Colleges Are Established, Fee/Capitalization Fee Is Collected, Then No Teaching Takes Place; A Very Sorry State Of Affairs: MPHC Allows MCI to Encash Bank Guarantee [Read Order]

A Single Bench of Justice S. C. Sharma observed,

"The present case reflects a very sorry state of affairs prevalent in the field of medical education. Colleges are established, the fee/capitalization fee is collected from the students and then no teaching takes place."

The Background of the Case

The Petitioner before the Court, Shree Aastha Foundation for Education Society (SAFE), had filed a petition 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.

It was further stated that the petitioner 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.

A Letter of Permission was issued on 20/08/2016 with an 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 petitioner 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.

Further, on 30/11/2018 the new Chairman Mr. Puneet Agrawal 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 stated that the respondent No.3 Medical Council of India through its Executive Committee vide letter dated 26/12/2016, had informed the Union of India that the College had 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 the year 2017-18 and 2018-19 and also to encash the Bank Guarantees furnished by the petitioner College.

It may be noted that the regulations framed by the Medical Council of India make 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 petitioner 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 of Madhya Pradesh vide letter dated 23/06/2018 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 studying in the Medical College in respect of academic session 2016-17 and the students admitted in Advance Medical College, Bhopal, which is 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 this 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.

The decision of the Executive Committee was communicated to the Government of India – respondent No.1 and State of Madhya Pradesh – respondent No.2 on 14/08/2018. The Central Government on 29/08/2018 granted approval to the decision taken by the Medical Council of India.

The Medical College which was established by the petitioner Society was not at all functional. Students were shifted to other Medical Colleges and the Desirability & Feasibility Certificate had also been cancelled.

The Petitioner had preferred a writ petition being aggrieved by the action of the State Government in cancelling the Desirability & Feasibility. The Court vide order dated 14/11/2018 had upheld the action of the respondent in cancelling the Desirability & Feasibility Certificate.

Further, on 19/06/2019 the Medical Council of India issued a letter to respondent No.5 – Chief Manager, Bank of India for encashment of Bank Guarantee of (Rs.9.5 Crores) and the respondent No.5 – Bank of India had issued a notice for encashment Bank Guarantee dated 27/06/2019.

Court's Observation

The Court in its order observed,

"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 a change in the Society, new office bearers have come, it does not mean that College has become functional." (emphasis supplied)

Further, the court acknowledged the fact that the present petition was only in respect of encashment of Bank Guarantee.

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 [Standard Chartered Bank Vs. Heavy Engineering Corporation Ltd. andOthers 2020 (1) ALT 62].

In this context, the court said,

"The Court exercising its power cannot interfere with the 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 a triable issue by strong evidence so as to prevent irretrievable injustice to the parties."

Further, the Court remarked,

"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. The respondent No.4 - Medical Council of India is justified in requesting encashment of Bank Guarantee." (emphasis supplied)

The Court held,

"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 proposition 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." (emphasis supplied)

Lastly, the Bank was directed to encash the Bank Guarantee and to transfer the account in the account of Medical Council of India immediately, preferably within a week from today. With the aforesaid, writ petition stood dismissed.

Case Details:

Case Title: Shree Aastha Foundation for Education Society (SAFE) v. Union of India & Ors.

Case No.: Writ Petition No.14856/2019

Quorum: Justice S. C. Sharma

Appearance: Advocate Rohit Kumar Mangal (For the Petitioner); Advocate Himanshu Joshi (for Respondent no. 1); Advocate Shrey Raj Saxena (for Respondent no. 2); Advocate Sumersingh Chouhan (for Respondent nos. 3 & 4); Advocate Darshana Baghel (for Respondent nos. 5 & 6).

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