NCLAT upholds Central government takeover of Delhi Gymkhana Club

The National Company Law Appellate Tribunal (NCLAT) on Monday upheld the Central government's takeover of the prestigious Delhi Gymkhana Club [Major Atul Dev (Retd) v. Union of India Ministry of Corporate Affairs Through Regional Director (North Region)].A coram of NCLAT comprising Chairperson Justice (retd) Ashok Bhushan and Technical Member Arun Baroka dismissed appeals against an order of National Company Law Tribunal (NCLT) approving the takeover. The bench held that the Central Government under Section 241-242 of the Companies Act, 2013, had the powers to take over the affairs of the club since it had come to the opinion to do so, after receiving complaints. Furthermore, it clarified that the government had to file a plea in the NCLT to take over the affairs of the club, since they were being conducted in a manner prejudicial to public interest. The order said "The affairs of the Company/Delhi Gymkhana Club are being conducted in a manner prejudicial to the public interest which enabled the Central Government to file an application under Section 241(2) of the 2013 Act."The Appellate Tribunal however accepted the contention of the appellants that the order of NCLT, superseding the general council of the club is for indefinite period and the tribunal ought to have directed a course of action for bringing an end to issues complained about. The order said "It is contended that neither any time limit was prescribed for completing the process by Fifteen Members Committee to bring an end to the affairs prejudicial to the public interest complained of and the Fifteen Members Committee cannot be allowed to continue indefinitely."Thus, it held that the government-appointed committee, must take all the remedial measures within a fixed timeframe and thereafter hold elections to appoint president and other members. Thus, the NCLAT directed the government-appointed 15-member committee 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 in order to install an elected General Council to conduct the affairs of the club. "The General Council of the Club with whom management is entrusted, shall act in accordance with Memorandum of Association and Article of Association and conduct its affairs accordingly," the order said. The petitioners were represented by Senior Advocate Krishnendu Dutta and advocate Gaurav M. LiberhanUnion of India was represented by Raunak Dhillon (Partner), Isha Malik (Senior Associate) and Jeezan Pakhliwal (Associate) from Cyril Amarchand Mangaldas..Today's NCLAT order puts an end to a two-year-old appeal by some members of the former management of the Delhi Gymkhana Club. In April 2022, the NCLT allowed the Central government to take over the affairs of the Club, appointing a 15-member committee to manage its affairs..The NCLT passed the order in a petition moved by the Central government under Sections 241 and 242 of the Companies Act, 2013 alleging that the affairs of Delhi Gymkhana Club were being conducted in a manner prejudicial to public interest.“We hold that it will be just and equitable to allow the prayer of the Union Government to nominate 15 persons to be appointed as directors on the general committee," the NCLT stated..The NCLT found merit in the Centre's contention that there were instances of mismanagement and financial arbitrariness in collecting various amounts by the Club, which was contrary to the Articles of Association and in violation of provisions of the Companies Act.It was alleged that the members of the General Committee of the Club were acting for the benefit of a few chosen members, and at the expense of the general public.The admission process could only be described as 'parivaar-vaad' (dynastic), the Centre alleged.