Overseas Indian Affairs Minister Vayalar Ravi, replying to a question in Lok Sabha, said the matter has been taken up with US department of Homeland Security, Department of Justice, and Immigration and Customs Enforcement requesting them to treat the students as "victims of fraud and not criminals".
The Tri Valley University (TVU) was shut down on charges of massive visa fraud affecting hundreds of Indian students, who were studying in the university.
Ravi said the government has also requested the US authorities to allow the students to pursue studies in other American universities.
According to a federal complaint filed in a California court in January, the University helped foreign nationals illegally acquire immigration status. The University is said to have 1,555 students. As many as 95 per cent of these students are Indian nationals, the complaint said.
"The US Immigration and Customs Enforcement (ICE) is currently probing the visa violation (charges) against some of the Indian students. Simultaneously directors/owners of Tri-Valley university are also being investigated," Ravi said.
He said External Affairs Minister S M Krishna had also taken up the issue with US Secretary of State Hillary Clinton last week requesting her to intervene in protecting the interest of Indian students and allow them to study in other US universities.
Investigations by Immigration and Customs Enforcement (ICE) have found that while students admitted to various residential and on-line courses of the University were stated to be living in California, but in reality they "illegally" worked in various parts of the country as far as Maryland, Virginia, Pennsylvania and Texas.
Ravi said officials from Indian embassy and consulates general at San Francisco and New York met the students and briefed them about the efforts being made to protect their interests. He said a free legal aid camp was also organised by the Consulate General at San Francisco for the 140 students.
Asked about voting rights for NRIs, he said any Indian citizen living abroad and who has not acquired citizenship of any other country can make an application in form 6A directly to the Electoral Registration Officer (ERO) of his or her constituency for entry of their names in voters` list.
"Every eligible NRI may send the application along with necessary documents either directly or by post to the ERO," he said.
The Government had issued a gazette notification earlier this month giving voting rights to the NRIs.
Parliament had in the monsoon session passed Representation of People (Amendment) Bill, 2010 to allow NRIs to vote in Indian elections.