the trademark. But over the last 12 months, there have been a number of dramatic reverses suffered by the CFA Institute, the end result of which is the above judgment which unnecessarily penalizes Indian professionals.
The first step was when ICFAI converted itself into a university based in Tripura, called the ICFAI University Tripura.
Tripura, for readers who are not from India (and perhaps even for Indian readers from Bombay or Delhi who can’t see beyond the ends of their noses) is a small state (pop 3.1 mm), in the North Eastern corner of India, surrounded by Bangladesh, which is famous for being the only part of India other than West Bengal and Kerala that regularly votes in Communist governments. Like West Bengal, Tripura has been ruled by the CPM for most of the past four decades. Unlike West Bengal, which used to be India’s industrial capital at one point in time, and consequently has quality finance education (notably at IIM Calcutta, my alma mater), Tripura is however not noted for the quality of either its businesses or its educational institutions. I personally can’t think of a single listed Indian company with a headquarters in Tripura. Such a communist state, without any significant business activity, is undoubtedly the right base for a high quality finance university.
Shortly thereafter, a petition was filed in the Agartala (capital of Tripura) bench of the Guwahati High Court, asking for the AICTE to take action against the CFA Institute for illegally running a technical education program in India. The Court promptly acted on the petition and directed the AICTE to look into the matter.
AICTE issued notices to the CFA Institute, and promptly came out with an order directing it to cease all activities in India. This order, issued very shortly before the CFA exams, led to considerable consternation in the business press. The Delhi High Court was moved, and it gave an interim stay permitting the exams to be held in India. The argument the CFA Institute took was that it did not run a technical education program and hence did not fall within the jurisdiction of the AICTE. The AICTE, like all third rate Indian government bodies, disagreed – and claimed that it had the right to regulate all kinds of higher education in India. The Delhi High Court, in its recent verdict, seems to have agreed with the AICTE, and barred the CFA Institute from operating in India.
In my view, the CFA Institute was making the wrong argument – trying to take a narrow technical interpretation of a law was clearly not the path to succeed – what needed to be questioned was the fundamental constitutionality of the AICTE Act. The AICTE, incidentally publishes on its website, a list of unapproved institutes offering technical education courses in India with foreign collaboration. Institutes on this list include the Indian School of Business, the CII Naoroji Godrej Centre of Excellence, the Great Lakes Institute of Management in Chennai, and assorted branches of IIPM. The fact that students would much rather study in, and recruiters would much rather recruit from ISB than 99.9% of AICTE recognized management institutes (viz. all recognized institutes other than IIM A, IIM B and IIM C) is irrelevant for the scum ball bureaucrats at the AICTE. All that matters to them is that all educational institutions must come crawling before them for accreditation.
What is the basis on which AICTE gives an institute accreditation? A glance at the
AICTE website reveals the process. Fill out a form, specifying the address of the institute, the courses it runs, its permanent location (which must be approved by the AICTE), the land area, the number of classrooms and their area, the number of library books, the sources of funds et al ad nauseum. Certify that you will not run any unapproved courses, follow AICTE guidelines for admission, and not charge capitation fees. Thereafter, the bureaucrats will grant you approval, if they deem that the information you have provided is in line with their norms for a quality educational institution. All of this, of course, is governed by an act of parliament, and recent regulations put out by the AICTE governing operation of foreign educational bodies in India. The purview of AICTE covers programmes of technical education including training and research in Engineering, Technology, Architecture, Town Planning, Management, Pharmacy, Applied Arts and Crafts, Hotel Management and Catering Technology etc. at different levels. From the above definition, it does not seem to me (as a lay person) that Financial Analysis is included in the purview of the AICTE. The Delhi High Court obviously thinks otherwise (perhaps Financial Analysis is covered by the
including and
etcetera -:) ) – we will need to wait and read its reasoned (!!!) judgment in this regard.
So what next? I guess an appeal to the Supreme Court will follow. If the High Court verdict is not overturned, Indian residents will no longer be able to register for the CFA Program. The CFA Institute will lose some students, but the market will continue to reward those who secure this qualification. How will people get around this problem? Those who are studying or working outside India will be able to register with an offshore address. Those who can afford it may take up a temporary residence outside India to register for the program. Perhaps the CFA Institute will tolerate white lies – allow people to register without insisting on a proof of foreign address as long as they pay through a credit card from outside India.
(The stock of NRI uncles will suddenly rise…). But ordinary resident Indians will be impacted – and will undoubtedly lose some opportunities as a result. Is it the end of the world? Of course not! The CFA Charter, like IIM MBAs, is a signalling mechanism – and those who are good will find some other way to strut their stuff.
The bigger issue is that the AICTE will undoubtedly be inspired by this victory, and start tilting at other “unrecognized” educational bodies like ISB. And that is the fundamental point. In a country which is woefully incapable of providing basic education to children, why should there be a government bureaucracy which approves what adults can study? The CFA charter and the ISB MBA are both post graduate qualifications. People going for a post graduation are surely capable of taking care of themselves, and deciding if a qualification helps their careers. Even for undergraduate courses, the fact is that unrecognized GNIIT qualifications offer much better prospects for students than most Indian university degrees.
The very existence of a third rate body like the AICTE reveals the statist mindset of Indian bureaucrats and politicians. They believe that they have the right to control all that the Indian people see or do. This attitude has no place a democratic and liberal society. Fortunately, the mainstream media has for once taken a reasonable position on this issue – instead of slavishly parroting the government line, there have been a few editorials asking the AICTE to live and let live – by listing unrecognized educational institutions but not stopping their operation. But this, in my view is not enough.
Government control over education is clearly a violation of the fundamental right of free speech –even with the overly broad exceptions that the constitution of India provides to circumscribe this right. Hence the AICTE Act is almost certainly ultra vires the Indian constitution. So it must be scrapped – either by parliament recognizing its mistake, or by the Supreme Court. I plan to right to my MP in this regard – so must you. And if any of the PIL brigade reads this, please go ahead and litigate – I would even be willing to right a small cheque to support your cause.
BTW – just realized that the AICTE had passed regulations restricting operations of foreign universities in 2005 – so all this is the b@st@#d Tendu Raja’s doing.