Bombay High Court Upholds NMC Regulation Allowing Only Non-Profit Companies To Set Up Medical Colleges

The Bombay High Court at Aurangabad recently upheld Regulation 6 of the Establishment of Medical Institutions, Assessment and Rating Regulations, 2023, which allows only non-profit companies to establish new medical colleges and hospitals.

A division bench of Justices Sandipkumar C. More and Abasaheb D. Shinde held that the rule is a valid exercise of regulatory power and is consistent with the National Medical Commission Act, 2019. The regulations were framed by the National Medical Commission.

Under the rule, companies can apply to set up a medical college only if they are registered as Section 8 companies, a category under company law meant for non-profit activities. Such companies are not allowed to distribute profits to shareholders and must use any surplus only for their stated social objectives.

“If the private companies, which are meant for making profit only, are allowed to start Medical Colleges, then they will definitely use such colleges as their commercial activities and then the object of imparting valuable knowledge to the aspirants will definitely be frustrated,” the court said.

The case was filed by Ajeet Seeds Private Limited and the dean of its proposed medical college in Chhatrapati Sambhajinagar. Their application to set up a medical college and hospital was rejected because the company is a regular private company and not registered as a non-profit Section 8 company, as required under the 2023 rules.

The petitioners argued that the parent law allows any “person,” except the Central Government, to establish a medical college. They said the regulation wrongly narrowed this permission by excluding private companies. They also pointed out that they had already invested large sums of money in the hospital project before the new rules came into force.

The court rejected the challenge. It said the National Medical Commission is an expert body empowered to set eligibility conditions to protect standards in medical education.

“When the statutory bodies are permitted to frame the Rules, Regulations,by keeping in mind the legislative intent, then it certainly has freedom to adopt certain other practical ways to fulfill the object of the statute,” the bench observed.

Holding that the restriction has a clear link with preventing the commercialization of medical education, the High Court dismissed the petition and refused to grant any relief.