Introduction:
The Supreme Court of India recently delivered a significant judgment concerning the financial liability of medical students who were transferred from a derecognised private medical college to other institutions after the collapse of the original college’s regulatory approval. In the case titled Soumya Ranjan Panda & Ors. v. Subhalaxmi Dash & Ors., a Bench comprising Justice Vikram Nath and Justice Sandeep Mehta held that students shifted from the defunct Sardar Rajas Medical College and Hospital (SRMCH), Odisha, could not continue enjoying government medical college fee rates indefinitely after being relocated to private institutions. The Court observed that such an arrangement would amount to “unjust enrichment” because the students had originally taken admission in a private medical college where the fee structure was substantially higher than that of government institutions.
The case emerged from a deeply troubling episode involving the collapse of recognition granted to SRMCH, which had admitted MBBS students for the academic sessions 2013-14 and 2014-15. Inspections conducted by the Medical Council of India, now succeeded by the National Medical Commission, reportedly revealed grave deficiencies in infrastructure, faculty strength, clinical facilities, and compliance with mandatory regulatory standards. These deficiencies threatened not only the institution’s continuation but also the academic future of hundreds of students who had already enrolled and invested significant amounts of money in their medical education.
Faced with the possibility of students losing precious academic years due to institutional failure, the Supreme Court had earlier intervened to protect their educational interests. Under a state-supervised counselling process, affected students were transferred to three private medical colleges in Odisha: Kalinga Institute of Medical Sciences, IMS & SUM Hospital, and Hi-Tech Medical College. Out of 124 affected students, 122 were successfully relocated to these institutions.
The transfer arrangement initially functioned as an emergency mechanism designed to prevent academic disruption. Interim orders permitted the students to continue their studies by paying fees equivalent to government medical college rates. However, over time, the transferee colleges argued that they had been forced to bear the enormous financial burden of educating students while receiving only nominal fees far below their actual fee structure. According to the colleges, they had not only provided academic instruction and infrastructure but had also paid stipends and borne operational expenses associated with medical education for several years.
The litigation therefore evolved into a complex dispute involving competing equities. On one side were students who had already suffered due to the collapse of their original institution and argued that they should not be financially penalised for circumstances beyond their control. On the other side were private medical colleges claiming that they could not be compelled to indefinitely subsidise education at rates applicable to government institutions when the students had originally enrolled in a private college.
The Supreme Court was consequently required to balance fairness to students, accountability of the defaulting institution, and the financial rights of the transferee colleges. The judgment ultimately addressed important principles concerning unjust enrichment, institutional accountability, and the limits of equitable relief in educational disputes.
Arguments of the Parties:
The transferred students argued that they were victims of institutional misconduct and regulatory failure rather than wrongdoers. According to them, they had secured admission to SRMCH in good faith, paid the prescribed fees, and pursued their studies believing that the institution possessed valid recognition and regulatory approval. They contended that the sudden withdrawal of recognition by the Medical Council of India placed them in an extremely vulnerable situation, threatening their academic careers and future medical profession.
The students further submitted that the transfers to other colleges were not voluntary decisions motivated by personal preference or financial gain. Instead, the transfers occurred under the direct supervision of the Supreme Court and State authorities as an emergency remedial measure intended to safeguard their educational interests. Therefore, they argued that the financial consequences arising from the collapse of SRMCH should not be imposed upon them.
A major argument advanced on behalf of the students related to the interim orders under which they had been permitted to continue their education by paying fees at government medical college rates. According to them, these orders created a legitimate expectation that they would not be compelled to pay significantly higher fees after being shifted to new institutions. They maintained that many students belonged to middle-class or financially constrained backgrounds and would face severe hardship if burdened with additional financial liabilities after completing their studies.
The students also contended that the transferee colleges had already accepted them under court-monitored arrangements and could not subsequently demand retrospective enhancement of fees. They argued that compelling them to pay private medical college fees after years of education would create enormous financial distress and effectively punish them for the failures of SRMCH and its management.
On the other hand, the transferee colleges strongly argued that they had accommodated the students only because of judicial directions and humanitarian considerations. According to them, they had provided infrastructure, clinical exposure, faculty support, hostel facilities, and stipends for several years without receiving fees commensurate with the actual cost of medical education.
The colleges emphasized that they themselves were private institutions operating under a substantially higher fee structure than government colleges. They argued that compelling them to educate transferred students at government-rate fees imposed an unfair financial burden and undermined the sustainability of private medical education institutions.
Importantly, the transferee colleges clarified that they were not insisting upon recovery of their own higher fee rates from the students. Instead, they expressed willingness to accept reimbursement calculated on the basis of the fee structure applicable at SRMCH, the original institution where the students had initially taken admission. Even on that basis, however, the outstanding dues reportedly amounted to approximately ₹16.2 crore.
The colleges further argued that allowing students to continue paying only government college fees would create an inequitable situation where students admitted to a private medical college would ultimately receive a medical education at a fraction of the cost borne by other similarly situated students. According to them, such an arrangement would amount to unjust enrichment at the expense of the transferee institutions.
The National Medical Commission and regulatory authorities highlighted the serious deficiencies that led to the collapse of SRMCH’s recognition. It was argued that the institution had failed to maintain minimum mandatory standards prescribed for medical education and had jeopardised the future of students through persistent non-compliance.
The Court was also informed that the Selvam Educational and Charitable Trust, which managed SRMCH, had failed to comply with earlier directions regarding refund of excess fees collected from students. This conduct, according to the respondents, demonstrated the extent of mismanagement and justified imposing financial responsibility upon the Trust.
The Trust and associated parties attempted to minimise their liability by contending that the students had already been accommodated elsewhere and that the interim arrangements effectively resolved the dispute. However, the transferee colleges maintained that unless reimbursement was directed, they would suffer substantial financial losses for having acted in compliance with judicial orders.
Thus, the central dispute before the Supreme Court revolved around determining who should ultimately bear the financial burden arising from the collapse of SRMCH: the students, the transferee colleges, or the defaulting institution and its management.
Court’s Judgment:
The Supreme Court approached the matter by balancing equitable considerations with established legal principles governing unjust enrichment and institutional accountability. The Bench recognised that the transferred students had faced extraordinary hardship due to the collapse of SRMCH’s recognition and acknowledged that they were not personally responsible for the regulatory violations committed by the institution. However, the Court made it equally clear that equitable relief cannot be stretched to the extent of granting unintended financial advantages inconsistent with the original nature of admission.
The Court observed that all affected students had consciously taken admission in a private medical college where the fee structure was significantly higher than that of government institutions. Therefore, the students could not legitimately claim a permanent right to continue paying only subsidised government medical college fees merely because of interim judicial arrangements necessitated by the crisis.
The Bench categorically held that such a result would amount to unjust enrichment. The Court explained that while judicial intervention was necessary to protect the students’ academic future, the interim concessions granted during the pendency of proceedings could not mature into permanent financial benefits disconnected from the original admission arrangement.
In a significant observation, the Court stated that permitting students to complete their education in private institutions at government medical college rates would create an unfair windfall. The Bench noted that the students had indeed faced a “chaotic situation” because of mid-session transfers, but hardship alone could not justify indefinite continuation of a subsidised arrangement that imposed financial losses upon the transferee colleges.
At the same time, the Court was conscious that the students should not be burdened with exorbitant fees charged by the transferee institutions. Accordingly, the Bench struck a middle path by holding that students would remain liable only to the extent of the fee structure applicable at SRMCH, the original institution where they had secured admission. This meant that the students would not be compelled to pay the considerably higher fee rates ordinarily charged by the three transferee colleges.
The Court’s reasoning reflected an attempt to balance fairness and practicality. On one hand, it rejected the argument that students were entitled to government-rate fees indefinitely. On the other hand, it prevented the transferee colleges from retrospectively imposing their own higher fee structures upon students who had not originally enrolled there.
The judgment also strongly criticised the conduct of the Selvam Educational and Charitable Trust, which managed SRMCH. Invoking the legal maxim commodum ex injuria sua nemo habere debet, meaning “no one should derive benefit from his own wrong,” the Court held that the defaulting institution could not escape responsibility for the crisis created by its own failures.
The Bench found that SRMCH had failed to maintain essential standards for medical education and had violated regulatory requirements governing infrastructure, staffing, and institutional functioning. The Court further noted that the Trust had failed to refund excess fees collected from students despite earlier judicial directions, thereby aggravating the financial and legal complications surrounding the dispute.
To partially compensate the transferee colleges, the Court directed release of approximately ₹14 crore secured from the Trust. This amount included a ₹10 crore bank guarantee furnished earlier before the Medical Council of India/National Medical Commission, along with ₹2 crore deposited before the Supreme Court and accrued interest. The Court ordered that these funds be distributed among the three private colleges that accommodated the transferred students.
However, the Court observed that even after release of the ₹14 crore amount, a deficit would still remain because the total dues calculated at SRMCH fee rates exceeded ₹16 crore. Therefore, the Court permitted the transferee colleges to approach the National Medical Commission with details regarding outstanding amounts recoverable from individual students.
The Bench directed the NMC to devise an appropriate mechanism for addressing recovery of the remaining dues after taking into account amounts already paid by students to SRMCH at the time of admission. This direction effectively ensured that the students’ liability would be assessed in a structured and regulated manner rather than through arbitrary demands by the colleges.
Importantly, the Court also protected the academic interests of the students by directing that those who complied with the fee liability determined under the judgment must be issued their academic certificates, degree documents, and course completion records without delay. This aspect of the ruling ensured that students would not face further prejudice in pursuing internships, postgraduate admissions, or professional registration due to pending disputes.
The judgment is particularly important in the context of medical education regulation in India. It reinforces the principle that private educational institutions must maintain mandatory standards and remain accountable for regulatory violations affecting students’ futures. Simultaneously, the decision clarifies that courts, while exercising equitable jurisdiction, must avoid creating financial arrangements that result in unintended windfalls or unfair burdens on third parties.
The ruling also demonstrates the Supreme Court’s continuing effort to strike a balance between protecting students from institutional failures and preserving the financial viability of educational institutions compelled to absorb transferred students. Rather than adopting an extreme approach favouring either side entirely, the Court fashioned a solution aimed at distributing responsibility proportionately among students, transferee colleges, and the defaulting institution.
Ultimately, the appeals were disposed of with directions ensuring reimbursement to the transferee colleges, accountability of the defaulting Trust, and protection of students’ academic rights. The judgment stands as a notable precedent on equitable balancing in educational disputes involving institutional collapse, fee regulation, and transfer of students between medical colleges.