NRI Students are Liable for Entire Tuition Fees Despite Illegal Creation of Cross-Subsidy Corpus Fund

The petitioners are NRI quota MBBS students admitted to various self-financing medical colleges in Kerala.

Historically, the Admission and Fee Regulatory Committee ("Fee Committee") increased NRI fees (e.g., from ₹15 lakhs to ₹20 lakhs in 2017-18), stipulating that ₹5 lakhs of said fee be diverted to a "Corpus Fund" to subsidize BPL category students.

This bifurcation was challenged, and the Kerala High Court in Director, Jubilee Mission (2020) and subsequent cases held that neither the Committee nor the Government had the legislative authority to mandate such a fund.

The matter reached the Apex Court in State of Kerala v. Principal KMCT Medical College (2025), which upheld the quashing of the fund's regulatory order but directed NRI students to pay the "entire fees" approved by the Committee to the colleges.

Following this, colleges demanded the ₹5 lakh arrears from students.

The petitioners challenged these demand notices, contending that since the Corpus Fund was declared illegal, they are only liable for the base fee (e.g., ₹16,65,720 instread of ₹21,65,720).

1. Whether NRI students are exempt from paying the ₹5,00,000 component originally earmarked for the Corpus Fund following the Apex Court’s declaration of that fund's illegality.

2. Whether the total approved NRI fee remains payable to the medical colleges regardless of the specific internal allocation or nomenclature assigned to a portion of it.

The Court applied the Kerala Medical Education (Regulation and Control of Admission to Private Medical Educational Institutions) Act, 2017, specifically Sections 3 and 11 regarding the fixation of fees by the Regulatory Committee.

It relied heavily on the precedent set by the Supreme Court in State of Kerala v. Principal KMCT Medical College [2025 KHC OnLine 6505], which clarified that while a State-mandated Corpus Fund required legislative backing, the underlying fee increase approved by the Fee Committee was reasonable and not exploitative.

The court further referenced the principles from P.A. Inamdar v. State of Maharashtra, noting that NRI fees can be used to subsidize economically weaker students.

The Court reasoned that the petitioners' challenge was based on a "mistaken assumption" that the ₹5 lakh was an additional levy over and above the fixed tuition fee.

The High Court clarified that the Fee Committee had actually approved a total fee (e.g., ₹20 lakhs), and the subsequent litigation only concerned the diversion of a portion of that fee to a Government-controlled fund.

The Supreme Court specifically directed that NRI students pay the "entire fees" to their colleges and categorically denied any refund to students.

By allowing colleges to retain the ₹5 lakh component to subsidize BPL students internally, the Apex Court affirmed that this amount remained a valid part of the approved fee structure.

Consequently, the High Court found that the students were legally obligated to pay the full approved amount, as the illegality of the fund mechanism did not reduce the quantum of the fee approved by the Committee.

The answering of the issues established that the ₹5 lakh component remains part of the "entire fee" as envisioned by the Apex Court.

The petitioners were granted six weeks to satisfy the arrears, and colleges were directed to defer the encashment of bank guarantees until the expiry of this period.