SC Quashes Kerala's Corpus Fund Order for NRI Student Fees, Says Welfare Measures Need Legal Backing

The Supreme Court has upheld the Kerala High Court’s 2020 judgment quashing a government order (GO) that mandated the creation of a corpus fund using fees collected from NRI students in self-financing medical colleges. The apex court ruled that the initiative, although aimed at subsidising education for economically weaker students, lacked statutory backing.

A bench of Justices Surya Kant and N Kotiswar Singh stressed that “a recourse to expropriatory measures cannot be sheltered under a piece of subordinate legislation,” unless expressly permitted by the parent statute. The court said the power to levy a tax or fee “cannot be delegated to the Executive unless the principal statute expressly authorises to do so.”

The bench examined the Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act, 2017, and found that Section 8A did not authorise retention of any amount by the State. It further clarified that Section 11, which allows the Fee Regulatory Committee to consider “any other relevant factor,” could not be interpreted as enabling the creation of a corpus fund without explicit legislative authority.

“Even assuming that the creation of a corpus fund for scholarships can be protected under the omnibus clause (g) of Section 11... such power cannot be exercised unless the Legislature authorizes the Committee to create a corpus fund or to prescribe its utility,” the court held.

The GO was challenged in three sets of appeals—by the State, self-financing colleges, and NRI students. While the State supported the GO's welfare aim, the colleges opposed the direction to use the fund exclusively for subsidising fees, and NRI students demanded refunds.

The bench noted that “howsoever laudable, pious, or noble the objective behind the GO may be, it cannot be legitimised unless its genesis is traceable to a legislative action.” Upholding the High Court's decision, it held the GO to be “devoid of any authority of law.”

Relying on earlier judgments; Islamic Academy and Modern Dental College, the Court clarified that fees collected from NRI students may serve broader educational purposes, including scholarships, but cannot be fixed solely on that basis. 

At the same time, the court held that “self-financing medical educational institutions are under the obligation to provide quality education to the BPL students who were admitted to those colleges.” It ruled that BPL students should not be charged more than the subsidised amount approved by the Committee. If they had paid extra, “they are entitled to a refund… such a refund must be made within three months.”

The bench clarified that colleges would be allowed to retain the corpus fund amount, but “a substantial part... shall have to be utilized by them for subsidizing the education of the BPL students.” The colleges were designated as “trustees of the ‘corpus fund’ amount, without permitting it to be utilized by them as per their own free will.” 

Case Title: State of Kerala & Ors. v. The Principal, KMCT Medical College & Ors.