The proposed super speciality hospital is being built on the basis of a MoU between BRS Ventures and the state government, which handed over the government maternity and children's hospital and its land on lease to the BRS Health and Research Institute Private Limited.
A litigation by the citizens' group seeking cancellation of the MoU and the lease granted to BRS ventures is pending before the additional civil court in Udupi.
The Sarkari Aspatre Ulisi Horata Samiti (Government hospital protection committee) president and noted psychiatrist P V Bhandary in a statement said they were "dismayed to see the President laying the foundation stone for a project" which was "mired" in controversy.
Bhandary said the district maternity and children's hospital had been rendering service to poor women and children for the last seven decades and it was a ray of hope for the poor.
A well-performing charitable hospital was being handed over to a private group, a move which had "devastated" the dreams of the poor for better quality health care facilities at cheaper price, he said.