Dear Visa Rejection Again:
We do not think we understand the last bit of your inquiry. How and where did you pay a lot of money? Application fee for a college, if any, is not large. If you had put down an advance to reserve a seat for him in the college, the college would refund the money. If a ticket had been bought for your friend, the ticket can be returned for a refund. So we are a bit puzzled; something doesn't quite add up.
Once you have been refused a visa, it is very difficult to undo the decision made by the immigration authorities. One of the key elements of processing a visa application is the truthfulness of the applicant and of the documents, and a complete disclosure of the information requested. The intentions expressed and information obtained by the immigration officials, through interviews and documents, must be consistent with the purpose, constraints, and restrictions of the type of the visa requested. Another element is the adequacy of the financial means. Obviously, the last requirement is that of having a "clean" background.
Generally speaking, the easiest, and perhaps the only, hurdle to overcome is the financial requirements. If the application were rejected on these grounds, demonstrating additional and adequate finances can overcome the rejection of the visa. However, if the immigration officials felt that your friend was being less than truthful or forthcoming in his interview(s) or documents, he is pretty much out of luck.
You must note that applying for a visa for any country is a privilege, and not a right. Your friend in India does not have the right to demand a review of visa application. If, however, you are somehow legally and officially involved in the processing of the visa application and you believe that your friend has been wronged, you can certainly approach your Member of Parliament for help. Not much is likely to change, but it may be worth a try.