Dama Seshadri Naidu, J.

Introduction:

1. A few students, under All India Quota (NEET), joined the post-graduate medical courses, both in Government and private colleges. At the time of their joining the course, the students' parents executed a bond with the college management. The bond stipulated that the students would have their certificates—submitted during admission—released only after their completing “one-year compulsory employment or on payment of the compensation….”

2. The bond provides for remedial mechanism if the student breaches the condition: the student's failing to serve in the State the mandatory period of one-year or, in the alternative, failing to compensate the State, the management can compel the parent to compensate; the recovery may be from the parent's properties, movable or immovable. Many students from other states, after passing out, refused to comply with the bond conditions; instead they questioned them. It led to litigation across the nation, Kerala included.

3. We have before us a batch of writ appeals filed by a medical college, the Government, and a few students, too. In these appeals the students insist that their certificates be returned without penalty imposed on them. We tabulate the cases:

Writ Appeal Writ Petition No. of Students State of Origin 2457 of 2016 31101 of 2016 6 Kerala (2) Tamil Nadu (2) Madhya Pradesh (1) Karnataka (1) 2392 of 2016 31690 of 2016 15 Karnataka (2) Tamil Nadu (10) Maharashtra (3) 1726 of 2017 18634 of 2017 1 Chattisgarh

WA Nos. 2457 of 2016 and 2392 of 2016:

4. Both WP (C) Nos. 31101 of 2016 and 31690 of 2016 were disposed of through a common judgment. The students' claim was for return of their educational certificates. Given their unwillingness to fulfil the bond conditions, the colleges refused to part with the certificates. It led to the students’ filing two writ petitions. On merits, the learned Single Judge has anchored his reasoning on Clause 2.2 of the Ext.P1 Prospectus/Information Bulletin for National Eligibility-cum-Entrance Test (Post Graduate). The clause cautions the students that their mere appearance for the test does “not confer any automatic rights to score a Post Graduate MD/MS/Post Diploma Seat.” The students' admission is subject to their fulfilling the admission criteria as may be prescribed by the respective universities, medical institutions, Medical Council of India, State/Central Government.” Further, the learned Single Judge has repelled the students' claim by referring to the Ext.P7 prospectus issued by the State Government.

5. So the learned Single Judge did not find any illegality or arbitrariness either by the Government or the colleges. Thus both the writ petitions dismissed, the students appealed.

W.A. No. 1726 of 2017:

6. One student got admitted under All India Quota into Medical PG Course of the Government Medical College, completed the course, and later demanded the college to return her certificates. Faced with refusal, she filed W.P. (C) No. 18634 of 2017: that the State Government can impose no conditions for compulsory state service on students admitted under the All India Quota.

7. A learned Single Judge, through judgment, dt.27.06.2017, allowed the writ petition. The judgment, in fact, notes that this Court in SHIREEN M.T v. STATE OF KERALA (2017) 2 KLT 691 has held that the condition is opposed to public policy—section 23 of the Contract Act. It also notes that another learned Single Judge in W.P. (C) No. 31690 of 2016 (now in appeal) took a different stand. So the judgment advises the student to await the issue resolution in appellate proceedings. But it also directs the Government “to release the original certificates” forthwith, besides clarifying that the judgment “will not preclude the State from instituting appropriate proceedings for realizing the liquidated damages” from the students.

Submissions:

Students':

8. The learned counsel for the students contend that neither the college nor the Government has any authority to withhold the students' original certificates. Their principal contention is that the State of Kerala could impose no conditions on the students admitted under the All India quota. If any conditions apply to students, they must emanate from Ext.P1 prospectus issued by the Director General of Health Service, Government of India, New Delhi.

9. No other States, contend the learned counsel, impose compulsory-service condition on the students admitted under All India Quota. Even the Director General of Health Services, Government of India, informed the students, when queried under the RTI Act, that the State Government cannot insist or enforce additional conditions—especially compulsory rural service on All India Quota Students.

Government & College Management:

10. The learned Government Pleader and the learned counsel for the medical college have contended that Ext.P2 Prospectus for PG Degree Course, 2013, squarely binds the students, for they secured their admission solely based on it. They have drawn our attention to the Clauses XIII(1)(C), XIII(2)(d)(ii) and XIII(2)(e) of the Ext.P2 prospectus.

11. The learned counsel have also relied on G.O. (MS) No. 533/2008/H&FWD dated 07.10.2008. According to them, all the students who secured admission under State Quota and All India Quota in Government Medical College studied at the expense of public exchequer. Therefore, All India Quota students are also bound to comply with bond-conditions. In G.O. (MS) No. 333/2012/H&FWD dated 08.10.2012, the Government reiterated its policy, they further submitted.

12. As per G.O. (MS) No. 100/2015 H&FWD, dated 12.05.2012, the Government ordered that the Post Graduate students, on their completing the course, should undergo Compulsory Senior Residency Programme for a period of one year. None of these Government Orders, the learned counsel contend, has been challenged.

D.G. of Health Services’:

13. Sri Nagaresh, the learned Assistant Solicitor General of India, has submitted that the Central Government did permit the State Government, the Universities, and other institutions to supplement admission criteria, but without defeating the criteria fixed by the Central Government. In this regard, he has drawn our attention to the answers the Government provided to the Frequently Asked Questions (FAQs).

Analysis:

14. To begin with, facts are not in dispute; they, in fact, fall in a narrow compass. All the three writ appeals—two filed by the students and one by a college—concern the interpretation of certain contractual clauses. All the students, holding MBBS degree, faced the National Eligibility Test (Post Graduate), for the year 2013, and got admitted into different PG courses in the medical colleges of Kerala State. To the college, they submitted their educational certificates, such as Matriculation, Higher Secondary, MBBS, as their testimonials. And, later, they did complete their MD courses.

15. But at the time of their joining the PG courses, the colleges compelled them to execute a bond: on completing the PG., the student should serve the State of Kerala for one year or, in default, should pay Rs. 20 lakh as liquidated damages.

The Contractual Clauses:

16. National Board of Examinations, New Delhi, issued Ext.P1 Information Bulletin for NEET (PG). Exhaustive as it is, clause 2.2 contains a disclaimer. It stresses that admission is not automatic; it is subject to the student's fulfilling the admission criteria, such as eligibility, medical fitness. It reads:

Applicant may kindly note that appearance in NEET-PG does not confer any automatic rights to score [secure?] a Postgraduate MD/MS/Post Diploma seat. The selection and admission to postgraduates seats in any medical institutions recognized for running MD/MS/Postgraduate Diploma courses as per Indian Medical Council Act, 1956, is subject to fulfilling the admission criteria, eligibility, medical fitness, and such criteria as may be prescribed by the respective universities, medical institutions, Medical Council of India, State/Central Government.

17. In fact, the learned Single Judge in the common judgment impugned in WA Nos. 2457 of 2016 and 2392 of 2016 has relied on the above condition.

18. Ext. P2 is the prospectus issued by the Government of Kerala for “Admission to Medical Post-Graduate Degree/Diploma Courses-2013.” Clause XIII mandates the students to execute a compulsory-service Bond or to pay liquidated damages. The clause reads thus:

(1) General Terms:

The Candidates selected for PG Degree and Diploma courses will have to execute two bonds in stamped paper (all pages of the bond should be in stamped paper) of the total value of Rs. 100 of Kerala stamp paper each at the time of joining the course to effect that:

(a) He/she shall not discontinue the P.G. Course that has been allotted to him/her after the final Certified Allotment Process.

(b) In the case of Service Quota Candidates, he/she shall serve the Government for a period of 10 years or up to superannuation, whichever is earlier, after the completion of the course. Service candidates who get admission under service quota and have not completed the period of probation as on the day before the date of admission will have to serve the Government for an additional period of 2 years.

(c) All the non-service quota candidates admitted to Medical Postgraduate Courses shall serve the Government in Health Services or Medical Education Services as decided by the Government of Kerala for a period not less than one year after the completion of the course on such remuneration and terms and conditions as decided by the Government.

(2) Conditions: …

(d)(ii) If candidates other than service quota violate the terms mentioned in Clause XIII(1)(c) above, it will be construed as Professional Misconduct and the fact reported to the T.C. Medical Council for suitable action including cancellation of Registration by the Council. A sum of Rs. 20,00,000/- (in addition to the stipend/salary drawn during the period of the course and the amount spent by the Government for their studies with interest as fixed by Government) will be levied as liquidated damages from those who fail to do the Government service as stipulated.

(g) The certificates which are to be submitted in the college at the time of admission will be released only after the completion of the compulsory bonded service or, in the case of bond violation, the liquidated damages are paid.

(underlining and emphasis original)

Precedential Position:

(a) Kerala High Court:

19. The issue—can the State Government impose its own admission conditions beyond those the Central Government did?—a recurring one, surfaced before various High Courts, including ours, and also before the Supreme Court. First, we will begin at home. A learned Single Judge in SHIREEN M.T v. STATE OF KERALA 2017 (2) KLT 691 has held that the conditions so imposed are against the public policy. The matter taken in appeal, a learned Division Bench, too, rejected the college's plea. Given the doctrine of merger, we need to refer to the only the Division Bench's findings.

20. In Principal (the Dean), MES Medical College v. Shireen M.T.. dt.22.03.2017, in WA No. 493 of 2017 the Division Bench has held that the contractual clause speaks of only the certificates the student submitted “at the time of admission”; the MD certificate was not deposited then. About the compensation, the Division Bench further observed that the clause does not permit the management to withhold the certificates; it can demand only the monetary compensation and that can be realised from the assets—without reference to the certificates.

(b) Supreme Court:

21. We will begin with a decision rendered in 1993. According to the system then in vogue, a candidate applying for admission in the All India quota had to indicate eight medical colleges and six subjects, in the order of preference, to which he wanted admission. In 1993 the Government changed this admission system and introduced the ‘merit-cum-preference-cum-eligibility’, in vogue.

22. A candidate challenged the changed admission system. He complained that students with lesser marks than his were being admitted to colleges in Kerala. He prayed that he may be given a seat in any subject in any of the colleges in Kerala — or for that matter anywhere else. In Anand S. Biji v. State of Kerala (1), (1993) 3 SCC 80 the Supreme Court refused to give any ‘positive direction’, for, by then, all the seats were filled up. So the Court did not disturb the new system and allowed no exception to the student. But the Court, in the judgment, approved certain modifications to the admission system as suggested by the Director General of Health Services, GOI.

23. In 2012 the Director General of Health Services, Government of India, filed an interlocutory application to have the judgment, dt.22.04.1993, modified. And the Apex Court, through Anand S. Biji (2) (2012) 13 SCC 713, allowed the IA, but refused to give any further directions because of its earlier judgment on the point. Anand S. Biji (2) noted the learned Solicitor General's request to the Court to “clear certain aspects for smooth implementation of the scheme of admission into medical colleges.” It also noted the Solicitor General's contention that the States and colleges should not insist upon satisfaction of the “State requirements” as a condition to grant admission to the allottees against the 15% all-India quota.

24. Of immense relevance is the fact that the Solicitor General, to illustrate ‘State requirements’, referred to the Gujarat's condition that the post graduate students execute a bond of Rs. 75,000/- for rendering 3 years rural service in the State. Identical is Maharashtra's condition to Kerala's: to serve the Government of Maharashtra for one year as medical officer in any of the PHC/RHC in the State. Indeed, Anand S. Biji (2) has observed that States have imposed different conditions, and candidates admitted under the All India quota under different State medical colleges are not uniformly placed. Nevertheless, Anand S. Biji (2) has felt that the field already stood covered by Harsh Pratap Sisodia v. Union of India. (1999) 2 SCC 575 So the Court refused to issue any fresh direction.

Harsh Pratap Sisodia:

25. A student passed his Intermediate Examination conducted by the U.P. Board, and later appeared for the All-India Pre-Medical/Pre-Dental Entrance Examination conducted by the Central Board of Secondary Education (CBSE). Qualified to join MBBS under the 15% all-India quota, he was allotted to a college in Solapur. But he was denied admission. The college justified its refusal by stating that the student had passed the Intermediate Examination of U.P. Board in the year July 1993 without Biology. Later, he passed Biology separately, however. As per rules existing in the State, the student must have passed HSC or equivalent examination in the same attempt.

26. In that factual context, the Supreme Court in Harsh Pratap Sisodia has held that the eligibility criterion for allotment of a seat to MBBS against the 15% all-India quota has, indisputably, been fixed by the CBSE in consultation with the Medical Council of India under a modified scheme approved by the Supreme Court. Under that scheme, the States and colleges cannot insist upon satisfaction of the “State requirements” as a condition to grant admission to the allottees against the 15% all-India quota. It is, therefore, not open to any State to fix any additional eligibility criteria in cases of candidates who fall under the 15% all-India quota.

Other High Courts:

27. High Court of Gujarat in Poojaben Rajeshkumar Patel v. State of Gujarat (2014) SCC OnLine Gujarat 7988 has ruled in students' favour. In Romil Saini v. State of Uttarkhand, 2015 SCC OnLine Utt 1296 and in Dr. Amit Bishamlal Vallabhani v. The State of Chattisgarh, W.P. (C) No. 586 of 2012 the High Courts of Uttarkhand and Chattisgarh respectively followed the same line. The High Court of Madras in Dr. P. Vani v. Director Of Medical Education 1989 and a host of other cases has taken a uniform stand: the students are not bound by the bond. But the High Court of Calcutta in Dr. Naval Patel v. State of West Bengal 2017 SCC OnLine Cal 16663, a well-reasoned one, took a different stand—the students are bound by the bond.

The Precedential Conclusion:

28. Anand S. Biji (2) and Harsh Pratap Sisdia proceed on the premise that the eligibility criteria for admission against the 15% all-India quota have been fixed by the CBSE in consultation with the MCI, as approved with modifications by the Supreme Court. So the States and colleges cannot impose their own conditions. But if we examine Ext.P1 Information Bulletin for NEET (PG)., its clause 2.2 contains a disclaimer. First, it stresses that admission is not automatic; next, it makes the admission “subject to [the students’] fulfilling the admission criteria, eligibility, medical fitness, and such criteria as may be prescribed by the respective universities, medical institutions, Medical Council of India, State/Central Government.”

29. Indeed, Clause XIII of the Ext.P2 Prospectus issued by the Government of Kerala for “Admission to Medical Post-Graduate Degree/Diploma Courses-2013.” mandates the students to execute a compulsory-service Bond or to pay liquidated damages. In other words, all the non-service quota candidates admitted to Medical Postgraduate Courses shall serve the Government in Health Services or Medical Education Services as decided by the Government of Kerala for a period not less than one year after their completing the course. Therefore, neither Anand S. Biji (2) nor Harsh Pratap Sisdia saves the students, for those judgments turn on the conditions then imposed in the prospectus.

The Stand of the Central Government:

30. On the bond and its aftermath, the Central Government, as contended by the learned Assistant Solicitor General, has stated its stand as an answer to Q. No. 28 of FAQs. As we shall see, the Central Government stand on the issue is unambiguous: Bond amount/rendering of service in rural/trial area/other conditions, etc., may vary from State to State and Institute to Institute. The candidates, it further cautions, should well examine these points before opting for a seat at a medical college. The Medical Counselling Committee (MCC) shall neither be responsible nor shall entertain any case on above ground, if any.

Is the bond for compulsory service opposed to Public Policy or is it a restraint on one's profession?

31. Section 23 of the Indian Contract Act covers the constraint of compulsory service; section 27 covers the restraint on profession. We will examine both.

(a) The Doctrine of Public Policy:

32. A void contract is an oxymoron—a contradiction in terms; what is void cannot be a contract. Contract signifies what is legal and binding. On the other hand, if anything is void, it is still born, without any legal consequences. A void contract lacks all the prerequisites of a valid contract. In fact, a contract has never come into existence, nor are they any legal obligations to be enforced.

33. Section 23 of the Indian Contract Act, 1872, enlists what considerations and objects are lawful and what are not. Simply stated, any consideration or object of an agreement is unlawful if it is forbidden by law; defeats the provisions of any law; is fraudulent; involves or implies injury to the person or property of another; immoral, or opposed to public policy (as the court regards). So every unlawful transaction—that is, tainted by any of the above stigmas—is void.

34. A contract, according to Catherine Elliott & Frances Quinn, is clearly illegal where its formation, purpose, or performance involves the commission of a legal wrong. But the law relating to illegal contracts extends beyond this. A contract is also regarded as illegal where it involves conduct which the law disapproves of as contrary to the interests of the public, even though that conduct is not actually unlawful.

35. Public policy is notoriously difficult to define, but essentially it assumes that there are some interests shared by most of society, which promote the smooth running of the type of society we have, and which should therefore be protected. Public policy changes over time as views and beliefs change. For example, in Cowan v. Milbourn (1867) a contract for leasing a hall for a meeting of atheists was held to be illegal. Some 50 years later, in Bowman v. Secular Society (1917) it was held that such a contract was not illegal at all, and today many people would regard even the suggestion that it might be as ridiculous.

36. Catherine Elliott et al illustratively list out certain types of contract opposed to public policy: contracts promoting sexual immorality; prejudicing the status of marriage, the public safety, the administration of justice; ousting the jurisdiction of the courts; or encouraging corruption in public life.

(b) Restraint on Trade or Profession:

37. Every agreement restraining a person, as per section 27 of the Contract Act, from exercising a lawful profession, trade, or business of any kind, is to that extent void. For long, courts have held that negative covenants compelling the employees, while he continues in service, to serve his employer exclusively are not in restraint of trade. Restraint on an ex-employ yields no straight forward answer. The need of the restraint and its duration essentially depend on the nature of employment. Mostly these are non-compete contracts.

38. But here, we see no absolute restraint on the students' finding employment. In fact, the State assures them of employment for the immediate one year; they are entitled to pay and perks, too. True, it restricts their choice, but that is a matter of contract, which they chose to enter into. So it is fallacious to claim that the students suffered any restraint on their profession. In any event, we will examine both the propositions—the public policy and professional restraint—in the factual backdrop.

39. In Shireen, a learned Single Judge has observed that if the practice of withholding the documents to realise the disputed amounts is permitted, the person affected would be compelled to forgo the defences, if any, available to him. According to the learned Single Judge whatever tends to injustice of operation, restraint of legal rights, “whatever tends to the obstruction of justice and whatever is against the morals can be said to be against public policy. In other words, matters which concern the public good and the public interest connotes the public policy”, as declared in P. Rathinam v. Union of India (1994) 3 SCC 394

40. The petitioners in Shireen agreed to the college's withholding their certificates as a guarantee for their fulfilling the bond conditions. But the judgment deprecates that practice— withholding the certificates—as unethical. It was termed as opposed to public policy, in the light of section 23 of the Contract Act. In short, the College's conduct cannot be “accepted as approved social conduct,” holds Shireen.

41. Interestingly, the learned Single Judge in the other two writ petitions—W.P. (C) Nos. 31101 and 31690 of 2016—took a diametrically opposite view. According to him, “the State Government is spending money from its Exchequer” to ensure that the students complete their Post Graduate course. To continue the recognition of various disciplines in the medical institutions in the State and to meet the standards laid down by the MCI, the medical colleges must enlist the services of the students who completed their PG course, observes the learned Single Judge. In other words, the successful students serving their bond obligation is “very essential and pivotal” to satisfy the requirements of the MCI. In effect, the students' conduct is found to oppose the public policy.

42. So we compel ourselves to conclude that the doctrine of public policy is highly subjective, shifting, and even changing. Statutorily examined, the compulsion of the students' fulfilling the bond-obligation does not seem to fall foul of any public policy. The Central Government, through Ext.P1, permitted the college, university, or the State Government to impose its own conditions for admission. The students, consciously, consented to the conditions, executed the bonds, and never challenged them—until they completed their course. True, students have a weak bargaining power in a contract vis-à-vis the college or the establishment. So they may have signed on the dotted lines, without demur. That said, still their conduct while they continued the course is inexplicable. They could have challenged the bond obligations. They did not.

43. Granted, education occupies the pride of place, and the students deserve every sympathy. But let us look at what underlines this transaction: the State or the college insisting on compulsory service or compensation. The State acted in its permissible limits and imposed an eligibility criterion; the student agreed and got admitted. The State compels the student to serve one year in the State where she had honed her medical skills and acquired a higher qualification. After all the State invests and subsidizes medical education. In the scenario of limited resources, spending somewhere amounts to not spending somewhere else. So those who get benefited must repay their debt—of gratitude.

44. Viewed differently, the doors are not shut on the students. They may serve the State and be paid or sever their relation and leave it; it comes at a price: paying liquidated damages. If the students leave for greener pastures, they must be prepared to pay, to compensate. Medical profession—tough as it is and, perhaps, lucrative as it may be—is not all about money; it has still an element of service.

45. About the State's retaining the documents, we may observe that most students are from other states. After their leaving the place, it is well neigh impossible for the State or the colleges to enforce recovery. So, as is permissible under law, and as agreed in Clause 2.2 of the State prospectus, it can enforce its contractual right, by retaining the documents.

The Options:

46. So the options for the student are two-fold: (1) The students must serve the bond period; or (2) they may, instead, pay the liquidated damages. For the college or Government, the options are these: (a) it can insist on the student's serving the bond period; (2) it can, on the student's refusal, recover the liquidated damages; (3) till such recovery, it can withhold the documents, as a matter of particular lien.

Conclusion:

47. We, therefore, uphold the judgment in W.P. (C) Nos. 31101 and 31690 of 2016; further, we reverse the judgment in W.P. (C) No. 18634 of 2017. In other words, we dismiss the W.A. Nos. 2457 and 2392 of 2016 and allow W.A. No. 1726 of 2017.