Pious Objective Cannot Authorise Executive Overreach: Supreme Court Quashes Kerala Govt’s NRI Corpus Fund Order for Want of Legal Sanction

"Even a noble aim cannot find legitimacy unless traceable to a valid source of law" – In a resounding declaration upholding the rule of law over administrative benevolence, the Supreme Court struck down the Kerala Government’s controversial 2018 order mandating self-financing medical colleges to divert a portion of tuition fees collected from NRI students towards a government-controlled corpus fund intended to finance scholarships for BPL (Below Poverty Line) students.

Terming the move “legally unsustainable,” the Court stated that however well-intentioned such actions may be, they must stand firmly on legislative footing and cannot be justified merely on grounds of public good or policy compassion.

“A welfare-oriented executive policy cannot override the foundational requirement of legality. However laudable, pious, or noble the objective, it cannot be legitimized unless its genesis is traceable to a legislative action.”

“You Cannot Use the Backdoor to Do What the Legislature Hasn’t Approved”: Supreme Court Rebukes the State and AFRC

The controversy arose from a Government Order dated 6 June 2018, directing that ₹5 lakh from the ₹20 lakh tuition fee paid by NRI students in self-financing medical colleges be allocated to a ‘corpus fund’ administered by the state for BPL student scholarships. The Admission and Fee Regulatory Committee (AFRC) endorsed this fund without statutory backing. The Kerala High Court had previously struck down this order, and that judgment stood affirmed.

The Bench categorically rejected the argument that P.A. Inamdar v. State of Maharashtra allowed such diversions. The Court made it clear:

“There is nothing discernible in the scheme of the Kerala Medical Education Act, 2017 or in the judicial precedents cited, which would enable the State or the AFRC to carve out a separate corpus fund from tuition fees and divert it for social subsidy.”

Calling the order a classic instance of executive overreach under the guise of equity, the Court added:

“The power to fix fees does not include the power to tax or divert for extraneous purposes. Fee regulation and wealth redistribution must operate in separate constitutional lanes.”

“Welfare Intention Is Not a License to Bypass Law”: Court Asserts Rule of Law Must Prevail

The Court observed that while the policy may have been welfare-driven, it was an expropriatory levy in effect and required a clear legislative basis. The Bench reiterated the position that administrative convenience cannot override legal sanctity:

“An executive action, regardless of its perceived morality, must conform to legality. Even if the ends are socially desirable, the means must be statutorily permissible.”

The Supreme Court underscored that financial impositions like the creation of such corpus funds affect both property and constitutional rights of stakeholders—students and institutions alike—and thus cannot be sustained in absence of legislative endorsement.

“Let the Law Lead, Not Noble Intentions Alone”: Supreme Court Allows Refund or Set-Off to NRI Students, Restricts Further Use of Fund

The Court declined to allow the continuation or repurposing of the corpus fund and restricted both the colleges and the State from retaining or utilizing any funds collected under the impugned scheme. However, in a measured approach, the Court stopped short of directing a full-scale refund. It instead held:

“NRI students who paid the additional amount are entitled either to a refund or adjustment against future dues. These funds cannot be treated as state property or institutional surplus.”

The judgment also expressed concern over the colleges' conduct, noting that while ₹182.9 crores had been collected across several batches, only ₹6.15 crores had actually been transferred to the designated state fund, exposing institutional apathy as well.

Rule of Law Triumphs Over Administrative Morality

This ruling reaffirms that in a constitutional democracy, the nobility of purpose cannot cure illegality of action. The Court stressed:

“The principle of legality cannot be sacrificed at the altar of expediency. Welfare policy must walk on the legs of law—it cannot stride ahead as an executive expedient.”

In doing so, the Supreme Court has drawn a firm boundary around executive discretion in matters of fee regulation and affirmed that public good must flow from lawful governance, not unfettered bureaucratic imagination.

Date of Decision: 16 May 2025