Institute of Legal and Management Studies

The Supreme Court today held that an Admission and Fee Regulatory Committee in a State does not have the power to direct that the fee collected from NRI medical students be kept in a corpus fund maintained by the State to subsidise the education of Below Poverty Line students.

The Court directed the State of Kerala to return the amounts collected from self-financing medical colleges for the creation of the corpus fund. The Court held that the self-financing colleges are entitled to retain the amounts.

The Court held that the direction issued by the Admission and Fee Regulatory Committee to transfer the NRI fees to the State Corpus fund was beyond the role assigned to it as per the judgments in P. A. Inamdar and Ors. v. State of Maharashtra (2005) 6 SCC 537 and Islamic Academy of Education v. State of Karnataka. Without the backing of a legislation, the Committee cannot issue such a direction.

A bench of Justices Surya Kant and N Kotiswar Singh observed :

"A conjoint reading of paragraph 131 of P. A. Inamdar (supra) and paragraph 7 of Islamic Academy (supra) amplifies the idea that the Committee's power is not limitless. Such a combined reading leads us to the conclusion that: (i) the Committee is competent to prescribe fees in respect of the NRI quota in self­financing medical educational institutions until the State enacts appropriate Legislation or Regulations; and (ii) the Committee cannot draw unlimited powers under the guise of 'regulation of NRI quota/seats.' In other words, the Committee can only make rules for admission to such seats and can review the fees charged to NRI students to ensure that they are not exploitative. This is the cumulative power granted to the Committee within which it must act. The Committee cannot perforate these bounds unless and until its power is expanded through a suitable Legislation or upon a direction by this Court.

In light of the above, it is evident that paragraph 131 of P. A. Inamdar (supra) does not clothe the Committee with the power to create a corpus fund for the benefit of economically­weaker students. It only directs the State to come up with a suitable plan to subsidize their education through the fees charged from NRI students. The Committee cannot usurp the powers vested in the State in this regard."

Colleges entitled to retain the NRI fees

The Court held that the self-financing colleges are retain the NRI fees, especially when the fee structure was approved by the Committee.

"Since the self­financing institutions are the best judge of their own needs and expenses, there appears to be no reason why they cannot retain the amount that was to be transferred to the corpus fund, when those amounts came out of the fee structures already approved by the Committee"

At the same time, the Court held that students belonging to Below Poverty Line (BPL) category are entitled to subsidised fee in self-financing medical and educational colleges of Kerala and ordered that excess payment made by such students be refunded within 3 months.

The NRI students, on the other hand, were held liable to pay full fee and not entitled to a refund of the amount transferred to the state for the purpose of a corpus fund out of which BPL students were offered scholarship/financial assistance.

The matter involved a challenge to certain orders related to fixing of fee by the Admission and Fee Regulatory Committee constituted in terms of the Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act, 2017 in respect of self-financing institutions offering MBBS course.

The Committee issued a direction for remitting a portion of the fee fixed for NRI quota to a corpus of funds meant for providing scholarship/financial assistance to students from BPL category. While certain self-financing institutions claimed that the corpus amount be released in their favor, students claimed that the amounts be refunded.

In 2018, Kerala government had issued an order containing terms on which scholarship was to be provided to students from BPL category. The High Court struck down this order and its view was today upheld by the Supreme Court, saying that the corpus fund could not have been created by the Committee.

The Court however designated the self-financing medical educational institutions as trustees of the corpus fund, without permitting them to utilize it as per their will. Such arrangement shall continue till appropriate legislation is enacted by the state, it said.

"Self-financing medical and educational institutions are under the obligation to provide quality education to BPL students who are admitted to those colleges. No additional fee of any nature therefore shall be charged from BPL students over and above the subsidized fee that they are required to pay as per the Committee's approved fee structure. To clarify, a substantial part of the amount which we are allowing the college to retain shall have to be utilized by them for subsidizing the education of BPL students."

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

As per the judgment, self-financing medical colleges are entitled to retain the fee transferred to state for creation of corpus fund "substantially for the purpose of subsidizing the fee charged to BPL students admitted to those colleges."

Further, if the state seeks to create a corpus fund or any other mechanism to subsidize education for students from weaker backgrounds in line with the judgment in PA Inamdar v. State of Maharashtra, it may do so by bringing in a suitable legislation.

The Court also permitted the state to direct colleges to furnish their accounts so as to establish that the directions given by the Court have been meticulously complied.

Case Title: THE STATE OF KERALA Versus THE PRINCIPAL KMCT MEDICAL COLLEGE AND ORS., SLP(C) Nos. 9885-9888/2020 (and connected cases)

Citation : 2025 LiveLaw (SC) 566

Click here to read the judgment