He has told BBC Sandeshaya that 20 schools were under investigation in this regard by the education ministry.
According to him, some without a job were involved in this racket to earn money, while principals too, were responsible.
He also said admissions to Royal College, Colombo have resumed after 31 children without qualifications were dropped.
However, no child who has already gained entrance will be removed although the admission was illegal, Kariyawasam assured, adding that those responsible would be dealt with.
The government will resolve this issue by developing all schools, he added.