Supreme Court Directs Refund and Sets Conditions for Affiliation: Lalitha R Nath vs. Kannur Medical College (2021)

Date of the Judgment: 18 February 2021

Citation: Civil Appeal No. 596 of 2021 (Arising out of Special Leave Petition (Civil) No. 7907 of 2020)

Judges: S. Abdul Nazeer, J. and Sanjiv Khanna, J.

Can a medical college continue to operate without fully refunding students as per court orders? The Supreme Court of India recently addressed this question in a case involving Kannur Medical College. The core issue was whether the college had complied with previous court orders to refund students who were wrongly admitted and whether the college should be allowed to continue its operations. The Supreme Court, in this judgment, set aside the orders of the High Court and issued directions for refund of money and also set conditions for the college to continue its affiliation.

Case Background

Kannur Medical College (KMC), a private self-financing medical college, was established in 2006 with an initial intake of 100 students, later increased to 150. In 2016, the Supreme Court mandated that all MBBS admissions be conducted through the National Eligibility-cum-Entrance Test (NEET). Subsequently, the Union Government directed all States to conduct centralized counseling for MBBS admissions. The Government of Kerala also directed that all medical colleges admit students selected by the Commissioner for Entrance Examinations (CEE) through common counseling.

KMC challenged this directive, but the Admission Supervisory Committee (ASC) reiterated that admissions not following its guidelines would not be recognized by the Kerala University of Health Sciences (KUHS). The ASC cancelled KMC’s admissions for non-compliance. The matter reached the Supreme Court, which directed centralized counseling. KMC’s admissions were cancelled again due to continued non-compliance. The High Court dismissed KMC’s challenge, and the Supreme Court upheld this decision. Students also challenged the cancellation, but their petition was also dismissed by the Supreme Court.

Following this, the State of Kerala promulgated an ordinance to regularize admissions, which was declared ultra vires by the Supreme Court. Students demanded refunds and return of documents, leading to police complaints and First Information Reports (FIRs). KMC entered into settlements with some students, but disputes over the amounts paid and full refunds persisted.

Timeline:

Course of Proceedings

The Admission Supervisory Committee (ASC) was tasked with ensuring that KMC complied with the Supreme Court’s order to refund double the amount of fees to the students. However, disputes arose regarding the actual amounts paid by students and the adequacy of the refunds. The ASC issued notices to students to determine the correct amounts due.

The Kerala High Court, in response to a petition by KMC, quashed the reopening notices issued by the ASC in 16 cases and directed ASC not to reopen 92 other cases where students had been issued notice after 4th October, 2018. The High Court also stayed the order of the Kerala University of Health Sciences (KUHS) denying affiliation to KMC for the academic year 2020-21, subject to KMC furnishing a bank guarantee and depositing title deeds of land as security.

The Supreme Court, in the present case, reviewed the High Court’s orders, the actions of the ASC, and the previous orders of the apex court itself.

Legal Framework

The legal framework in this case primarily revolves around the orders passed by the Supreme Court and the directives issued by the Admission Supervisory Committee (ASC). Key elements of the legal framework include:

• Supreme Court Order dated 29th August, 2018: This order directed KMC to refund double the amount of fees deposited by each of the 150 students by 4th September, 2018. It also stated that the order of the ASC for withdrawal of affiliation shall not be acted upon if the refund was complied with.
• Supreme Court Order dated 4th October, 2018: This order acknowledged the ASC’s report that KMC had collected diverse amounts from students and directed the ASC to conduct an enquiry to determine the actual amount collected from each student and the adequacy of the refund.
• Kerala Professional Colleges (Regularisation of Admissions in Medical Colleges) Ordinance, 2017: An ordinance promulgated by the State of Kerala to regularise MBBS admissions in certain colleges against payment of a regularisation fee, which was later held to be ultra vires by the Supreme Court in Medical Council of India v. State of Kerala and Others.

These orders and directives form the basis for the legal obligations of KMC to refund the students and the conditions for the college’s affiliation.

Arguments

Arguments by the Appellants (Students/ASC):

• Coerced ‘No Dues Certificates’: The appellants argued that students were forced to sign documents, including ‘No Dues Certificates,’ under duress because they needed their original certificates and refunds to secure admissions in other colleges. They contended that these certificates should not be considered valid due to the coercive circumstances.

• Non-Compliance with Court Orders: The appellants emphasized that KMC had not fully complied with the Supreme Court’s orders of 29th August, 2018 and 4th October, 2018, which directed the college to refund double the amount of fees paid by the students. They argued that the High Court should not have granted relief to KMC without ensuring full compliance.

• Lack of Hearing for Affected Parties: The appellants pointed out that the High Court had passed the order dated 22nd November, 2019 without hearing the affected students/guardians who had purportedly signed the ‘No Dues Certificates’.

• Inadequate Security: The appellants argued that the High Court’s direction for KMC to furnish a bank guarantee of Rs. 10 crores and title documents was insufficient to cover the actual amounts due to the students. They also raised concerns about the college’s financial state and its ability to pay the full amount.

Arguments by Kannur Medical College (KMC):

• Penalized for Non-Admission: KMC argued that it had been unfairly penalized by not being allowed to admit students for the academic years 2016-17, 2018-19, and 2019-20. The college asserted that it was a fully compliant institution and met all regulatory requirements.

• Financial Hardship: KMC contended that further restrictions on admitting students would lead to bankruptcy and that the college had a substantial infrastructure and facilities that were not being fully utilized.

• Settlements and Payments: KMC claimed that it had entered into settlements with 134 guardians/students and had made payments of Rs. 39 crores to students/guardians. The college also offered to deposit Rs. 15.71 crores to be paid towards double the amount of fees.

• Compliance with Orders: KMC argued that it had substantially complied with the orders of the Supreme Court and that the issue of refunds was being addressed.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues based on the arguments presented:

1. Whether the High Court was right in quashing the re-opening notices issued by the ASC in the case of 92 students.
2. Whether the High Court was right in staying the operation of the order passed by the Kerala University of Health Sciences (KUHS) denying affiliation to the college.
3. Whether the directions issued by the High Court for furnishing a bank guarantee of Rs. 10 crores and title documents etc. was sufficient to secure the interests of students.
4. Whether the college had complied with the orders of the Supreme Court regarding refund of fees to the students.

Additionally, the court also considered the sub-issue of whether the ‘No Dues Certificates’ signed by the students were valid, given the circumstances under which they were obtained.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court set aside the impugned orders of the High Court and issued several directions to ensure justice for the students and to set conditions for KMC’s affiliation. The Court emphasized that KMC had not fully complied with the previous orders regarding refunds and had also failed to pay the undisputed amounts.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court used the authorities as follows:

• The Court relied on Sankalp Charitable Trust and Another v. Union of India and Others, (2016) 7 SCC 487* and Modern Dental College and Research Centre and Others v. State of Madhya Pradesh and Others, (2016) 7 SCC 353* to establish the need for centralized admissions through NEET.
• The Court relied on Medical Council of India v. State of Kerala and Others, (2019) 13 SCC 185* to highlight that the Kerala ordinance was ultra vires.
• The Court relied on Riya George v. Kannur Medical College and Others, to support the argument that the ‘No Dues Certificates’ were signed under duress and were not voluntary.
• The Court relied on its own orders dated 29th August, 2018 and 4th October, 2018 to emphasize that KMC was directed to refund double the amount of fees and that the ASC was directed to conduct an inquiry to determine the actual amount collected from each student and the adequacy of the refund.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Non-compliance with Previous Orders: The Court was firm that KMC had not fully complied with the previous orders of the Supreme Court regarding the refund of fees. This non-compliance was a major factor in the Court’s decision to set aside the High Court’s orders.
• Protection of Students’ Interests: The Court emphasized the need to protect the interests of the students who had been wronged by KMC’s actions. The Court was concerned that the students had been coerced into signing ‘No Dues Certificates’ and that they had not received the full refunds they were entitled to.
• Need for Transparency and Accountability: The Court highlighted the need for transparency and accountability in the actions of KMC. The Court was critical of the High Court’s decision to quash the notices issued by the ASC without hearing the affected parties.
• Factual Disputes: The Court recognized the presence of factual disputes regarding the actual amounts paid by students and the adequacy of refunds. The Court directed the ASC to conduct a thorough inquiry to resolve these disputes.

Sentiment Analysis of Reasons

Fact:Law Ratio

The court’s decision was more influenced by the factual aspects of the case, particularly the non-compliance by KMC and the need to protect the students’ interests. The legal considerations were also important to ensure that the court’s previous orders were followed.

Logical Reasoning

The court considered alternative interpretations but rejected them due to KMC’s non-compliance and the need to protect students’ interests. The final decision was reached by prioritizing the rights of the students and ensuring that the college complied with previous orders.

The Supreme Court’s decision was clear: KMC had to refund the students fully and comply with all previous orders before being allowed to operate. The court’s reasoning was based on the principles of justice, equity, and the need to protect the rights of the students.

The majority opinion was authored by Justice Sanjiv Khanna, with Justice S. Abdul Nazeer concurring. There were no dissenting opinions.

“The impugned order dated 22nd November, 2019 quashing the re-opening notices issued by the ASC in the case of 92 students for several reasons is liable to be set aside.”

“The impugned order dated 29th May, 2020 that directs the College to furnish a bank guarantee of Rs.10 crores is predicated on the assumption that no further amounts would be due and payable in respect of 92 students… “

“We do not, therefore, find anything wrong in the letter dated 29th April, 2020 whereby KUHS has rejected KMC’s application for continuation of affiliation for the academic year 2020-21 as it is a necessary sequitur and consequence of the two orders passed by this Court.”

Key Takeaways

• Refunds Must Be Prioritized: Medical colleges must prioritize the refund of fees to students as per court orders. Non-compliance will lead to strict action.
• ‘No Dues Certificates’ Under Duress are Invalid: Certificates obtained under duress or coercion will not be considered valid, and the authorities must look into the circumstances under which they were obtained.
• Full Compliance is Mandatory: Medical colleges must fully comply with court orders before being allowed to operate. Partial compliance is not sufficient.
• Transparency and Accountability: Regulatory bodies must ensure transparency and accountability in the actions of medical colleges.
• Protection of Students’ Rights: The rights of students must be protected, and any actions that undermine these rights will be dealt with strictly.

The judgment has potential implications for future cases involving similar issues. It sets a precedent for the importance of full compliance with court orders and the protection of students’ rights. It also underscores the need for regulatory bodies to be vigilant in ensuring that educational institutions do not exploit students.