The National Company Law Tribunal (NCLT) on Friday allowed the Ministry of Corporate Affairs to take over the control of the Delhi Gymkhana Club by nominating 15 persons to be appointed as the directors who will manage the affairs of the Company. In a 149-page order passed by a two-member bench of the NCLT, headed by President Justice Ramalingam Sudhakar and Member Narender Kumar Bhola said there was "sufficient material" for holding that it is a case of mismanagement for the affairs of the club on a petition moved by the Ministry of Corporate Affairs 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 find that there is sufficient material for holding that it is a case of mismanagement for the affairs of the company and the general council members of each financial year have been propagating the same violations year after year and some have been continuing from one period to another giving credence to the stand of the Govt, that the club is run in the nature of “parivadvaad” which cannot be countenanced in the light of provisions of the Companies Act. The continued conduct of the governing body of the company whose acts arc prejudicial to the public interest and against the interest of the company justify that the company of this kind should be wound up,” said the NCLT in its order while referring to some members continuing to be part of the previous general committee for a long period.
The NCLT order directed the ministry of corporate affairs to take all the actions for restructuring of the respondent no 1 ( Delhi Gymkhana Club) in terms of memorandum and articles of Association and take corrective measures, which are in violation.
Further, the Tribunal asked the present administrator or any other person, who are in charge of the affairs of the club, to "hand over the charges to the newly appointed directors forthwith". "The new directors of the general committee appointed by the government in terms of this order shall file a report before this tribunal immediately after taking over charge of the club," it said.
The order also allowed the prayer of the central government to nominate 15 persons to be appointed as Directors on the General Committee of the club. Earlier, the NCLT had allowed the ministry to nominate 15 persons as directors on the club's general committee as well as manage the affairs of the club.
In April 2020, the government through the Ministry of Corporate Affairs had moved NCLT seeking to supersede the club's general committee.
In its petition before the NCLT, the ministry said that pursuant to several complaints received by it, the affairs of M/s Delhi Gymkhana Club Ltd were inspected by it under Section 206(5) of the Companies Act.
During the course of the investigation, the ministry alleged that there was rampant mismanagement by the General Committee of the Club, in violation of the Articles of Association and the Companies Act.The ministry has also alleged that the general committee of the Club was acting on behalf of a few chosen members.
It was also alleged that the membership of the club is being given in a completely partial and undemocratic manner and several other violations of the Companies Act were also alleged by the Union of India. According to the allegations, 30.34 per cent of the total expenditure of the Club has been incurred towards catering consumables, wine, beverages and cigarettes. On the other hand, the Delhi Gymkhana Club objected to the maintainability of the petition on the ground of want of opinion by the Government of India under Section 241 of the Companies Act and that there is no public interest as it is restricted to the cause of few members of the club.
The NCLT found that the club is generating no income from any sports activities which is the primary objective of the club as per its memorandum of Association. Delhi Gymkhana Club was incorporated on July 14, 1913 as a non-profit company with the objective to promote sports and pastimes under license from the Central Government.