In a setback to a growing field of outsourcing, the New York City Department of Education has virtually prohibited US companies from hiring teachers from other countries, including India, arguing it was not possible to undertake their background checks in foreign states.

A controversy had been raging for quite sometime as to whether US companies can employ teachers in other countries to tutor American children.

The companies planning distant learning had argued that since the student and teacher do not come into contact, they even do not talk with each other and as everything is done on computers, the background checks are unnecessary.

But the officials did not agree as the rules provided that teachers must give their social security as also fingerprints number, which only American educators can give.

As a result, the New York authorities cancelled the $2 million a year contract of a Texas-based Indian American owned company Socratic Learning Inc which, the Educations Department said had employed 250 teachers in India and was expected to tutor some 2,000 children.

The highly controversial ruling could have repercussions in other states also as it could become a benchmark.

The administration has earmarked funds for 'No Child Left Behind' scheme under which students can seek outside tutors if they are not up to mark. The scheme was introduced to improve skills in mathematics and science two subject American students are weak in.