The National Company Law Appellate Tribunal (NCLAT) on Monday ordered suspension of the Delhi Gymkhana Club's general committee, which is managing the colonial-era club's affairs, directed the government to appoint an administrator and also stayed acceptance of new club memberships till further orders.
In a strongly-worded 57-page order, the NCLAT also observed that "under the garb of distinctive character of the club which is a relic of the imperial past, the doors for membership are virtually limited to people having blue blood in their veins thereby perpetrating apartheid and shattering the most cherished constitutional goal of securing social justice and equality of status and opportunity".
The latest ruling has come on petitions by the corporate affairs ministry as well as the club, and both of them had challenged an interim order passed by the National Company Law Tribunal (NCLT) in 2020.
The ministry has been requesting for superseding the club's General Committee (GC) citing oppression and mismanagement of the club's affairs.
A three-member NCLAT bench, headed by Acting Chairperson Justice Bansi Lal Bhat, upheld the interim order passed by the NCLT's Principal Bench, saying there is the existence of a prima facie case demonstrating that the affairs of club were conducted in a manner prejudicial to the public interest.
While noting that the NCLT's order in so far as finding the existence of the prima facie case "does not suffer from any legal infirmity", the NCLAT also modified the former's order.
According to the appellate tribunal, the government has prima facie a case and the interim relief provided by the NCLT has to be "effective and adequate enough" to ensure that the club's affairs are conducted in accordance with law and the charter of the club.
Emphasising that the interim relief must prove to be result-oriented, NCLAT modified the NCLT's order and directed "suspension of the GC and appointment of an administrator to be nominated by the Union of India to manage the affairs of the club".
Further, it ordered that "acceptance of new membership or fee or any enhancement thereof till disposal of waitlist applications be kept on hold till disposal of the company petition".
The NCLAT said the modifications should come into effect within two weeks, which means there is a two-week period for appointing an administrator to manage the affairs of the club.
"The observations made herein above are limited to grant of interim relief. The same shall not be construed as an expression of opinion on the merits of the case," it noted.
In its order passed on June 26, 2020, the NCLT had asked the government to constitute a five-member Special Committee to enquire into the affairs of the club and also to look into the issues related to the utility of the land leased out by the government, among other issues.
The ministry, in April last year, had moved the NCLT under sections 241 and 242 of the Companies Act, 2013, seeking to supersede the club's GC and also allow it to nominate 15 persons as directors to run the club's affairs.
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.
Gymkhana Club had also challenged the NCLT order requesting the appellate tribunal to set aside the order. The NCLAT clubbed later clubbed the petitions and has now passed a common judgment.
In its latest order, the NCLAT noted that the mechanism adopted by the club 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 company having been virtually converted into a recreational club relegating the prime object of sports activity to the back burner has the effect of destroying its distinguished character as envisaged at the inception," it said.
Delhi Gymkhana Club was initially registered as a Section 8 company with specific objectives related to sports and pass times.
"Prima facie it appears that there is violation of the restrictions as regards objects in MOA and AOA and the government's land given on perpetual lease primarily for sports related activity has been converted into recreational club for a chosen few with doors virtually shut for an aspirant belonging to the common stock," the NCLAT said.
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