SC directs Kannur Medical College to Deposit Rs 40.7 crore with ASC to claim affiliation

Regarding the cancelled affiliation of the medical college, the Apex Court had observed, "KMC would be entitled to claim affiliation and admit students only after they have deposited Rs.15,72,89,020/- and Rs.25 crores, as indicated above. Of course, KMC, for affiliation would have to meet and satisfy all statutory conditions. It is made absolutely clear that if the aforesaid payments of Rs.15,72,89,020/- and Rs.25 crores are not made, the order passed by the ASC and KUHS denying/rejecting KMC's application for continuation of affiliation for academic year 2020-21 and future academic years would continue."

The order of the Apex Court comes after Lalitha R Nath and others had moved the Supreme Court against the Kannur Medical College regarding the issue related to refund for the admissions made in the academic year 2016-2017.

Also Read: Another Setback to Kannur Medical College: Supreme Court stays HC order

Medical Dialogues extensively reported about the matter which ensued after a complaint was registered by the father of the petitioner MBBS student to the Admission Supervisory Committee, seeking reimbursement of the fee collected by the medical college management. The complainant alleged that the management had collected Rs 20 lakh to Rs 50 lakh from students, besides collecting bank guarantees to secure future payments.

However, the Medical College soon got derecognized after it failed to comply with the orders of the Admission Supervisory Committee on the refund.

Repeated directives by the committee to the college authorities resulted in failed compliance on the part of the college, towards refunding of fees to the students. This, in turn, resulted in the committee recommending withdrawal of affiliation from Kannur Medical College to KUHS.

The litigation then went to the apex court which at that time directed the medical college to return back the amount paid by the MBBS students in double.

A number of conflicts followed the apex court's order. The medical college had stated that they paid back Rs 20 lakh to the students for Rs 10 lakh paid by the students.

Then, the government-appointed Supervisory Committee had submitted the report with SC stating that the court order was not obeyed. The Committee found that the students had paid Rs 30 – 40 lakhs at the time of admissions. So the court ordered for a probe regarding this issue.

Later, at the hearing in HC on the plea of the committee and the MBBS students, the High Court instructed to submit a bank guarantee of Rs 10 crore and documents of the 25 acres of land in which the campus is located.

Following this, the admission supervising committee notified the apex court that the medical college has not implemented the order to refund the fees of students who took admission to the college in the academic year 2016-17.

Taking cognizance of the committee's submission, the Supreme Court had issued a stay order on the HC verdict and had issued notices to the Kannur Medical College authorities seeking their stance.

The Apex Court had observed that the primary contention of ASC and the medicos had been based on the assertion that "the students/guardians were compelled and forced to sign documents by the College even without informing them about the contents. Students/guardians were coerced as they required money at the earliest so that the students could take admission in some other college. Secondly, without discharge receipt, the College would not return the original certificates submitted by the students. Accordingly, these documents obtained under duress and coercion should not be accepted as valid 'No Dues Certificates'."

In particular, the apex court further relied on the decision in the case of Writ Petition (Civil) No. 1247 of 2018 titled Riya George v. Kannur Medical College and Others, wherein, it had noted the contention that the withdrawal of the complaint against KMC by the father of the student therein might not be voluntary and could be occasioned by the urgency to obtain certificates deposited with the College and refund of money, so as to secure admission to another college.

During the recent hearing, the counsel appearing for the petitioner students had submitted before the Apex Court that the "Division Bench of the High Court ought not have granted the relief, as this Court vide two orders dated 29th August, 2018 and 4th October, 2018, had directed the ASC to examine the disputed factual matrix pertaining to the actual amount paid by the students and for refund of double the amount, which direction and mandate had been agreed to and accepted by KMC. Further, the impugned order dated 22nd November, 2019 was passed by the Division Bench without hearing the adversely affected parties, namely, the guardians/students who had purportedly signed the certificates in favour of KMC."

The petitioner had challenged the order dated 29^th May, 2020 and had submitted that the order directing furnishing of bank guarantee of Rs 10 crores and title documents etc. hadn't taken into account the misery and suffering of the students who have not been paid/refunded double the amount they had paid, though orders in this regard had been passed by this Court in August and October, 2018.

The impugned order, it had been submitted, had been at variance with, and ignored the continued non-compliance of the orders of this Court as well as those of the High Court. Even the amounts due and payable as per the orders of the High court had not been paid, though KMC had not challenged the determination, they contended.

KMC, in its affidavit filed on 16th December, 2020, had accepted and admitted that an amount of Rs.4,82,46,000/- had been due to one batch of students. This amount had not been paid, though the College had submitted that it were ready and willing to secure payment of the amount by bank guarantee or other means considered fit by the Apex Court, the counsel for the students further submitted before the bench adding, "Similarly, with regard to another batch of students, the affidavit had stated that an amount of Rs.6,49,29,000/- had been ordered to be paid by the ASC and that it was ready and willing to secure the amount by a bank guarantee or other means as may be considered fit by the Supreme Court. The College had primarily paid double of the fee including tuition fee deposited by the students at the time of admission, amounting to Rs.23.30 lakhs in each case. In respect of the other amounts, including capitation fee paid in cash, no refunds/payment had been made."

"Thus, KMC had been deliberately disobeying the orders passed by this Court and the High Court. The students should not be put in a disadvantageous position by permitting KMC to furnish bank guarantee, which on invocation would only lead to another round of litigation for realisation of the amount. Besides, the amount of bank guarantee, as directed, had been wholly inadequate and ignored the quantum actually payable. Selling land would be a long drawn, if not an impossible exercise. KMC had to pay substantial amount to different banks and the College property itself (valued at Rs.136 crores) had been mortgaged with a bank," the counsel argued.

On the other hand, KMC submitted that it has been penalised as it was not permitted to admit students for the academic years 2016- 17, 2018-19 and 2019-20. KMC had been conducting MBBS course since the academic session 2006-07, and had been a fully compliant institution which met all regulatory and statutory requirements for a medical college. The facilities, including the infrastructure, plant and equipment, had a market value of Rs.1,000 crores. Excellent medical facilities were, therefore, not being utilised and taken full advantage of, as students were not being allocated and admitted to the MBBS course.

The institute further had submitted that "KMC is a self-financing minority medical college and any further restraint on admitting students would bring the institution itself to a state of bankruptcy."

The college further stated that KMC had already offered to deposit Rs.15.71 crores to be paid, if required, towards double the amount of fee paid by the students. KMC had entered into settlements with 134 guardians/students. Further, payment of Rs.39 crores had been made to students/guardians.

The bench of justices of the Apex Court had listened to all the arguments made by both the parties and had referred to two orders passed by the Supreme Court on 29th August 2018 and 4th October 2018 which had directed that double the fee paid by the guardians/students would be refunded by KMC through electronic mode.

After considering all these facts, the Apex Court in its latest judgement has stated, "In light of the abovementioned facts and with due regard to orders passed by this Court on 29th August, 2018 and 4th October, 2018, we are inclined to issue the following directions:

(a) KMC shall deposit Rs.15,72,89,020/- with the ASC along with full details of the guardians/students to whom the amounts have to be paid, their addresses and bank accounts, within a period of one month from today. On deposit of the said amounts, the ASC would disburse and make payments to the guardians/students.

(b) ASC would issue fresh notices to the remaining students (possibly 92 in number) as was the position before impugned order dated 22nd November, 2019 was passed. It will examine the objections or claims made by the guardians/students as to the actual amount paid by them on the basis of material placed by the guardians/students and the college. It will thereupon pass appropriate orders. Any party, i.e. the guardian/student/college, aggrieved by the order to be passed by the ASC would be entitled to challenge the same before the High Court.
(c) KMC would make a deposit of Rs.25 crores with the ASC, which deposit would be converted into multiple fixed deposit receipts as the ASC may deem appropriate.

(d) ASC would disburse and make payments to the guardians/ students on the basis of the orders passed by it or on the basis of the orders passed by the High Court in case a writ petition is filed impugning the order passed by the ASC regarding quantification and refund.
(e) The orders passed by the ASC would indicate that the payments in terms of the said order would be made within 45 days of the passing of the order and that any party, be it the student/guardian or KMC, would have the right to challenge the order before the High Court. The High Court upon examination of the case would be entitled to grant stay or direct refund/payment.

(f) KMC would be entitled to claim affiliation and admit students only after they have deposited Rs.15,72,89,020/- and Rs.25 crores, as indicated above. Of course, KMC, for affiliation would have to meet and satisfy all statutory conditions. It is made absolutely clear that if the aforesaid payments of Rs.15,72,89,020/- and Rs.25 crores are not made, the order passed by the ASC and KUHS denying/rejecting KMC's application for continuation of affiliation for academic year 2020-21 and future academic years would continue. As the amount of Rs.15,72,89,020/- has not been disputed by the College, in case it fails to deposit the same, the students/ guardians will be well within their rights to approach the authorities for enforcement and payment. Further, in the event that KMC does not deposit Rs.15,72,89,020/- and Rs.25 crores, decision with regards to grant of affiliation shall be made by the ASC and KUHS only upon determination, settlement and refund of all claims pertaining to the students admitted in the academic year 2016-17. Compliance report would be filed in terms of order dated 4th October, 2018.

(g) As indicated above, the ASC would be entitled to open a separate bank account and convert the amounts received in multiple fixed deposits of varying amounts for different periods. The bank account and the fixed deposits would be in the name of KMC, i.e. Kannur Medical College, but the account/deposits would be only operated and abide by the instructions of the Authorised Officer/Member of the ASC. For the purpose of account opening, KMC would provide their PAN number and other details. KMC would assist and cooperate with the ASC. Tax at source, if any, deducted on the interest would be reflected as deducted on interest earned by KMC. The interest accrued on the fixed deposits would also be income and would be reflected in the income-tax returns of KMC. However, the interest accrued on the deposits/bank account (minus the TDS) would be also available to the ASC to make payment to the students.

(h) ASC is requested to complete the aforesaid exercise as expeditiously as possible and preferably within a period of nine months from the date of this order. Upon completion of the entire exercise, including awaiting the decision of the High Court/this Court, the ASC shall refund excess amount, if any, to KMC. In case of a shortfall, it would be the obligation of KMC to make the amount available for disbursal to the guardians/students. In case of failure to make payment, the ASC would be entitled to issue appropriate orders/directions, including direction to restrain KMC from admitting students in the then current or the next academic year. Such direction, however, would not affect the students who have already been admitted. (i) In case of any difficulty in implementation or clarification of this order, it would be open to the parties to move an application for directions, clarification or modification before this Court."

Disposing of all the other pending applications, the judgment had mentioned, "Accordingly, the impugned orders are set aside and the appeals are allowed in the aforesaid terms. Pending applications, including application I.A. No. 120323 of 2020 filed by the College, are also disposed of in the above terms."