@Akash and Avi - I had asked the same to the Principal but she explained to me that there were many parents who used to take their children out of the school in Class 1 in the middle of the session and so those seats would remain empty throughout the year. Many parents who would be eager to admit their child would be turned down because of lack of seats in the start of the session. As a result the school has made it a rule for parents to pay the entire year's fee (Including a Refundable Security Deposit of Rs. 15,000 that the students get back when they leave the school in class XII or before) for Class 1 as an added assurance that they will not leave mid year.
Students going from KG to Class 1 also get back their Rs. 10,000 refundable security deposit that they earlier pay at the time of admission in the KG school, so they only have to add the Rs. 5000 to that and pay the new refundable security deposit if they want their child to get admitted in Class 1. Many parents who try in other schools do not pay the fees at the required time and get admitted later if the seats are empty.
I think you must go and speak to the principal like i do with my doubts. She meets parents every week.
@Ashish - my child is also in the school studying in LN and i get to meet the teacher and discuss my child's progress on a daily basis when i go to collect him from school. the teachers are available every day during home time, thus if you or your wife could take a day off in a month and meet the class teacher that would serve your purpose. i am extremely happy with my child's performance and the care taken by the class teacher.