Delhi Gymkhana Club Case : Justice Sanjiv Khanna Recuses From Hearing Appeals

Supreme Court judge Justice Sanjiv Khanna on Tuesday recused from hearing appeals  filed challenging NCLAT's order directing the suspension of the General Committee of the Delhi Gymkhana Club and appointment of an Administrator nominated by the Union of India to manage the affairs of the Club.

A Bench comprising Justice AM Khanwilkar, Justice Sanjiv Khanna and Justice JK Maheshwari was hearing the appeals today. The appeals are directed to be listed before a bench where Justice Khanna is not a part of on September 13.

A battery of Senior Advocates such as Harish Salve, Kapil Sibal, C Aryama Sundaram are appearing in the matter.

The NCLAT's order also directed that acceptance of new membership or fee or any enhancement in the fee of waitlist applications be kept on hold till disposal of the Company Petition before the NCLT.

Arguments Of The Appellant

The appellant before the Top Court has argued that the direction passed by NCLAT in the impugned judgment for appointment of an Administrator by the Union of India is without any basis as no requirement for the said appointment has been showcased or established.

It has been argued that the direction is contrary to settled principles of law relating to the appointment of an Administrator under the Companies Act since not only does it delegate the power of the appointment to the Union of India itself, which has initiated the action, but further, is without any determination for the need of such an Administrator.

Further, no reasons have been accorded as to why the appointment of an Administrator for running the day to day affairs of the DGC, which is a private recreational club would be required

The appeal has stated that, NCLAT, in an appeal against an interim order, has unequivocally held that Union of India is entitled to "final relief" of replacement of Directors of the DGC with nominees of the Government to conduct the affairs of the Club.

According to the appellant, such a finding of the NCLAT at the interim stage is akin to a grant of final relief and contrary to the settled proposition of law.

The appellant has also argued that the premise that DGC's object was for sports activities and pastime for public at large is the misconstrued basis of the determination by NCLT as well NCLAT as its MOA is clearly indicative that it was meant more as a recreational private club than one meant for running sports academy or a stadium for public at large.

Background Of The Case

Company petition by Union of India Before NCLT: A company petition was moved by the Ministry of Corporate Affairs against the General Committee of the Delhi Gymkhana Club under section 241(2) of the Companies Act, 2013, alleging that the affairs of the club are being conducted in manners prejudicial to the public interest.

The petition was filed seeking suspension of the General Committee and to appoint Administrator nominated by the petitioner to manage the affairs of the Club and report to this Bench

Interim Order By NCLT: The National Company Law Tribunal, Principal Bench at New Delhi, directed the Central Government to constitute a special committee to look into the functioning of the Delhi Gymkhana Club.

The Principal Bench headed by Acting President BSV Prakash Kumar further directed the General Committee of the Club to not carry out the following activities:

• proceed with any construction on site

• make any policy decision

• make any changes to the Memorandum of Association or Articles of Association

• utilise funds received from members

• conduct balloting

An appeal was then filed by the Union of India challenging the NCLT's order arguing that the interim relief granted was inadequate and prayed for modification of the relief by providing for the nomination of an Administrator by the Central Government to manage the affairs of the Club. The DGC also moved an appeal seeking the setting aside of the order.

NCLAT through its impugned order dismissed DGC's company appeal and allowed the Union of India's appeal, by directing suspension of the GC of the DGC and appointing an Administrator to be nominated by the Union of India to manage the affairs of the Club.

Case Title: Rajeev Sabharwal & Anr vs Union of India & Anr

Click here to read/download the order