NCLAT suspends Delhi Gymkhana board, permits takeover by government-appointed administrator

February 15, 2021 0 By boss


An appellate tribunal has handed over the management of the Delhi Gymkhana Club to a government-nominated administrator by suspending the 107-year old club’s general committee (GC) over findings of mismanagement by the ministry of corporate affairs (MCA), on Monday.

Granting interim relief to the MCA, the National Company Law Appellate Tribunal (NCLAT) also directed that the club shall not accept new membership or enhance its fees till the matter is settled.

The directions will be carried into effect in two weeks, read the judgement of a three-member bench, headed by Justice Bansi Lal Bhat.

“The interim relief, to which the Union of India is found entitled to on the strength of a prima facie case demonstrated by it, has to be effective and adequate enough to ensure that the affairs of the Club are conducted in accordance with law and the charter of the Club,” the bench said in a 57-page order.

The MCA has nominated Manmohan Juneja, regional director for the western region at the ministry, as the administrator of the club, an official aware of the matter said.

The judgment came on the back of a challenge to a previous order from a lower company law court in June last year, which directed the government to appoint two nominees to the GC and to constitute a five-member special committee to enquire into the affairs of the club.

While the club had challenged its maintainability, the MCA assailed the order to the extent that the interim relief granted was inadequate.

The government had filed a petition against the club under section 241 of the Companies Act, seeking nomination of 15 people by the Centre as directors of the GC to manage its affairs and to restructure the club.

To prevent oppression and mismanagement, section 241 allows the government to seek an order from a tribunal to take over management and control of a firm in public interest.

The appellate tribunal sided with the MCA’s findings, from multiple inspections conducted in 2019, of a prima facie case that the affairs of the club are being conducted in a manner prejudicial to public interest.

“It has been noticed that the mechanism adopted in ensuring that the membership stays tied up and confined to a close group with an ordinary aspirant waiting for decades in queue with disappointment staring in his/ her face and the membership fee garnering interest for the benefit of existing members is in blatant violation of AOA (articles of association) and MOA (memorandum of association),” the judgement said.

Incorporated on July 14, 1913, the club sits atop 27 acres of land in the heart of the capital city. Given on a perpetual lease for a nominal monthly rent of Rs 1,000, the Centre contended the grant of land counts as ‘state largesse’.

When “activities of the Company are hit by nepotism and favoritism while the Company was formed on the basis of State largesse, there was an injury to public interest,” according to the MCA.

Further, the NCLAT said that the government had raised questions which would entitle it to the final relief of replacement of directors of the club with government nominees.


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