Introduction
Every recognised private school in Delhi is bound by a simple, unambiguous rule: it must pay its teachers exactly what a government school teacher of the same rank is paid. Not "comparable." Not "reasonable given the circumstances." The same. This isn't a policy aspiration — it is a statutory command under Section 10(1) of the Delhi School Education Act, 1973 ("DSE Act"), and Delhi courts have enforced it, without exception, every time it has been tested.
And yet, a well-documented practice persists across a large number of Delhi's private schools: the school credits a teacher's full, compliant salary to her bank account — the number that will show up in payslips, Form 16, PF records, and any Directorate of Education (DoE) inspection — and then has her withdraw and hand back a portion of it in cash, off the books, with no paper trail at all.
This is Part 1 of a four-part series. Here, we look at what Section 10 actually says and exactly how the cash-back mechanism works. Part 2 covers what courts have said about it; Part 3 covers what happens when schools retaliate against teachers who push back; Part 4 is a practical action guide.
What Section 10 Actually Says
Section 10(1) of the DSE Act, 1973 provides that the scales of pay and allowances, medical facilities, pension, gratuity, provident fund and other prescribed benefits of employees of a recognised private school shall not be less than those of employees of corresponding status in schools run by the appropriate government authority.
Three things about the drafting matter for a legal reading of this section:
- It applies to "recognised private schools" as a category — the obligation does not turn on whether the school is aided or unaided. Courts have specifically rejected the argument that unaided status exempts a school from Section 10.
- It is a floor, not a target. The language is "shall not be less than" — there is no discretion for a school to pay somewhat less while citing financial constraints, enrolment numbers, or fee caps.
- The Act itself contains an enforcement trigger. Where a school's pay and benefits fall short of the government scale, the appropriate authority is empowered to direct the school in writing to bring them up to level, and failure to comply is deemed non-compliance with the Act — which carries consequences for the school's recognition itself.
This last point is significant and under-discussed: Section 10 was not drafted as a toothless entitlement. It was built with its own compliance mechanism baked in.
The Cash-Back Mechanism — What It Actually Looks Like
The scheme is not hypothetical. It has been documented in reported cases and journalistic accounts for well over a decade, and it typically takes one of two forms:
Form A Withdraw and return. The school pays the full, statutorily compliant salary into the teacher's bank account by cheque or transfer. The teacher is then required to withdraw a portion of that amount in cash and hand it back to the school management, informally, with no receipt or record generated for that second transaction.
Form B Signed blank cheque books. In more coercive variants, the teacher does not even control her own account. She is made to sign an entire cheque book in one sitting, which the school retains and uses through the year. The school withdraws the "official" salary shown in its books, and pays the teacher a smaller amount in cash directly — meaning the bank record reflects a salary the teacher never actually received in that form.
Both forms achieve the same objective for the school: every document that a regulator, an auditor, or a court would look at — Form 16, salary slips, bank credit entries, PF contribution statements — shows full statutory compliance. The shortfall exists only in an unrecorded cash transaction that leaves no institutional trace.
Why This Is More Than a Labour Dispute
It's worth being precise about what's actually being violated here, because the cash-back scheme doesn't just breach Section 10 — it potentially creates exposure across several distinct legal fronts:
a) Direct violation of Section 10(1)
The real, in-hand salary is what should be tested against the government pay scale, not the paper figure. A school that structures payments to make an underpaid salary look compliant is not curing the Section 10 violation — it is concealing it.
b) Tax and statutory-filing misrepresentation
If Form 16 and payroll records show a salary that was never actually paid in full, the school's own tax filings and statutory returns become questionable documents. This also affects the teacher, who may be shown as having received — and being taxable on — income she never actually retained.
c) Provident Fund and gratuity shortfall
PF, gratuity, and pension contributions are typically calculated as a percentage of recorded salary. If the recorded salary is inflated relative to what's actually paid, the teacher may on paper appear to be accumulating retirement benefits at a higher rate — but only if the school is actually depositing those contributions, which schools running this scheme have historically been found to default on as well.
d) Coercion in obtaining the teacher's cooperation
Requiring an employee to withdraw and hand back cash, or to pre-sign a cheque book surrendering control of her own bank account, raises questions that go beyond service law — particularly where a teacher's continued employment is made conditional on participating in the scheme.
A legal research piece that treats this only as "schools not paying enough" undersells the actual scope of the problem. The mechanism is designed specifically to survive scrutiny — which is itself evidence that those running it know it doesn't survive scrutiny.