NCLAT Upholds Central Government's Takeover Of Delhi Gymkhana Club

The National Company Law Appellate Tribunal (NCLAT) on Monday upheld the the Central government's takeover of the iconic Delhi Gymkhana Club.

The NCLAT upheld the NCLT’s order dated 01.04.2022 holding that union of India’s intervention in the affairs of the Delhi Gymkhana Club, resulting in the erstwhile management of the Club being superseded by a 15 member general committee appointed by the Union of India to manage the affairs of the club, was necessitated in view of the rampant mismanagement by the erstwhile general committee.

By way of its judgment, the NCLAT has held that the Delhi Gymkhana Club being a company under Section 8 of the Companies Act,2013 was incorporated for a useful object i.e. sports and in doing the same was serving a public purpose. Such non profit companies that are incorporated to serve a public purpose, if found to not be promoting their main object, would be acting contrary to public purpose. Further, if such a company is acting prejudicial to public interest, then the central government is entitled to file an application under section 241/242 of the companies act 2013.

The main object of the Club was sports and in not conducting affairs towards its main object, the affairs of the Club were being conducted in a manner prejudicial to public interest which enabled the central government to file an application under section 241(2) of the companies act and the same has been rightly held by the NCLT. Further, the prerequisites of exercising jurisdiction under section 241-242 of the Companies Act, 2013 I.e (a) formation of opinion and (b) sufficient materials on record - have both been met, said NCLAT.

Additionally, the NCLAT stated that it is inclined to fix a time frame for completing the process of remedial actions by the union appointed general committee and hence the general Committee has been directed to complete all remedial actions by 31.03.2025. Thereafter, elections for appointment of president and for members of the general committee will be conducted within 3 months of 31.3.2025.

Union of India was represented by Dr UK Chaudhury; senior advocate and Mr Raunak Dhillon (Partner), Isha Malik (Senior Associate) and Jeezan Pakhliwal (Associate) from Cyrl Amarchand Mangaldas.