Kiran Raj

The Supreme Court of India’s Division Bench of Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh adjudicated on the State Government's directive concerning the imposition of a corpus fund collected from Non-Resident Indian (NRI) students in self-financing medical colleges. The Court categorically held that the creation of a corpus fund intended to subsidize medical education for economically weaker sections cannot be instituted without the express authority of law. The Court quashed Government Order (GO) dated 06.06.2018, which had mandated such a collection, declaring it devoid of statutory backing.

The Bench directed that no further amounts be levied from NRI students toward the creation or maintenance of a corpus fund until appropriate legislative measures are adopted. It further held that the amounts already collected under the now-invalidated GO must be administered strictly for the benefit of economically weaker students admitted under the State’s allotment process. However, the Court declined to order a refund of the collected sums directly to the NRI students or self-financing institutions, instead directing that the funds be used strictly in accordance with the principles laid down in the judgment.

Also Read: No Limitation To Enforce Perpetual Injunction | Supreme Court Restores Execution Petition Saying Satisfaction In Earlier Proceedings Cannot Bar Fresh EP For Subsequent Interference

The issue arose following a directive by the State of Kerala’s Admission and Fee Regulatory Committee requiring self-financing medical colleges to create a corpus fund to subsidize medical education for Below Poverty Line (BPL) students. The corpus fund was to be funded by remitting a portion of the fees collected from NRI students to the State Government. This led to multiple writ petitions challenging the Government Order (GO) dated 06.06.2018, which validated the Committee’s decision.

The Kerala High Court, through a common judgment dated 23.07.2020, quashed the GO, directing that the amounts collected from NRI students for the corpus fund be transferred to the respective institutions and maintained as a separate account. This account was to be operated jointly by a nominee of the self-financing institution and a nominee of the State Government and utilized exclusively for the benefit of economically weaker students admitted under State allotment. It was further directed that until the State adopted suitable legislative measures, no further amounts would be levied or collected from NRI students toward the creation or maintenance of the corpus fund.

Three sets of cross-appeals arose from the High Court’s decision: (i) The State of Kerala challenged the quashing of the GO; (ii) Self-financing medical colleges contested the restriction on the utilization of the corpus fund; and (iii) NRI students appealed, seeking a refund of the amounts collected from them.

The relevant statutory background includes the Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act, 2017 (the 2017 Act), under which the Admission and Fee Regulatory Committee was constituted. The Committee had approved the fixation of fees for NRI students at Rs. 20 lakhs per annum, with Rs. 5 lakhs from this amount designated as the corpus fund for scholarships.

KMCT Medical College and other institutions challenged the Committee’s decision, arguing that the imposition of a corpus fund lacked statutory authority and that such collection adversely affected their financial operations. They contended that their proposal to fix fees at Rs. 20 lakhs per annum was based on the understanding that the entire amount would be utilized by the institution to meet operational expenses.

NRI students, represented by Senior Counsel Mr. Shoeb Alam, supported the High Court’s decision to quash the GO but contended that the High Court erred by not directing a refund of the amounts collected. They argued that the additional levy lacked legal backing and resulted in an unjust financial burden. Further, it was submitted that in some cases, institutions obtained post-dated cheques for future payments toward the corpus fund.

The State of Kerala, represented by Senior Counsel Mr. Jayant Muth Raj, defended the GO, asserting that it was issued pursuant to paragraph 131 of the Supreme Court’s decision in P. A. Inamdar v. State of Maharashtra (2005) 6 SCC 537. It was argued that the Committee had acted within its powers by requiring the creation of a corpus fund intended for the welfare of economically weaker students.

Certain BPL students, represented by Senior Counsel Mr. Gaurav Aggarwal, intervened, stating that the GO was a welfare measure intended to ensure that meritorious students from disadvantaged backgrounds received necessary financial support to continue their medical education.

The Court conducted a detailed examination of the statutory framework and judicial precedents to determine the validity of the GO dated 06.06.2018. Referring to paragraph 131 of P. A. Inamdar, the Court stated: "It is clear that paragraph 131 of P. A. Inamdar validates and encourages the idea of charging higher fees to NRI students in order to subsidize education for students from economically weaker or backward sections of society."

However, the Court clarified that the Committee’s powers were limited to regulating NRI admissions and ensuring that fees charged were non-exploitative. It observed: "The Committee’s power is necessarily meant to prevent misutilization of the NRI quota or any malpractice referable to that quota."

The Bench examined Section 8A and Section 11 of the 2017 Act, noting that while the Committee had significant powers concerning the fixation of fees, there was no provision authorizing it to divert a portion of the approved fees for the creation of a corpus fund. The Court recorded : "There is nothing discernible in Section 8A of the 2017 Act, based on which the Committee can assert its power to divert a part of the fee determined by it or issue a direction regarding how such diverted fee is to be utilized."

The Court further noted: "The power to levy tax or fee cannot be delegated to the Executive unless the principal Statute expressly authorizes to do so." Accordingly, the GO dated 06.06.2018 was held to be without legislative competence and was quashed.

Addressing the issue of refund, the Court observed:"The denial of a refund of the illegally collected fees has put the self-financing medical colleges under financial strain." However, it balanced this by noting the welfare considerations and directed that the amounts already collected should be utilized strictly for the benefit of economically weaker students as per the directions specified.

The Court also acknowledged the submissions of the intervenor-BPL students, recording: "After the High Court directed that no further amount should be credited towards the corpus fund, many BPL students have been finding it difficult to continue their studies due to financial hardships."

Also Read: Delhi HC Dismisses Plea To Quash Defamation Summons | Proceedings Flow From 2016 Complaint Not A Fresh Case | Appeal Revision Is A Continuation Of Original Proceedings

In light of the above discussion, the Supreme Court deemed it appropriate to allow the appeal by the self-financing medical colleges in part, dismiss the appeals filed by the State of Kerala and the NRI students, and modify the Impugned Judgment of the High Court dated 23.07.2020 with the following directions and conclusions:

• The High Court was correct in quashing the Government Order (MS) No. 107/2018/H&FWD dated 06.06.2018.

• If the State seeks to establish a corpus fund or any other such mechanism to subsidize education for students from weaker backgrounds, in line with the vision enshrined in A. Inamdar, it may do so by enacting suitable legislation to that effect.

• The self-financing medical colleges are entitled to retain the fees transferred to the State for the creation of the 'corpus fund' substantially for the purpose of subsidizing the fees charged to BPL students admitted to those colleges, as per the directions contained in paragraph 37 of this judgment.

• The BPL students, who were admitted on the basis of scholarship schemes or who are to be admitted in future, shall not be required to pay the full, regular fees. They will continue to pay fees at the subsidized rate fixed by the State or the Committee. If they have paid any fees over and above the subsidized amount promised, they are entitled to a refund of the amounts so paid. Alternatively, those amounts may be set off against the fees to be charged for later years. Such a refund must be made within three months.

• The State of Kerala is directed to release the fees collected for the creation of a corpus fund back to the respective colleges within a period of three months without prejudice to the right and responsibility assigned in paragraph 37 of this judgment.

• The NRI students are not entitled to a refund of the amount transferred to the State for the creation of the 'corpus fund.' They are directed to pay the entire fees to their respective colleges, as approved by the Admission and Fee Regulatory Committee, if not already done, within three months.

• The State of Kerala or the Admission and Fee Regulatory Committee is at liberty to direct the colleges to furnish their accounts to establish that the directions given herein have been complied with.

Ordered accordingly. Pending applications, if any, are to be disposed of in the above term

Case Title: The State of Kerala and Ors. versus The Principal, KMCT Medical College and Ors.

Neutral Citation: 2025 INSC 518

Case Number: Civil Appeal No. _____ / 2025 (Arising out of SLP (C) Nos. 9885–9888 / 2020 ) and connected matters

Bench: Justice Surya Kant, Justice Nongmeikapam Kotiswar Singh

[Read/Download order]