The National Company Law Appellate Tribunal (NCLAT) has upheld an order permitting a committee appointed by the Central Government to take over the management of the Delhi Gymkhana Club, which is facing allegations of financial irregularities. The Tribunal directed the existing committee to conclude remedial actions and hold elections.

The NCLAT, the final appellate authority for corporate matters, set aside the petition filed by former management members against the order passed by the National Company Law Tribunal (NCLT) in April 2022, which established a 15-member committee to replace the Club’s General Council.

The committee appointed by the Central Government has been instructed to expedite the completion of remedial actions to address the raised issues, with a deadline set for March 31, 2025. Additionally, it has been mandated to conduct elections for the President and General Council members within three months following the March 2025 deadline, facilitating the installation of a duly elected General Council.

After the election, the new General Council will take over the management of the club, conducting its affairs in accordance with the club’s status. The Delhi Gymkhana Club, located in Safdarjung, is one of the oldest and most exclusive clubs in the country, with its history dating back to the British colonial era.

ABOUT THE APPEAL

The Centre initiated an enquiry into the club’s affairs following an order in March 2016. A report was submitted to the Ministry of Corporate Affairs in March 2020, highlighting multiple violations.

In response, the government filed a petition under Sections 241 and 242 of the Companies Act, 2013, which deals with oppression and mismanagement and empowers the Appellate Tribunal to issue orders.

In June 2020, the Tribunal issued an order directing the government to appoint two members to monitor the Delhi Gymkhana Club alongside the General Council members and provide recommendations to the council. The Centre was also instructed to investigate the club’s affairs. This order was later upheld by the Appellate Tribunal.

In April 2022, the Tribunal ruled in favour of the petition filed by the government, allowing it to nominate 15 individuals to serve as Directors on the General Committee of the Delhi Gymkhana Club and oversee its management.

The appeal before the Tribunal challenged this order, seeking the appointment of a duly elected Board of Directors to manage the club with appropriate checks and balances in place.

The appellants, represented by Senior Advocate Krishnendu Dutta and Advocate Gaurav M Liberhan, argued that the Central Government must establish that the company’s affairs were being conducted in a manner prejudicial to public interest in order to form an opinion. They further contended that the NCLAT’s findings regarding the alleged financial irregularities were baseless.