NCLAT | Delhi Gymkhana Club – ‘Nepotism in upper echelons?’ | Holding it true, suspends General Committee

National Company Law Appellate Tribunal (NCLAT): A Coram of Justice Bansi Lal Bhat (Acting Chairperson), Justice Anant Bijay Singh(Judicial Member), Dr Ashok Kumar Mishra (Technical Member) while hearing two clubbed appeals challenging an order by NCLT, upheld the order, and modified the interim relief by directing suspension of the General Committee (GC) and appointment of an Administrator to be nominated by the Union of India to manage the affairs of the Club.

In the instant case, the 107 years old Delhi Gymkhana Club (registered under Section 8 of the Companies Act) was under a dispute involving allegations of mismanagement. The Club had its main objective to promote various sports and pastimes and other objectives set out in the Memorandum of Association and had limited membership. The number of permanent members was 5600. However, the users of the Club were stated to be double the number of permanent members. Following the Complaints from the government, Ministry of Corporate Affairs directed to take penal action against the Club management, auditors of the Club besides revocation of license of the Club, removal of the existing management, the appointment of Government Directors and carrying out a supplementary inspection to take up issues related to allotment of membership, money received from the new applicants as registration fee for membership, accounting treatment of the amount received from new applicants, investments made by the Club from such membership fee and with regard to the processing charges received from the Applicants.

Therefore, the Ministry of Corporate Affairs (MCA) had moved the NCLT alleging that the club’s affairs were being run in a manner “prejudicial to public interest”.

While opining in favour of the State, “Krishan Lal Gera v. State of Haryana (2011) 10 SCC 529 was referred to, which states, “If a chunk of a Government stadium, being prime land in the heart of the city meant for developing sports and 49 athletics is misused or illegally allowed to go into private hands, it cannot be said that no public interest is involved…”.

Certain points were stressed on while deciding the appeal and were remarked as:

“…It is abundantly clear that misuse of the Club meant for pastime and sports activities and denying access of membership even after accepting the enhanced membership fee and putting them in queue for decades together with utilization of the component of interest admissible on their invested membership fee for the benefit of permanent members and users seriously jeopardized interest of such prospective members and involved public interest…”.

“…that induction of two nominees by Central Government as members in the GC to monitor the affairs of Club and give suggestions to the GC is of no consequence as the voice of such nominees, on account of their inferior numerical strength in GC is bound to be lost in the din and the interim relief as granted would become meaningless…”.

[Ministry of Corporate Affairs v. Delhi Gymkhana Club Ltd., 2021 SCC OnLine NCLAT 76, decided on 15-02-2021]

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