"The student who came in good faith, they should not be victimised," External Affairs Minister S M Krishna told mediapersons in New York.
"It is necessary they should be absorbed into other universities in the United States and allowed to pursue their studies," he said.
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.
Investigations by Immigration and Customs Enforcement have found that while students were admitted to various residential and on-line courses of the university and on paper lived in California, but in reality they "illegally" worked in various parts of the country as far as Maryland, Virginia, Pennsylvania and Texas.
Krishna underlined that the students came on valid visas and were "cheated by dubious promises made by education providers" and he called on the US government "to bring to justice the bogus institutions."
ICE has called it as a "sham vniversity", a charge denied by the university. According to available information, 18 students in California were radio-tagged by ICE as part of their investigation against Tri Valley University.
Ankle monitors send a radio frequency signal containing location and other information to a receiver.
US immigration authorities have removed radio tags from the ankles of two Indian students. Krishna, who has previously called the tagging as "inhuman", said that he had expressed his "resentment" against the practice.
Later on Saturday, Indian ambassador to the US Meera Shankar and Consul General at the Indian Consulate San Francisco Susmita Gongulee Thomas will meet the minister and are expected to brief him on the matter before he leaves New York.
Video: Paresh Gandhi