SUPREME COURT RULES ON LEGALITY OF CORPUS FUND FROM NRI FEES IN KERALA MEDICAL COLLEGES
The Judgment in the Case of “The State of Kerala and Ors. v. The Principal, KMCT Medical College and Ors” Civil Appeal No. ___ / 2025 (Arising out of Special Leave Petition (C) Nos. 9885 – 9888 / 2020) was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh on 16th May 2025. This case primarily addresses the legality and implications of creating a corpus fund through fees collected from Non-Resident Indian (NRI) students to subsidize medical education for Below Poverty Line (BPL) students in self-financing medical institutions in Kerala. It examines the authority of the Admission and Fee Regulatory Committee and the State Government to mandate such a fund through an executive Order.
Facts
The Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act 2017 was enacted to regulate admissions and fee structures in private medical colleges. Under this Act, the Admission and Fee Regulatory Committee fixed NRI student fees at ₹20 lakhs per annum, raising them from the previous ₹15 lakhs. The increase of ₹5 lakhs was earmarked as a ‘corpus fund’ to subsidize medical education for Below Poverty Line (BPL) students. This arrangement was later supported by a Government Order GO (MS) No. 107/2018/H&FWD dated 06.06.2018. Self-financing colleges, including KMCT Medical College, implemented this by collecting the corpus fund from students. However, multiple parties, including the colleges and NRI students, challenged the GO and the committee’s authority in the Kerala High Court. The High Court ruled that in the absence of legislative backing, such a levy could not be imposed, and quashed the GO. The State of Kerala, the colleges, and the NRI students then filed cross-appeals before the Supreme Court.
Main Issues
- Whether the Committee had the power to determine and direct that a particular amount of the fees charged to NRI students be kept in a corpus fund maintained by the State?
- Whether the NRI students are entitled to a refund of the amount so charged or whether it can be set off against fees to be charged for later years?
Contentions of the Parties
Arguments on behalf of KMCT Medical College and Other self-financing Institutions
They argued that they proposed a fee of ₹20 lakhs, which included their operational needs and scholarship commitments. Deducting ₹5 lakhs for a corpus fund, without legal authority, was arbitrary and violated their autonomy under Article 19(1)(g) and minority rights under Article 30 of the Indian Constituion. They also contended that collection lacked statutory backing. Section 8A of the 2017 Act did not empower the Committee to divert any part of the fee for creating a corpus fund.Once the High Court quashed the GO, it should have Ordered a refund of the ₹5 lakhs per NRI student or allowed the colleges to retain it for their own scholarship schemes. Lastly, they pointed out that similar scholarships were already being awarded by KMCT even before the GO, showing no need for State intervention.
Contentions on behalf of NRI Students
The counsel on behalf of NRI students argued that the levy was illegal and had to be refunded. Many were forced to give post-dated cheques for ₹5 lakhs in addition to regular fees. He also contended that Paragraph 67 of P. A. Inamdar and Ors. v. State of Maharashtra,(2005) 6 SCC 537 only permitted charging slightly higher fees from NRI students to subsidize two BPL students, which could be achieved by charging ₹15 lakhs (if general category fee was ₹5 lakhs), and not ₹20 lakhs.Using the amount collected from one college to benefit students in another institution was unfair and discriminatory.
Contentions on behalf of the State of Kerala
The State justified the GO as a welfare measure relying on paragraph 131 of P.A. Inamdar (supra) which envisaged cross-subsidization using NRI fees and allowed regulation by committees until legislation was passed. It accused colleges of misusing funds, stating that although ₹189 crores had been collected as corpus fund from NRI students across multiple years, only a fraction was remitted to the State corpus fund. The GO was necessary to standardize and ensure proper utilization of the funds for deserving students.
Contentions on behalf of the Intervenor – BPL Students
They argued that many students had taken admission on the assurance of subsidized fees. Due to the High Court’s ruling, their scholarships were stopped, and they were now unable to pay full tuition fee. The GO was a progressive welfare measure and should not be invalidated merely for lack of statutory support.
Supreme Court
The Apex Court found it appropriate to partly allow the appeal filed by the self-financing medical colleges, while dismissing the appeals filed by the State of Kerala and the NRI students. The Court accordingly modified the High Court’s judgment dated 23.07.2020, and issued the following directions
- The Supreme Court upheld the High Court’s decision, stating that the High Court was correct in striking down Government Order (MS) No. 107/2018/H&FWD dated 06.06.2018, as it had no legal backing
- If the State intends to establish a corpus fund or implement any similar mechanism to support students from economically weaker backgrounds, in line with the Supreme Court’s observations in P.A. Inamdar (supra), it must do so through proper legislation.
iii. The self-financing medical colleges are permitted to retain the fees that had been transferred to the State for the creation of the corpus fund. However, this amount must be used substantially for subsidizing the fees of BPL students admitted to those colleges, in accordance with paragraph 37 of the judgment.
- BPL students, whether already admitted under scholarship schemes or to be admitted in the future, shall not be required to pay the full regular tuition fees. They will continue to pay fees at the subsidized rate fixed by the State or the Committee. If any student has paid more than the promised subsidized fee, they are entitled to a refund of the excess amount, or it may be adjusted against future fees. Such refunds must be processed within three months.
- The State of Kerala is directed to release the funds collected for the corpus fund back to the respective colleges within three months, without affecting the obligations outlined in paragraph 37 of the judgment.
- NRI students are not entitled to a refund of the amount transferred to the State towards the corpus fund. They must pay the full fees to their respective colleges, as approved by the Admission and Fee Regulatory Committee, if not already done, within a period of three months.
vii. The State of Kerala or the Admission and Fee Regulatory Committee is free to require the colleges to submit their financial records to ensure compliance with the directions given in this judgment.
Parichaya Reddy
Associate
The Indian Lawyer & Allied Services
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