MCI encashment of Bank Guarantee of defunct medical college: HC laments sorry state of medical education in India

The observation was made during the hearing of the petition filed by Shree Aastha Foundation for Education Society (SAFE), being aggrieved by the action of Medical Council of India in encashing the Bank Guarantees furnished by the petitioner, stating that the petitioner Society is a registered Society registered under the provisions of Madhya Pradesh Society Registrikaran Adhiniyam, 1973. In its plea, it stated that the Society had taken steps for establishment of a Medical College i.e. Modern Institute of Medical Sciences & Sewakunj Hospital & Research Centre in the year 2016-17 and the Ministry of Health & Family Welfare forwarded the petitioner's application the Medical Council of India (MCI) for evaluation and making the recommendations to the Ministry under Section 10 of Indian Medical Council Act, 1956.

A Letter of Permission was issued on 20/08/2016 with annual intake of 150 MBBS students under the Madhya Pradesh Medical Science University Jabalpur under Section 10A of the Indian Medical Council Act, 1956 for the academic year 2016-17.

The Society further stated that initially the Society and Medical College was being run by some other group of members and due to mismanagement by the earlier Members and Chairman, the College was closed.

On 30/11/2018 the new Chairman took charge and then only he came to know about the mismanagement and irregularities in the College as well as in the Society.

The petitioner further submitted that the Government of India granted a provisional Letter of Permission to run the College with 150 seats for MBBS students and the medical College started enrolling the students by participating in the counselling conducted by the State Government.

Besides, the Medical Council of India through its Executive Committee vide letter dated 26/12/2016 and informed the Union of India that the medical College failed to comply with the conditions laid down by the Oversight Committee and the recommendation was made to debar the College from admitting the students for two academic years i.e. for academic year 2017-18 and 2018-19 and also to encash the Bank Guarantees furnished by the College.

It was submitted that in spite of the aforesaid the College participated in counselling conducted by the State Government and 150 students were admitted. The government then issued a letter for withdrawing the conditional permission and directed the College not to admit any student in MBBS Course and has also informed that the College has been debarred from admitting students for the next two academic year i.e. the academic year 2017-18 and 2018-19. The College was also informed that the next batch shall be admitted only after obtaining permission from the Central Government and a direction was also given to Medical Council of India for encashing the the Bank Guarantee.

In response to the petition, the MCI submitted before the court that the petitioner has concealed the material facts before this Court and has selectively placed facts and documents. It had been further stated that the petitioner has played fraud with Medical Council of India and State Government as well as Central Government.

The regulations framed by the Medical Council of India makes it mandatory to possess the valid Essentiality Certificate issued by the State Government and Consent of Affiliation from the concerned University.

In case of the petitioner, the Trust submitted an application to the State of Madhya Pradesh for grant of Desirability & Feasibility Certificate and the Desirability & Feasibility Certificate was issued by the State of Madhya Pradesh on 27/09/2013. The State then informed the Medical Council of India that on account of multiple irregularities committed by the College reported in the inspection carried out by the Madhya Pradesh Medical Science University, the Desirability & Feasibility Certificate has been cancelled on 19th and 20th June, 2018.

The students in the Medical College in respect of academic session 2016-17 and the students admitted in Advance Medical College, Bhopal, which was again a private Medical College, for the academic session 2016-17 in identical circumstances were reallocated to other recognized private Medical Colleges / Government Medical Colleges situated in the State of Madhya Pradesh, meaning thereby, the State of Madhya Pradesh was burdened with 295 students who were granted admission in petitioner Medical College i.e. Modern Medical College and Advance Medical College, Bhopal for the academic year 2016-17. On account of the intervention of the court, they were granted admission in various private Medical Colleges and most of the students studying in the petitioner's Medical College were accommodated in another premium Institution namely M. Y. Medical College, Indore.

The Government of India was informed about the development which took place in the matter and the Executive Committee of Medical Council of India also accorded approval for shifting of the students and also for transfer of fees paid by the students to State of Madhya Pradesh so that additional revenue generated from fees can be utilized to upgrade the infrastructure in the Government Medical Colleges in which the students were transferred.

Maintaining its stance, the MCI asserted that the State Government was forced to withdraw the Desirability & Feasibility Certificate. The students were adjusted in the Medical Colleges of State of Madhya Pradesh and in those circumstances, the Bank Guarantees furnished by the petitioner were being encashed. The institute concealed the vital fact that no student is being taught in the Medical College as the batch of student admitted during academic session 2016-17 has already been shifted to other Medical College by the State of Madhya Pradesh, it said.

After hearing both the parties at length and perusing the records presented, the Single Bench of Honourable Justice SC Sharma reiterated the role of the apex medical council in the country and the regulation which provides for certain Mandatory / Statutory Preconditions, Essentiality Certificate and Consent of Affiliation required for establishing the Medical College.

The bench took account of the MCI's submissions and the transfer of medical students and said that the Medical College which was established by the Society is not at all functional. Students have been shifted to other Medical Colleges and the Desirability & Feasibility Certificate have also been cancelled.

Expressing anguish on the plea, the bench said that the present case reflects a very sorry state of affairs prevalent in the field of medical education. Colleges are established, fee / capitalization fee is collected from the students and then no teaching takes place.

It asserted that the College played with the carrier of the students and in those circumstances, in the present case, the Desirability & Feasibility Certificate was cancelled.

"At present, the College does not have any kind of permission and therefore, merely there is change in the Society, new office bearers have come, it does not mean that College has become functional."

On the key contention based on the encashment of bank guarantee, the bench mentioned that the Law in respect of encashment of Bank Guarantee has already been crystallized by the Hon'ble Supreme Court. The Bank Guarantee is an independent contract between the Bank and the person in whose favour Bank Guarantee has been executed. It said:

The court exercising its power cannot interfere with enforcement of bank guarantee/letters of credit except only in cases where fraud or special equity is prima facie made out in the case as triable issue by strong evidence so as to prevent irretrievable injustice to the parties

Holding that the Medical Council of India is justified in requesting encashment of Bank Guarantee, the bench said:

In the present case, no such contingency is involved. In fact it is the petitioner, who has played fraud upon the State of Madhya Pradesh, upon the Union of India, upon the students and upon the public at large and therefore, this Court does not find any reason to interfere in the matter.

Keeping in view the aforesaid judgment and the Bank Guarantee in question and also keeping in view the fact that Desirability & Feasibility Certificate has been cancelled by the State Government way back on 20/06/2018, the College has played fraud upon the State as well as with the students and also keeping in view the settled preposition of law that Bank Guarantee is a contract between Bank and beneficiaries, the question of restraining the Medical Council of India from invoking the Bank Guarantees does not arise.

At the end, the bench dismissed the petition and directed the bank to encash the Bank Guarantee and to transfer the account in the account of Medical Council of India immediately.

Attached is the detailed order below: