NCLT allows Centre to take over management of Delhi Gymkhana Club, says sufficient material of mismanagement

New Delhi [India], April 1 : The National Company Law Tribunal (NCLT) on Friday allowed the Central Government to nominate 15 persons to be appointed as Directors on the General Committee of Delhi's Gymkhana Club to manage the affairs of the Company in accordance with the memorandum and Articles of Association and the Companies Act, 2013.
The Bench comprising of Justice R Sudhakar and Narendra Kumar Bhola of Principal Bench, NCLT New Delhi on Friday further directed that "such Directors so appointed as above will file a report with this Tribunal, once in three months or whenever required".
The Bench observed, "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 Government 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 are prejudicial to the public interest and against the interest of the company justifies that the company of this kind should be wound up, the Bench observed.
However, keeping in mind the inspection report and the nature of action proposed contemplated in the petition we are inclined to invoke the power under Section 242 (1) and (2) of the Companies Act, 2013, said the NCLT Bench.
The Order passed in the petition, filed by the Ministry of Corporate Affairs, prayed that the Central government be allowed to nominate 15 persons, to be appointed as directors on the general committee of the company to manage its affairs.
Earlier in February 2021, NCLAT had also allowed Centre Government to go ahead with the appointment of an administrator to oversee the management at the Delhi Gymkhana affairs.
NCLAT had directed the Ministry of Corporate Affairs to appoint an administrator to be nominated by the Union of India to manage the affairs of the Club. It also directed that acceptance of new membership or fee or any enhancement thereof till disposal of waitlist applications will be kept on hold till disposal of the Company Petition.
The Centre's plea said that an inspection report dated July 31, 2019, and a supplementary inspection report dated March 3, 2020, are evidence of rampant, deep-seated mismanagement of the company by the General committee over the years.
"The lapses, misuse, circumvention of the law, absence of procedure and non-adherence to the law are too many, repeated and continued in nature and fact, cannot be passed off as negligence of duty or service," the plea stated.
"There has been the consistent lack of transparency, absolute disregard to integrity and minimum adherence to democratic and ethical practices for which a company/club of this nature has been promoted by the government by giving the status of Section 8 company and misuse of a huge land property having enormous potential for the nation," it added.
The petition said that the matter deserves the urgent indulgence of the tribunal under Sections 241 (application to the tribunal for relief in cases of oppression) and 242 (powers of the tribunal) of the Companies Act, 2013.
Section 241 of the act pertains to any member of a company who complains that the affairs of the company have been or are being conducted in a manner prejudicial to the public interest or in a manner prejudicial or oppressive.