Is it sensible to invest 20 lakhs in a top b school with avg salary of 12 lakhs?

It is worth every bit of it. You spend 20 lakh over 2 years. You are going to recover that money within 3-4 years of your working life. Once you hit break even, all you have to do is earn and save. That goes on for the rest of your life. Put all worries to rest. Mind you, make sure you get into a top B-School if you are ready to spend that amount of money as fee.

I understand that ROI is a major concern for everyone aspiring to pursue MBA as a career which happens to be very dynamic but it's also important to clarify that dear, not all institutes charge such high fees. It's only the creme B- schools of our nation like IIMA, B and C whose fees are 20 lacs (IIMA's fees is 22 approx)  but the fees other premium B schools is ranging between 14-19 lacs. One point to be brought to notice is that, the average packages of the institutes is always approximately equal to the fees of the respective colleges. Rather let me put it in these words, there has been an observation that the colleges revise their fees looking into the average package of the past year and definitely other economic, internal and external factors being responsible.
What it means in nutshell is that, if you are investing something around 20 lacs for two years, there's a very high chance of recovering that amount or even more than that in just one year via the package that you are able to bag.
Hope this clarifies your doubt and guides you.

For that high a fees I don't think the average salary would be 12 LPA. IIM A, B and C charge that much and the average salary is much more than that. The other older IIMs charge somewhere in the range of 15-18 and the average salary there too is more than 12. That being said people also don't mind investing so much because they are also investing in a brand. The IIM brand or any other prestigious bschool brand.  That brand is going to stay with you forever and open a lot of opportunities that would not have been possible otherwise. Moreover the ROI that is the return on investment is pretty high. If you calculate it you will get to know it's around 30-40% which believe me is a high return for an investment.

Definitely yes... because u won't be getting 12 lakhs for whole life.it will eventually increase and the iim tag will remain with you forever.
And also 12 lakhs is the average salary so if u perform well at iim u might be the topper getting much greater then the average.
So yes go for it.