INTRODUCTION
We know that there are many types of club operation in our country like sports, recreational and many other. Now the most important factor in running of these club is their proper functioning and appointment of proper body to regulate their functioning and day to day affairs. It is the ultimate duty of the Government to ensure that these organization are properly functioning and not operation in any ways prejudicial to public order and Interest. It is very important for these organization to confirm with bye laws of the country and abide by public morality. We see many organization which are not involved in activity for which it was formed rather engaging in illegal activities like drug trafficking, gambling,child trafficking to name a few which is injurious to public order and morality. It is ultimately duty of the Government to shut down such organization and make sure that they are not engaging in unauthorized activities. At last the Court also recognised the above duty of the Government in landmark judgement delivered in 2021 in which the court laid down guidelines for the proper functioning of these organization and club. The present case talks about universal application of principle of Equality for all the business organization including clubs.
FACTS
The Club came to beincorporated on 14th July, 1913 as a Companyunder the name “Imperial Delhi Gymkhana Club Ltd” withits registered Office presently situated at 2nd, Safdarjung Road, New Delhi as anon-profit company,inter alia, under license from the CentralGovernment to carry out its sports activity subject to the conditions and regulations binding on the Club.The Club has been operating for further than a century in 27 acres of land leased out by the alsoland of club was on parcel by the Government. The Club, with its main ideal, being to promote sports which was set out in the Memorandum of Association. The number of permanent members is 5600. However theusers of the Club are statedto be double the number of Permanent members. Based on complaints entered by the Governmentagainst the Club, Ministry of Corporate Affairs, Government of India issued order dated 16th March,commanding examination of the Club by invoking powers vested in it under Section 206( 5) of theCompanies Act, 2013. As a effect to the Inspection Reportand action taken thereof, the Inspectors filed the supplementary examination Report dated 3rdMarch, 2020 which detailed multitudinous violations and mismanagement of the affairs of the Clubtelling that the Club had been acting in violation of Articles of Association of the Club and thevittles of the Companies Act, 1956/ 2013 which was mischievous to the public interest, similarviolations being gross and extreme in nature and bringing it to fore that the Club members had actedin an autocratic manner to confer benefits on chosen rich members of the Club in heritable manner by taking money from general public in name of membership and using them for the Government found to be violative of Right to equality.Thus a Companypetition was filed under Section 241( 2) of the Companies Act, 2013 againstthe Club and its members and the decision of tribunal was given against the club. Hence this present appeal was filled by the Club against the order of tribunal.
ISSUES
*WHETHER THE APPEAL SHOULD BE ALLOWED?
*WHETHER THE ACT OF CLUB IS PREJUDICIAL TO PUBLIC INTEREST?
*WHETHER THE ACT OF CLUB IS VIOLATIVE OF ARTICLE 14 OF CONSTITUTION?
*WHRTHER THE CLIB IS LIABLE FOR ACTION UNDER SECTION 241(2) OF COMPANIES ACT 2013?
CONTENTIONS
ARGUMENTS FROM APPELANT SIDE
*Mr SN Mookherjee, Senior Advocate representing the Club submitted that no opinion has been formed by the Central Government and in the absence of any similar opinion, the Tribunal can not assume governance in any matter under Section 241( 2) of the Act, 2013.
*It was further contended that the Inspection Report and supplementary examination Report don’t at each render any finding in regard to the affairs of the Club or its affairs being conducted in a manner prejudicial to public interest. Thus, order passed by the Tribunal is without governance
*It was brought to court noticethat the Tribunal has misdirected itself and misconstructed” public interest” to exercise a governance where none existed.
*The counsel also contended that there’s complete non-application of mind by the Union of India and the conformation of opinion on the base of repetition of commentary of the Inspecting Officer renders itnon-est. The Tribunal has a veritably limited scope of judicial review in the matter of functioning of such Clubs
* At last it was contended by Sh. S.N. Mookherjee, Senior Advocate that the impugned order is contrary to Article 19( 1)( c) of the Constitution of India. Appellant, being an association of persons in the incorporated form, has the absolute right to associate with only those whom the Club freely admits. Such right includes the right of continuance to the association. The association is entitled to admit members and there can be no hindrance with conformation or class or operation except on the grounds set out in Article 19(4) of the Constitution of India which doesnt exist in the present case.Thusthe Tribunal erred in not understanding the import of this right and sought to curtail the same in the name of Article 14.
ARGUMENTS FROM RESPONDENT SIDE
*MrNatrajalearned ASG representing Union of India that the decision passed in form of Interim order by tribunal grounded thereon, including the decision for further inquiry( supplementary examination) shows that there has been material as well as operation of mind to the findings therein.
*The counsel submitted that the power of the Tribunal in Section 242 isn’t circumscribed or regulated by the opinion formed under Section 241( 2) of the Act, 2013.
*The respondent brought to notice of court that there’s large public interest involved in the matter.
*K.M Natraja submitted that the license under Section 8 of the Companies Act restricts the objects in MOA to creation of sports and pastimes and similar other objects which are Subsidiary, ancillary and incidental functions to creation of sports and pastimes. It was submitted that each of the objects aren’t severally permitted under Section 8 of the Companies Act.
*It was further argued that the Government land held on lease by the Club for a purpose cannot be converted into a recreational club for the elite class onlypertaining to violation of Section 8 and Article 14 of constitution, further the act of taking public deposits and distribution of dividendsindirectly, indeed though banned, calls for State action.
*It was contended that the activities of theClub in serving of wine, beverages and cigarettes and catering to the elite sections are not ‘usefulpurpose’ and cannot be said to be in accordance with the provisions of Section 8 of Companies Act,2013.
JUDGMENT
After hearing both the sides the Hon’ble court rejected the appeal and gave a landmark judgment and held as further “It is a case saying Section-8 of Company Act , running on Government owned land, is run by a group of people where the children of permanent members and children’s children for using facilities of the club is violative of Right to equality, when Government Officer retires taking him into private members quota, and using crores of rupees collected from waitlist members as its own money, and using public property of 27 acres of land in the Lutyen’s Delhi adjacent to Prime Minister residence worth of thousands of crores on minimal annual rent of Rs.1000 annual rent for lazing around in the evening for drinking amounts to prejudice to the public interest, all these are born out from the records, of course any interpretation could be given, but they cannot deny the fact that the club is basically for sport but not such activity, in fact it is the case of the Club and its members. To say public interest is involved, whole country at large interest is not required to be effected; public interest is involved where actions of somebody will prejudice the public of that vicinity or a class of people”. The members remain waiting years together formembership is nothing but causing prejudice to the public, when some are in waiting,some getting entry prior to others in waiting is prejudice to the public, some personsalone enjoying the state property is also prejudice to the public. The Club having been converted into recreational Club relegating the prime object of sports activity hasthe effect of destroying its distinguished character as envisaged at the inception.Thus the court agreed with Respondent contention and rejected the appeal and directed the chairman of club to be suspended and Government administrator in his place must be appointed.
CONCLUSION
In the end the Judgment of court in accepting the position of government was a welcome one and this judgement recognised the duty of the Government to maintain public order and morality in society and in maintaining principle of right to equality. Thus the act of club was not in accordance with public interest which is the paramount consideration of any Welfare Government. This judgement also gave some guidelines for proper functioning of club and the ultimate authority to the Government to look after proper functioning of these organization and penalize the violators.This judgment was a welcome one as it recognized the one of the most important principle of any democratic country which is principle of Right to equality which is also to be followed by each and every organization including Clubs.
REFERENCES
*IBC LAWS, https://ibclaw.in/union-of-india-vs-delhi-gymkhana-club-ltd-ors-nclt-principal-bench/?print=print, Last accessed on 20 August
*SCC ONLINE,https://www.scconline.com/blog/post/2020/06/30/nclt-delhi-gymkhana-clubs-conduct-of-affairs-is-prima-facie-prejudicial-to-public-interest-union-govt-directed-to-form-a-special-committee-to-look-into-the-affairs-of-the-dgc/, Last accessed on 20 August
*LIVE LAW,https://www.livelaw.in/top-stories/supreme-court-on-delhi-gymkhana-club-case-directs-nclt-to-dispose-in-four-months-183727,Last accessed on 20 August
*THE ECONOMIC TIMES,https://m.economictimes.com/prime/corporate-governance/delhi-gymkhana-members-cry-foul-as-nclt-defers-extraordinary-general-meeting-indefinitely/primearticleshow/101433611.cms, Last accessed on 20 August
*THE HINDUSTAN TIMES,https://www.hindustantimes.com/india-news/delhi-gymkhana-club-to-fight-legal-battle-against-govt-takeover/story-2UxjRHw9BTpKcq4tQIa6ZN.html, Last accessed on 20 August