NCLAT upholds order to allow govt to takeover Delhi Gymkhana Club's mgmt

Don't want to miss the best from Business Standard?

Appellate tribunal NCLAT has upheld an order to allow the central government to take over the management of the prestigious Delhi Gymkhana Club.

The National Company Law Appellate Tribunal (NCLAT) set aside the petition filed by the erstwhile management members against the order passed by the Principal Bench of the NCLT.

On April 1, 2024, the NCLT allowed the plea filed by the Ministry of Corporate Affairs for taking over the Delhi Gymkhana Club management citing "violations" of the Company Law and said there was "sufficient material" for holding that, as it is a case of mismanagement.

In its 149-page order, the NCLT had also allowed the ministry to nominate 15 persons as directors on the club's general committee as well as manage the affairs of the club.

The said order was challenged before the appellate tribunal, which has been now upheld on Monday by a two-member bench, comprising Chairperson Ashok Bhushan and Member Arun Baroka.

However, the NCLAT bench also also directed the government to carry out all remedial measures as mandated by the NCLT, by March 31, 2025.

The committee has further been directed to conduct an election at the club three months after March 31, 2025.

The order was pronounced in the open court on Monday morning and a detailed order is still awaited.

"The NCLAT upheld the NCLT's order holding that Union of India's intervention in the affairs of the Delhi Gymkhana Club was necessitated in view of the mismanagement by the erstwhile general committee. The current committee has been asked to take necessary remedial measures by 31st March and conduct elections thereafter," said Advocate Raunak Dhillon, who appeared for the Central government.

In April 2020, the government through the Ministry of Corporate Affairs (MCA) moved the NCLT under sections 241 and 242 of the Companies Act, 2013, seeking to supersede the club's general committee.

Sections 241 and 242 of the Companies Act deal with oppression and mismanagement and give wide powers to the tribunal, which include removal of the managing director, manager or any of the directors of the company and recovery of undue gains.

Delhi Gymkhana Club initially registered as a Section 8 company with specific objectives related to sports and pastimes, obtained land on lease from the government.

The government alleged that over a period of time, it had slightly started drifting away from the permitted objectives, which may also impact the subsistence of the lease.