Hardly possible to come out of elite culture: NCLT directs Centre to constitute Committee to look into affairs of Delhi Gymkhana Club

The National Company Law Tribunal (NCLT) has directed the Central Government to appoint two nominees as Members in the General Committee of the Delhi Gymkhana Club as it prima facie opined that the affairs of the Club were being conducted in a manner prejudicial to the public interest. (UOI vs Delhi Gymkhana Club Ltd)

The Tribunal has also directed the Central Government to constitute a Special Committee of five members of its choice to enquire into the affairs of the Club including its membership issues.

The Special Committee is directed to file a report within two months, recommending ways to use the club premises in a transparent manner and in the larger good.

The order was passed by the Principal Bench of NCLT comprising Acting President, BSV Prakash Kumar in Central Government's petition under Section 241 and 242 of the Companies Act, 2013.

Delhi Gymkhana Club Ltd is registered as a company under Section 8 of Companies Act.

The Central Government had alleged that the affairs of Delhi Gymkhana Club, which was running on land leased from the government, were being conducted in a manner that is prejudicial to the public interest. It was stated that there was rampant mismanagement by the General Committee of the Club, in violation of the Articles of Association and the Companies Act, 2013.

The Central Government further claimed that the successive General Committees continued to control the Club through an "unauthorized and complicated succession mechanism" and restricted admission to the Club by indulging in "parivaar- vaad".

The Club, in response, contended that it had the right to form associations and clubs under Article 19 of the Constitution and any interference with its affairs was a violation of its fundamental rights.

It was also alleged that the petition was borne out of malafide intentions and lacked application of mind.

To arrive at its conclusion, apart from persuing the documents and inspection reports of the Club submitted by the Central Government, the NCLT discussed the historical character of the Club.

It noted that Club came into existence in the pre-independence era for the then ICS officers.

Stating that post-independence, the Club should have "left its doors azar for many if not all", the NCLT remarked,

NCLT recognized one's right to form clubs or associations but opined that the same could not be extended to include the right to use acres of government land "for lazing around" while making the entry of others next to impossible.

The NCLT further took note of the Club's assertion that it was a "privileged club" which gave membership to "high-level officers, judges, eminent persons, businessmen" and exclaimed,

NCLT observed that for the purpose of Section 241, the conduct of a company could also be indicative of the existence of "prejudice".

It explained,

"Prejudice under section 241 (2) may not be violation of something from law book, the relief under this rule has a little more, it is a section deals with something that is unfair, may be it is seemingly right, but at the bottom of it manifesting prejudice to the public at large or a member or company, in this case it is public."

The NCLT stated that the club was sitting on public monies collected in the name of entrance fees or registration fees and enjoyed 27 acres of government land in Lutyen’s Delhi while controlling entry in favour of a chosen few.

In view of the above, the NCLT prima facie opined that the affairs of the Club were being conducted in a manner prejudicial to the public interest.

It directed the Central Government to appoint two nominees as Members in the General Committee and to constitute a Special Committee to enquire into the affairs of the Club including its membership issues.

NCLT further directs the General Committee to not proceed with any construction on the site, make any policy decisions, or changes the Memorandum of Association or Articles of Association of the company.

General Committee is directed to not deal with the funds received for admission of Members or conduct balloting until further orders.

The Committee may continue to carry the day-to-day functions of the Club, it is ordered.

Centre was represented by ASG KM Natarajan with Advocate Vatsal Joshi.

Club was presented by Senior Advocates Arun Kathpalia, Vikas Singh and Advocate Gaurav M. Liberhan.

The matter would be heard next on September 7.

Read the order: