In the case of Unni Krishnan, J.P. and others Vs. State of Andhra Pradesh and others etc. etc., the Apex Court held thus:
” Private educational institutions may be aided as well as non-aided. Aid given by the Government may be cent per cent or partial. So far as aided institutions are concerned, it is evident, they have to abided by all the rules and regulations as may be framed by the Government and/or reconginsing affiliating authorities in the matter of recruitment of teachers and staff, their conditions of service, syllabus, standard of teaching and so on. In particular, in the mater of admission of students, that have to follow the rule of merit and merit alone subject to any reservations made under Article 15. They shall not be entitled to charge any fees higher than what is charged in Governmental institutions for similar courses. These are and shall be understood to be the conditions of grant of aid. The reasons is simple, public funds, when given as grant and not as loan carry the public character wherever they go. Public funds cannot be donated for private purposes. The element of public character necessarily means a fair conduct in all respects consistent with the constitutional mandate of Articles 14 and 15. All the Governments and other authorities in charge of granting aid to educational institutions shall expressly provide for such conditions (among others), if not already provided, and shall ensure compliance with the same. Again aid may lake several forms.
For example, a Medical College does necessarily require a hospital. We are told that for a 100 seat medical college, there must be a fully equipped 700 bed hospital. Then alone the medical college can be allowed to function. A private medical college may not have or may not establish a hospital of its own. It may request the Government and the Government may permit it to avail of the services of a Government hospital for the purpose of the college free of charge. This would also be a form of aid and the conditions aforesaid have to be imposed may be with some relaxation in the matter of fees chargeable and observed. The Government’s (Central and State) and all other authorities granting aid shall impose such conditions forthwith if not already imposed. These conditions shall apply to existing as well as proposed private educational institutions.