Since only the judgment is on the web, it is difficult to know the exact argument of all stake holders, but what I can make out from the judgment is the following.
The petitioner is a student of ISM Dhanbad, who got admission to the Institute in 2010 after passing the Joint Entrance Examination. When the results of the first round of counseling were announced, she was allotted MSc (Chemistry) in ISM Dhanbad. She paid her fee, etc., as per the JEE procedure. If you recall, last year, there was an error in the counseling. The Counseling software had not taken into account the results of the Architecture aptitude test. When this error was detected and corrected, it turned out that the course allotment of several students had to be canceled. This student was one of them. There were 52 such students. She got lucky that at least she could get a program allotted. She was assigned MSc (Mathematics and Computing). By the only 41 students could get some course in the second round. Eleven students had no where to go (even though as we will see later, there were hundreds of seats vacant in the system).
After this the details are sketchy. She apparently wanted a better branch. ISM Dhanbad refused saying that the branch changes will be done after 2nd semester, based on performance in the 1st year. However, she noticed that the rules in ISM Dhanbad did not allow too many people to get branch change. The rules said a student is not allowed to leave a branch, if that would cause the strength of the program to become less than 50%. A very large number of students who had been offered admission to ISM Dhanbad had not joined, leaving more than 250 vacancies in the Institute. This meant that many programs would have less than 50% seats filled up. Or the number of branch changes that would be permitted would be extremely few. So, she appealed to High Court that JEE should have filled up those huge number of vacant seats in all the institutes put together, and if such a thing was done in 2010, she would have got a better program to begin with.
JEE responded to the writ petition by arguing that it is not possible to keep doing multiple rounds of admission, since the classes have to start at some time. And IITs have such a high standard of academics that doing admission even a few days into the semester would be harmful to the quality of education.
The court asked for information on the number of vacant seats after the students had joined various institutes. It turned out that the number of seats vacant were 8% of the total seats available through JEE. The court has said that based on JEE's argument, if there were a small number of seats vacant, it would have accepted the situation. But the argument cannot justify such a large number of vacant seats, particularly when JEE could have started the admission process a bit earlier, and tried to incorporate another round of admission process.
For 2010 admissions, the court has asked ISM Dhanbad to allot any of the vacant seats to the student in question before doing its branch changes. And for 2011 admissions, it has asked JEE to do whatever it deems fit to make sure that such a large number of seats are not left vacant.
This is an excellent judgment which will make JEE more student friendly. However, there is one aspect of the whole admission process which has not been clearly understood by the court. If JEE were to do a 3rd round of counseling, it would still leave 8% of the seats vacant, unless the 3rd round was done AFTER the semester started.
Let us understand why third round prior to the semester would not help. The reasons for vacant seats is NOT that students who are offered seats do not accept it. Such a number is rather small after the 2nd round. The reason for vacant seats is that students accept the admission offer by paying whatever amount is needed, and then never inform JEE that they would like to withdraw. They just don't show up on the campus on the 1st day of the semester. So you can have any number of rounds prior to the semester beginning, and you still wouldn't know how many people won't show up on the appointed day.
So what is the solution. There are, in fact, several solutions possible.
The obvious one that Central Counseling Board (which does counseling for all NITs based on AIEEE ranks) makes use of is to offer admission after the semester has started. The assumption with which CCB works is that teaching is unimportant and even if a student misses a few days, nah a few weeks, may be half the semester, it is still ok for him/her to get admission. The underlying assumption appears to be that teaching in most such places is so poor that it is perhaps better for the student to not face such teaching :-) But JEE can't make such an assumption, and it has correctly argued in the court that late admissions will result in poorer quality of education.
The second solution is to admit more students than the number of seats that you have. This is the solution that every single country in the world follows (other than India, of course). In India, we believe, we are very unique. Our problems are very unique. So nothing that works in the rest of the world will work in India. (Of course, the corollary is that what does not work in the rest of the world will also not work in India.) And, therefore, we must do opposite of what the rest of the world does, and consider our seats as sacrosanct.
But, if somehow JEE can come out of this anti-rest-of-the-world feeling, then what they may do is to look at historical data about the percentage of students who don't join a particular institute, and admit that many extra students to each institute. So if we have 500 unreserved seats (since we need to do this category wise), and 10% students did not join on an average in the last 5 years, then may be I can admit 8% more (to be on the conservative side - I don't want to exceed my target strength, not by large number, anyway). So, we shall admit 540, and if 10% did not join, I will still have 486 students as opposed to 450 in the current scenario. Yes, there is a risk that I might have 510 students. But the question is that if you have capacity to deal with 500 students properly and in the best way that you want to deal with them, would you rather have 450 students and waste a significant investment, or would you rather live with a very small probability of 510 students in some year (and hence the quality of education for that batch presumably going down).
Of course, the immediate question will be what branch to assign to these extra students. It is assumed that the students will give a choice during the counseling that they are willing to be admitted to an Institute without any assignment of a program. So someone, for example, could give a higher preference for IITB-NONE compared to ISM-Dhanbad-Mining-BTech. On the joining date at an institute, we will know how many students in each category have joined. Based on this data, we know vacancies in each program in each category. We can do an internal branch change of each student based on their preferences in JEE counseling, and by this process, the unassigned students will get some program assigned to them. It is assumed that when they opt for unassigned seat, they are actually willing to take any program in the Institute. So if they have not put in all the choices during the JEE counseling, they could be given a random seat.
The problem will come when the number of vacancies (or people not joining) is less than the number of students admitted against unassigned seats. In such a case, each institute will take its own decision on how to assign programs to these people. The easiest will be to increase the number of seats in each program by same proportion. If there are 10 programs, and there are 10 unassigned students, increase 1 seat in each program.
This has a downside. Most of the JEE selected candidates - while they may have solved hugely complex mathematical problems in JEE, they will now claim that they don't understand probability and statistics. They will make statements like this: If you have 500 seats and you are admitting 8% extra, then theoretically you could have 540 students. It means that at least in such a case, you will somehow manage 540 students. Then why not admit 540 students anyway. The only answer to this question is that if you do not understand probability and statistics, then you don't deserve to be in an IIT. We will take your name off the JEE merit list.
There is a solution number 3. This is to somehow have an incentive for the student to inform JEE in advance that he has decided not to take admission. What could be such an incentive. How about returning some of the money that you charge them. Right now, JEE asks for Rs. 40,000 to be deposited for accepting admission, and whether you decide to withdraw the next day or 2 weeks later, you don't back a single paisa. If we could have a sliding scale. If you withdraw within a day, we will give you back most of the money, if you withdraw within a week, we will deduct some more, and so on. Then there is an incentive for people to decide fast and communicate that decision to JEE.
The problem with this scheme is that the Government has mandated that anyone leaving the program till the day of beginning of the semester, has to be refunded the entire amount (except a token processing fee of Rs. 1,000). IITs currently are below the radar of the government, and don't get hauled up when they don't give any refund. But if they start giving refund, they will have to follow this policy of 100% refund. This policy of 100% refund has played havoc with admission process in India. Ever since this rule has been made in 2007, most admissions are now done after the beginning of the semester in most colleges across the country. To know more about it, you may want to read one of my old blog article on refund rules. Strangely, most students and parents believe that this refund rule is very good, not realizing how it has destroyed education in NITs, and other good institutes, and how it is actually making more money for private colleges, since most admissions are now happening after the beginning of the semester, where the refunds are not controlled by this rule anyway.
So, IITs may have to argue with MHRD to junk this rule and come with an alternate scheme with gradations for refund depending on how many days before the semester the student is withdrawing.
Of course, there is a 4th solution. IIT Directors can agree that after the 2nd round of counseling, each Institute can decide on its own whether they want to do more admissions, and do those admissions in whatever way they deem fit (increase ad hocism). Of course, JEE could go to Supreme Court and not do anything on the ground this year.
The right thing to do is to do both 2nd and 3rd solutions. Admit additional students, and have a graded refund policy. Doing these things together will clean up the admission process not just in IITs, but in all engineering colleges, since they will then be able to do the same thing.
In my opinion, this high court ruling is a godsend to IITs to improve their admission process without political interference or too much media glare. After all, they will be following the legal mandate. I hope they will do something that will have a positive impact on all engineering admissions throughout the country.
In the end, I will like to just give out the vacant seats last year in old IITs, BHU and ISM in unreserved and OBC categories (combined). IITB (2/663), IITD (5/640), IITK (8/622), IITM (10/630), IIT-GHY (20/442), IIT-KGP (54/1008), IIT-R (114/866), IT-BHU (146/785), ISM (213/760).