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TMI Blog2024 (10) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... any time period. What are the requisite conditions precedent for invoking provisions of Section 241(2) of the Companies Act, 2013? - HELD THAT:- To enable the Central Government to apply for an order under Section 241, the conditions precedent i.e. (i) the Central Government is of the opinion; and (ii) that the affairs of the Company are being conducted in a manner prejudicial to the public interest, need to be satisfied. On fulfilment of the above two conditions, an application can be filed by the Central Government under Section 241 of the 2013 Act for an order. Whether the requisite conditions precedent within the meaning of Section 241(2) of the Companies Act, 2013 in the application filed by the Union of India under Sections 241 and 242 are met i.e. (i) formation of opinion by the Central Government under Section 241(2); and (ii) that the affairs of the Company are being conducted in a manner prejudicial to the public interest? - Whether there was sufficient materials on the record for formation of requisite opinion under Section 241(2) by the Central Government? - Whether affairs of the Company (Delhi Gymkhana Club) were being conducted in a manner prejudicial to the public i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form an opinion that affairs of the Company are being conducted in a manner prejudicial to the public interest. The materials which were before the Central Government, as noticed above, contained inspection report and the supplementary inspection report pointing out various violations of the 2013 Act as well as violation of the Articles of Association. The inspection report reported that only 3% of the entire expenditure by the Company is devoted towards sports. The findings returned by the NCLT on the materials before it that the Company has not been able to follow-up its main object and the affairs of the Company are being mismanaged which is prejudicial to the public interest - the submission of the appellants cannot be accepted that there was no public interest involved in carrying of the affairs of the Company and the Company is only for the benefit of its members and no public interest is prejudicially affected by the internal management and affairs of the Company. When a company is incorporated with an object, which is object of public interest, any impairment of such object in carrying out the affairs of the Company which do not truly promote the objects for which it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to Fifteen Members Committee cannot be accepted. Whether the supersession of the management of the Company by 15 members committee to be nominated by the Central Government without providing for any time period or course of action with a view to bringing to an end the matters complained of requires interference by the Appellate Tribunal? - HELD THAT:- The principal objective of order under Sections 241 and 242 is to pass order with a view to bringing to an end the matters complained of. Thus, the proceeding under Sections 241 and 242 is to take remedial action. The affairs of the Company, which are being conducted to the prejudicial to the public interest, should be remedied to protect the public interest, has to be the objective of the Court in proceeding under Sections 241 and 242. The order was passed by the NCLT on 01.04.2022 and more than two and a half years have been elapsed from passing of the order and Fifteen Members Committee (at present only eight Members are functioning) has acted in pursuance of the impugned order and has taken certain steps. It is not necessary for us to enter into details and the steps taken by Fifteen Members Committee, since the chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in directing the existing Committee nominated by Central Government to conclude remedial steps and conduct the election of Delhi Gymkhana Club in accordance with Clause 20 of Article of Association. The order dated 01.04.2022 passed by NCLT is upheld - The Committee nominated by the Central Government in pursuance to the order dated 01.04.2022 passed by NCLAT is directed to complete the all remedial measures, so as to end the matters complained of on or before 31.03.2025 - The Committee nominated by the Central Government in pursuance of the impugned order dated 01.04.2022, is directed to conduct the election of President and Members of the General Council in accordance with Clause 20 of the Article of Association within three months after 31.03.2025 and install the duly elected General Council accordingly - The General Council of the Club with whom management is entrusted, shall act in accordance with Memorandum of Association and Article of Association and conduct its affairs accordingly. Appeal disposed off. - JUSTICE ASHOK BHUSHAN CHAIRPERSON AND ARUN BAROKA MEMBER (TECHNICAL) For the Appellant : Mr. Krishnendu Datta, Sr. Advocate with Mr. Gaurav M. Libehran, Mr. Arun Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Company, financial position etc. were also noted in the inspection report. The details of the complaints, which were received, were also noticed in the report. The Inspectors before submitting the report, have also given opportunity to the Company s Directors and auditors. The inspection report was divided into several parts. Part-A dealt with violation of the 2013 Act under the purview of the Central Government ; details of the membership and other details. Several instances of mismanagement were noted. A supplementary report dated 3rd March, 2020 was submitted to the Ministry of Corporate Affairs detailing numerous violations. After receipt of the report, a letter dated 4th March, 2020 was submitted recommending filing of petition under Section 241-242 of the 2013 Act. A letter dated 18th March, 2020 was issued by the Union of India indicating sanction of the competent authority for filing a petition under Section 241-242 of the 2013 Act. (b) On 22nd April, 2020, a petition under Section 241-242 of the 2013 Act was filed by the Union of India on which the NCLT issued notices. On 24th April, 2020, time was allowed to file reply. Certain interim directions were also iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violations of the memorandum and Articles of Association and the Companies Act, 2013. 4. A duly authorized person of the newly appointed Directors who form the General Committee of the Respondent No.1- Company will file the report including financial report as indicate above or when required. 5. The present Administrator or any other person(s)/who may be in-charge of Respondent No.1 Company/Club will hand over charge to the newly appointed Directors of the Respondent No. 1 Company forthwith. 6. The new Directors of the General Committee appointed by the Government in terms of this order shall file a report before this Tribunal immediately on taking over charge of the Respondent No. 1-Company/Club. 4. Company Appeal (AT) No. 93 of 2022 has been filed by 7 appellants who were members of the Club. Company Appeal (AT) No. 141 of 2022 has been filed by Rajeev Sabharwal, a member of the Club. The reliefs sought in Company Appeal (AT) No. 93 of 2022 are as under:- A. That this Hon'ble Appellate Tribunal be pleased to quash and set aside the Impugned Order dated April 1, 2022 passed by the Ld. National Company Law Tribunal, Principal Bench, New Delhi. B. That this Hon'ble Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are being noted as arguments of the appellants. Three additional submissions made in Company Appeal (AT) No. 141 of 2022 shall be additionally noticed. 8. Learned counsel for the appellants challenging the impugned order, contends that twin conditions under Section 241(2) of the 2013 Act being not satisfied, the NCLT committed error in passing the impugned order allowing the petition. The twin conditions fulfilment of which is required, are (a) The Central Government has to establish that the affairs of the Company are conducted in a manner which are prejudicial to the public interest; and (b) it has come to form an opinion about the aforesaid. It is submitted that there is no opinion formed by the Central Government in terms of Sections 241(2) of the 2013 Act and the document dated 18th March, 2020 and 4th March, 2020 cannot be held to be an opinion of the Central Government. It is submitted that formation of opinion under Section 241(2) of the 2013 Act is not mere formality. The Central Government has to apply its mind to the materials before it and has to give a reasoned opinion for filing a petition under Section 241-242 of the 2013 Act. The memorandum dated 18th March, 2020 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reserved. The green card holders and UCP holders are not membership categories which has been relied in the inspection report as well as by the NCLT as violation of articles of association of the Club. The green card holders are those individuals who are using the Club premises as a dependent of a permanent member after attaining the majority of 21 years and wishes to continue to use the Club. They do not become automatically a member of the Club. Use of green card does not constitute a separate class of permanent voting, they must await their turn in the queue to get full-fledged permanent voting membership in the Club. The number of permanent voting Members continues to remain 5600 and neither green card nor UCP nor eminent category can be treated as permanent Members of the Club. The ground given by the NCLT that asking deposit from the common pubic who applies for Membership violates Section 58A of the 2013 Act and the provisions of the Companies (Acceptance of Deposit) Rules, 1975 is erroneous. The collection and use of registration fees does not violate the Articles of Association or the 2013 Act. It is further submitted that jurisdiction under Section 241-42 empowers the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41-242 does not establish any case for passing the impugned order. 13. Learned counsel for the Union of India submits that company petition under Section 241(2) of the 2013 Act was filed before the NCLT after forming an opinion that the affairs of the Company were being carried out in a manner prejudicial to the public interest and such opinion was based on relevant materials. The opinion formed and communicated vide letter dated 18th March, 2020 to file company petition, was formed after following a step by step process of carrying out a thorough inspection into the affairs of the Club. The inspections were carried out after issuance of summons to the Club as well as its Members and thereafter recommendations were made. The opinion formed communicated by letter dated 18th March, 2020 was formed after perusing various recommendations and observations made by the functionaries at lower levels including the observations in the inspection report, supplementary inspection report as well as the recommendations in the letter dated March 4, 2020. It is submitted that pursuant to receipt of several complaints starting from 2014 with regard to mismanagement, irregularities, misuse of funds, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the Memorandum of Association the main object of the Club is to promote polo, hunting, racing, tennis and other games, athletic sports and pastimes . The object listed in Clause 3(a) of the Memorandum of Association is in relation to sports . The promotion of sports being main object of the Company, the Club has to carry on its business in alignment with the main object. The Club being a Section 8 Company under the 2013 Act, is a non profit company and has to carry out its functioning in public interest. The Club is operating on a land owned by the Government of India in pursuance of the lease dated 2nd February, 1928 which consists of an area of 27.03 acres situated at 2, Safdarjung Road, New Delhi i.e. in heart of New Delhi. Functioning of a Section 8 Company has to be as per Section 8. From the statement of income and expenditure account of the company during the financial year 2014-15 to 1018-19, out of total income earned in the respective financial years, there was no income directly from sports and the expenditure of the company towards sports was only 3%. Collecting money from desirous persons and keeping such members to wait for several years, some time running into 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as turned profitable from the financial year 2022-2023 onward. The KYC record of the members has been updated and the administrative facilities have been improved. The Administrator has found 125 green cards issued to over-aged dependent of the Members whose membership was terminated on 31st March, 2022. 17. Learned counsel for respondent No.2 has referred to various proactive steps taken by the General Committee appointed by the NCLT. 18. Col. Ashish Khanna, respondent No.18, has appeared in person and has raised submission. Respondent No.18 has made allegations against the Members of the General Committee during the period 2013-2018. Allegation of corruption has been made by respondent No.18. It is contended that NCLT has not fixed any individual responsibility despite glaring proof. Respondent No.18 further contends that several violations were committed which were found during the inspection conducted by the Ministry of Corporate Affairs. It is also contended that despite according of sanction for prosecution of the General Committee under Section 447 of the 2013 Act, no action has yet been initiated nor any prosecution has been launched. Respondent No.18 was the Secretary of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Appellate Tribunal? (IX) To what relief, if any, the appellants are entitled in the present appeals. (X) Course of Action with a view to bringing to an end the matters complained of Question No. I 21. The application, which was filed by the Union of India, was filed under Section 241-242 of the 2013 Act. Section-241-242 of the 2013 Act are contained in Chapter XVI of the 2013 Act. Section 241 of the 2013 Act is as follows:- 241. (1) Any member of a company who complains that (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es various checks and balances of a company which is registered under the 2013 Act. Various powers are retained with the Central Government to ensure compliance of the provisions of the 2013 Act by the company in addition to rights given to the Members as per Section 241(1) of the 2013 Act, the Central Government has also been empowered to apply to the Tribunal for an order. What are the conditions precedent for applying to the Tribunal for an order, is a question to be answered. The very language of the Statute as contained in Section 241(1) indicates that there are two conditions precedent which entitles the Central Government to apply to the Tribunal for an order. They are (i) if it is of the opinion; (2) that the affairs of the Company are being conducted in a manner prejudicial to the public interest. 26. Learned counsel for the appellants has referred to and relied upon a judgment of Hon ble the Supreme Court in Tata Consultancy Service Limited vs Cyrus Investment Private Limited reported in 2021(9) SCC 449. In the said case Hon ble the Supreme Court had occasion to consider the provisions of Sections 241 and 242 of the 2013 Act. In the above judgment, Hon ble the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While the conduct of the company's affairs in a manner that warrant interference, should be present and continuing , under the 1913 Act and the 1956 Act, as seen from the usage of the words are being , the conduct could even be past or present and continuous under the 2013 Act as seen from the usage of the words have been or are being (but the conduct cannot be of a distant past). 87.2. Prejudice to public interest and prejudice to the interests of any member or members were not among the parameters prescribed in the 1913 Act, but under the 1956 Act prejudice to public interest was included both under the provision relating to oppression and also under the provision relating to mismanagement. Prejudice to the interest of the company was included only in the provision relating to mismanagement. But under the 2013 Act conduct prejudicial to any member or prejudicial to public interest or prejudicial to the interest of the company are all added along with oppression. 87.3. Under the 1913 Act, the court should be satisfied that winding up under the just and equitable clause will not only unfairly prejudice but also materially prejudice the interests of the company or any part of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of Section 396 is if the Central Government is satisfied that it is essential in the public interest . Hon ble the Supreme Court had occasion to consider the provisions of Section 396 of the Companies Act, 1956 in the case of 63 Moons Technologies Limited vs. Union of India and others reported in 2019(18) SCC 401. The expression whether the Central Government is satisfied came to be dealt with by Hon ble the Supreme Court in the said judgment. In the judgment Hon ble the Supreme Court has also considered its earlier two judgments i.e. in the case of Barium Chemical Limited vs. The Company Law Board and others reported in AIR 1963 SC 295 and in the case of Rohtas Inudstries Limited vs. S.D. Agarwal and another reported in 1969(1) SCC 325 where the expression in the opinion of came for consideration. Hon ble the Supreme Court in paragraph 70 of the said judgment held as under:- 70. With regard to similar language that is contained in Section 237(b) of the Companies Act, 1956, this Court, in Barium Chemicals [Barium Chemicals Ltd. v. Company Law Board, 1966 Supp SCR 311 : AIR 1967 SC 295] , contained separate opinions as to what the phrase in the opinion of contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : AIR 1967 SC 295] . 6. The decision of this Court in Barium Chemicals case [Barium Chemicals Ltd. v. Company Law Board, 1966 Supp SCR 311 : AIR 1967 SC 295] which considered the scope of Section 237(b) illustrates that difficulty. In that case Hidayatullah, J., (our present Chief Justice) and Shelat, J., came to the conclusion that though the power under Section 237(b) is a discretionary power the first requirement for its exercise is the honest formation of an opinion that the investigation is necessary and the further requirement is that there are circumstances suggesting the inference set out in the section; an action not based on circumstances suggesting an inference of the enumerated kind will not be valid; the formation of the opinion is subjective but the existence of the circumstances relevant to the inference as the sine qua non for action must be demonstratable; if their existence is questioned, it has to be proved at least prime facie; it is not sufficient to assert that those circumstances exist and give no clue to what they are, because the circumstances must be such as to lead to conclusions of certain definiteness; the conclusions must relate to an intent to defraud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company to carry on its trade or business and thereby an infraction of the fundamental right guaranteed to its shareholders under Article 19(1)(g) and its validity cannot be upheld unless it is considered that the power in question is a reasonable restriction in the interest of the general public. In fact the vires of that provision was upheld by majority of the Judges constituting the Bench in Barium Chemicals case [Barium Chemicals Ltd. v. Company Law Board, 1966 Supp SCR 311 : AIR 1967 SC 295] principally on the ground that the power conferred on the Central Government is not an arbitrary power and the same has to be exercised in accordance with the restraints imposed by law. For the reasons stated earlier we agree with the conclusion reached by Hidayatullah and Shelat, JJ. in Barium Chemicals case [Barium Chemicals Ltd. v. Company Law Board, 1966 Supp SCR 311 : AIR 1967 SC 295] that the existence of circumstances suggesting that the company's business was being conducted as laid down in sub-clause (1) or the persons mentioned in sub-clause (2) were guilty of fraud or misfeasance or other misconduct towards the company or towards any of its members is a condition pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te two or more companies. The formation of satisfaction cannot be on irrelevant or imaginary grounds, as that would vitiate the exercise of power. 32. The ratio of the above judgment is that the Central Government satisfaction must be as per the conditions mentioned in the section and must be based on the fact that has been gathered by the Central Government to show that the conditions precedent exist in the order of the Central Government. 33. In view of the foregoing discussion, we conclude that to enable the Central Government to apply for an order under Section 241, the conditions precedent i.e. (i) the Central Government is of the opinion; and (ii) that the affairs of the Company are being conducted in a manner prejudicial to the public interest, need to be satisfied. On fulfilment of the above two conditions, an application can be filed by the Central Government under Section 241 of the 2013 Act for an order. Question Nos. II, III IV 34. All the above questions being interrelated, are taken together. 35. The challenge to the impugned order by the appellants in the present case is on the ground that the twin conditions under Section 241(2) of the 2013 Act did not stand satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The conclusion of the inspection report is as follows:- 18. CONCLUSION:- Keeping in view the irregularities and mis-management of company s affairs including funds of the applicants seeking membership of the club and deposits accepted by the company action U/s 241 r/w Section 242 of the Companies Act, 2013 has been suggested in the part A of the report. Further, as the company has not been able to achieve the object, for which it is formed, action for revocation of license u/s 8(6) of Companies Act, 2013 has been proposed in Part B of the report. 38. The inspection report was placed before the Regional Director, Ministry of Corporate Affairs who forwarded the inspection report along with its opinion to the Ministry of Corporate Affairs by letter dated 5th August, 2019. The letter dated 5th August, 2019 is quoted below:- Dear Shri, I am forwarding herewith the Inspection Report under Section 206(5) of the Companies Ad. 2013 in respect of DELHI GYMKHANA CLUB LIMITED conducted by Shri. Ajay Kumar Meena, Deputy Director. The Inspection of this company was ordered by the Ministry vide letter No. 7/29/2016/2016-CL.II (NR) dated 16.03.2016 directing to examine 1M complaints by the mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector and for supplementary inspection. The supplementary inspection report dated 3rd March, 2020 was submitted, which was perused and vide letter dated 4th March, 2020, the same was sent to the Ministry of Corporate Affairs agreeing with the concluding remark of the recommendation made by the Inspecting Officer. It is useful to extract the letter dated 4th March, 2020, quoted in paragraph 9.7 of the impugned judgment, which is as follows:- 9.7 Thereafter, Regional Director, Northern Region, submitted the Supplementary Inspection Report dated 03.03.2020 annexed as annexure P-5 with its letter dated 04.03.2020 (at page 980 of volume IV of the Petition) and the contents of the same are reproduced below: Dear Shri, I am forwarding herewith the Supplementary Inspection Report under Section 206(5) of the Companies Act, 2013 in respect of M/s Delhi Gymkhana Club Limited conducted by Smt. Seema Rath, Deputy Registrar of Companies/Delhi Inspector. The supplementary inspection of the company was directed by the Ministry vide letter No. 1/97/2019/CLII(NR) dated 12.09.2019 broadly on the following issues: a) to take up issues related to allotment of membership; b) the money received from ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es manipulation of the registers and records kept by the company and furthermore, the furnishing of false information falls within the purview of violations specified under section 448 of the Companies Act, 2013. d. For mis-statement in the e-form action u/s 628 of the Companies Act, 1956 for filing wrong Annual Financial Statement of the year 2013-14. e. Col. Ashish Khanna, Secretary of the company who is member of the company from 2018 onwards has given a wrong statement knowing to be false and attracts the provisions of section 229 r/w section 449 of the Companies Act, 2013 to be initiated against him. f. For members of the General Committee of the company section 449 of the Companies Act, 2013 gets attracted which prescribes punishment for intentionally giving false evidence. g. Ministry/ICAI to take disciplinary action u/s 226 of the Companies Act, 1956 and section 141(3)(d)(i) of the Companies Act, 2013 for Mr. Vinod Chander Chandiok who being an auditor of the company was also the member of the company. Further, in view of the false statement given by Mr. Vinod Chander Chandiok, the provisions of section 229 r/w section 449 of the Companies Act, 2013 gets attracted and has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee members under section 447 of the Companies Act, 2013; (iii) Immediate appointment of Government appointed administrator(s) in the General Committee and transfer of absolute power to such administrator(s); (iv) Immediate ban on acceptance of any further membership application and fees; and (v) The prime location of the land with the company being worth thousands of crores to be better utilized for meaningful purposes to achieve the objectives of the company as laid down in the MoA, in the interest of the public. 2. This issues with the approval of the Competent Authority. 41. The letter dated 18th March, 2020 itself contained a statement that this is issued with the approval of the competent authority . The letter dated 18th March, 2020, which specifically contained a stipulation that it has been issued with the approval of the competent authority, clearly indicates the opinion was formed by the Central Government to file a petition under Section 241-242 of the 2013 Act. The expression used in Section 241-242 that Central Government is of the opinion does not contemplate any particular manner of formation of opinion. The opinion formed by the Central Government is clearly refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable, needful or essential [see para 14]. It is thus clear that the Central Government's mind has to be applied to whether a compulsory amalgamation under Section 396 is indispensably necessary, important in the highest degree, and whether such amalgamation is both basic and necessary. Public Interest 81. The third prerequisite of Section 396 is that the Central Government must apply its mind when compulsorily amalgamating two or more companies in the public interest. Public interest is an expression which is wide and amorphous and takes colour from the context in which it is used. However, like the expression public purpose , what is important to be noted is that public interest is the general interest of the community, as distinguished from the private interest of an individual [see State of Bihar v. Kameshwar Singh [State of Bihar v. Kameshwar Singh, (1952) 1 SCC 528 : 1952 SCR 889 : AIR 1952 SC 252] at pp. 1073-1075]. 44. The above judgment of Hon ble the Supreme Court clearly indicates that the expression public interest is of wide amplitude when it is used in different statutes. We have to look into the concept of public interest in reference to Section 241 of the 2013 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the project; (D) deadlines for completion of the project; and (E) any litigation or legal action pending or taken by a Government Department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company; (xii) minimum subscription, amount payable by way of premium, issue of shares otherwise than on cash; (xiii) details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed; and (xiv) disclosures in such manner as may be prescribed about sources of promoter s contribution; (b) set out the following reports for the purposes of the financial information, namely: (i) reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed; (ii) reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed: Provided that in case of a company with respect to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently. Explanation. The date indicated in the prospectus shall be deemed to be the date of its publication. (4) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless on or before the date of its publication, there has been delivered to the Registrar for registration, a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his duly authorised attorney. (5) A prospectus issued under sub-section (1) shall not include a statement purporting to be made by an expert unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion or management, of the company and has given his written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for registration and a statement to that effect shall be included in the prospectus. (6) Every prospectus issued under sub-section (1) shall, on the face of it, (a) state that a copy has been delivered fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same for the purposes of the Company and to provide club houses, pavilions, lavatories, kitchens, refreshment rooms, workshops, stables, sheds and other conveniences in connection therewith and to furnish and maintain the same and to permit the same and the property of the Company to be used by members and other persons either gratuitously or for payment; c) to purchase, hire, make or provide and maintain all kind of horses, live stock, furniture. implements, tools, utensils, plates, glass, linen, books, paper, periodicals, stationery, cards games and other things required or which may be conveniently used, in connection with the courses, grounds, houses and other premises of the Company by persons frequenting the same whether members of the Company or not; d) to buy, prepare, make, apply, sell, deal in all kinds of apparatus used in connection with any sport, game or pastime and all kinds of provisions and refreshments required to be used by members of the Company or other persons frequenting the courses, grounds, club houses or premises of the company; e) to purchase, take on lease or in exchange. Or otherwise acquire. any property movable or immovable which may be required f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, research, social welfare, religion, charity, protection of environment or any such other object; (b) intends to apply its profits, if any, or other income in promoting its objects; and (c) intends to prohibit the payment of any dividend to its members, the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word Limited , or as the case may be, the words Private Limited , and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section. (2) The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies. (3) A firm may be a member of the company registered under this section. (4) (i) A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government. (ii) A company registered under this section may convert itself into compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any registered under this section should be amalgamated with another company registered under this section and having similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order, provide for such amalgamation to form a single company with such constitution, properties, powers, rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order. (9) If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to the Rehabilitation and Insolvency Fund formed under section 269. (10) A company registered under this section shall amalgamate only with another company registered under this section and having similar objects. (11) If a company makes any default in complying with any of the requirements laid down in this section, the company shall, without prejudice to any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Association, we find that other objects are in aid and the sport is the main object of the Company which are object of promoting polo, hunting, racing, tennis, other game, athletic sport and pastime. 49. Learned counsel for the appellants has relied on a judgment of Delhi High Court in the case of Air Vice Marshal J.S. Kumar vs. Governing Council of Air Force Sports Complex and another reported in 2006 SCC Online Delhi 8 to support his submission that no public functions are discharged by such entities like Air Force Sports Complex. In the case before the Delhi High Court writ petition under Article 226 of the Constitution of India was filed by the writ petitioner challenging termination of his membership from Air Force Sports Complex. The question which arose for consideration in the said writ petition was as to whether the dismissal of the writ petition by the learned Single Judge was sustainable. The appeal was filed by the writ petitioner challenging the dismissal of the writ petition. In the above context, the Delhi High Court had occasion to consider as to whether the Air Force Sports Complex is discharging any public function. In paragraphs 34 to 37 of the said judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the affairs of the Company are being conducted in a manner prejudicial to the public interest which is a entirely different expression and concept. 52. Another judgment which has been relied by the learned counsel for the appellants is in the case of Secretary Madras Gymkhana Club Emloyees Union vs. Management of the Gynkhana Club reported in AIR 1968 SC 554. The above was a case where appeal was filed by the Employee Union challenging the order of the Industrial Tribunal which held that Madras Gymkhana Club is not an industry. In paragraph 2 of the said judgment facts have been noticed, which is as under:- 2. The Madras Gymkhana Club is admittedly a members' club and not a proprietary club, On December 31, 1962 its membership was about 1200 with 800 active members. The object of the club is to provide a venue for sports and games and facilities for recreation and entertainment. For the former, it maintains a golf course, tennis courts, rugby and football grounds and has made arrangement for billiards, pingpong and other indoor games. As part of the latter activities it arranges dance, dinner and other parties and runs a catering department, which provides food a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a limited way production of material goods mainly in the catering department. But these circumstances are not truly representative in the case of the club because the services are to the members themselves for their own pleasure and amusement and the material goods are for their consumption. In other words, the club exists for its members. No doubt occasionally strangers also take benefit from its services but they can only do so on invitation of members. No one outside the list of members has the advantage of these services as of right. Nor can these privileges be bought. In fact they are available only to members or through members. 32. It is contended that, although there is no incorporation as such, the club has attained an existence distinct from its members. It may be said that members come and members go but the club goes on for ever. That is true in a sense. We are not concerned with members who go out. The club belongs to members for the time being on its list of members and that is what matters. Those members can deal with the club as they like. Therefore, the club is identified with its members at a given point of time. Thus it cannot be said that the club has an existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Police Act and Section 4 of the Gaming Act? 6. Whether the Madras Race Club (Acquisition and Transfer of Undertaking) Act, 1986 (the 1986 Act) gives effect to the policy under Article 39(b) and (c) of the Constitution of India (the Constitution) and as such is protected under Article 31- C of the Constitution. If not, whether the 1986 Act is liable to be struck down as violative of Articles 14 and 19(1)(g) of the Constitution. 57. The Hon ble Supreme Court held that horse racing is a game of skill where the winning depends substantially and preponderantly on skill. In paragraphs 47 and 49 of the judgment, following observations have been made: 47. There is no material on the record to show that any inquiry or investigation was held by the State Government in the affairs of the Club. In the facts and circumstances of this case, it was of considerable importance that there should be a proper inquiry held by the Government before such an action is taken. The inquiry should show that the management have so misbehaved and mismanaged that they are no longer fit and proper persons to be permitted to manage the affairs of the Club. Even if the mismanagement on the part of the Club is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that any inquiry or investigation was held by the State Government in the affairs of the Club. The said findings in no manner support the submissions of the Appellant, rather, the Hon ble Supreme Court s categorical observation that Companies Act provides for elaborate machinery for dealing with the mismanagement companies registered under the Companies Act. 59. The next judgment relied by learned Counsel for the Appellant is (1970) 1 SCC 462 The Joint Commercial Tax officer, Harbour Division, II-Madras vs. The Young Men s Indian Association (Regd.), Madras and Ors. The above was a case where proceedings under Madras General Sales Tax Act, 1959 were questioned by the Club by a writ petition, which was allowed by the High Court, holding that Club could not be held as a dealer within the meaning of Section 2(g), read with Explanation I of the Act, nor was any sale involved in the aforesaid activities of the Club. In paragraph 1 of the judgment, facts have been noticed, which are as follows: These appeals by certificate are directed against a common judgment of the Madras High Court in petitions filed under Article 226 of the Constitution by the Cosmopolitan Club, Madras, the Young ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of goods to its Members attracts the Madras General Sales Tax Act, 1959 and answer was given in negative. The said judgment has no bearing in the issues, which are involved in the present Appeal and does not render any help to the Appellant. 62. Another judgment, which has been relied by the Appellant is (2019) 19 SCC 107 State of West Bengal vs. Calcutta Club Ltd. The question involved in the above case was eligibility to sales tax/ VAT for supply of food and drinks to Members of the Club and the doctrine of mutuality. The Hon ble Supreme Court in the above case has quoted with approval of earlier judgment of the Supreme Court in the Joint Commercial Tax officer, Harbour Division, II-Madras vs. The Young Men s Indian Association (Regd.), Madras and Ors. (supra) and ultimately concluded that there is no sale transaction between a club and its Members as there cannot be a sale of goods to oneself. Doctrine of mutuality was noted and considered in the above context. In the above case, notices were issued by Assistant Commissioner of Commercial Taxes to the Club, apprising it that it had failed to make payment of sales tax on the sale of food and drinks to the permanent Members, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich also included casual members in addition to permanent and tenure members. The casual members were also using the Golf Course in the same manner as permanent and tenure members were using. The AO has declined fees received from the casual members as income u/s 12A merely because assessee club was not maintaining separate books of accounts regarding this business activity. As per AO it was a business income and not income from the mutual interest that was not liable for exemption u/s 11. There is no merit in the AOs' action for treating the fees received from the casual members as business income. The assessee club was maintaining required records with regard to income and expenditure. There is no requirement of maintaining separate accounts with respect to fees received from different kinds of members, as provided in the articles of Association. The assessee, Delhi Golf Club Limited is a well known club having been in Delhi for over five decades. Its main object is to promote the game of gold in India. It has members from various walks of life. Even the department all along after due examination had accepted that activity of the assessee as not for profit motive. In spite of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im exemption under section 10 (23) of the Act relating to exemption from tax of sports associations and institutions having their object the promotion control regulation and encouragement of specified sports and games. 64. The judgment of the Delhi High Court, which concurred with the opinion of the Tribunal that advancement of any object beneficial to the public or a section of the public as distinguished from an individual or group of individual would be an object of general public utility and in view thereof, promotion of sports and games was considered as a charitable activity within the meaning of Section 2(15) of the Income Tax Act 1961. Hence, it was held that Club was entitled for exemption from tax of sports associations. We fail to see how the above judgment help the Appellant in the present case. 65. The power given to the Central Government under Section 241(2) is for a purpose and object, which is not far to seek. When a company, which is registered under Section 8 of the 2013 Act, and its affairs are being conducted in a manner prejudicial to the public interest, the Central Government is entitled to file an application under Section 241 of the 2013 Act. When the affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inspection report highlighted gross irregularities committed by the company and the persons who are conducting the affairs of the company. The Govt. initially thought it fit to go into the allegations and in the course of inspection various acts of mismanagement were unearthed. What has been unearthed in the course of inspection is that for the period beginning from 2014-15 onwards the club adopted the method of increasing the registration fee, additional registration fee, application processing fee etc. and invested this amount on the interest bearing investment/mutual funds and the amount of Income generated thereon become part of the income of the respondent club. On one hand the inspection report states that amount received as registration fee was subsumed as income. The counsel for the respondent club pleads that it is shown as a liability and has been refunded as and when desired by the person to make the repayment. For some period, it has treated as an income and for some period as a liability. In any event we find such a course of action deserves to be treated only as a method adopted to enhance the finances of the club for the benefit of the members at the cost of thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the club while returning the same cannot justify in retaining the interest components. This will amount to unjust enrichment for no justifiable reason. We are compelled to state so because this company as per the MOU is non-profit company and its primary objective of sports and sports related activities which is nothing but a public interest. We are therefore of the definite opinion that the affairs of the company are being conducted in a manner prejudicial to the public interest as also in the manner prejudicial to the interest of the company and therefore, the application stands justified. The argument of the respondent that the action taken by the Central Govt. is based on complaints of 12 persons (1.e., 2 members and 10 others), the details of which are discussed in Para 9.2 and therefore, the entire exercise of inspection in filing of this petition was based on irrelevant complaints of members and bias and predisposed mind on the part of the Central Govt. This argument appears to be incorrect because though the initial complaint was received, the government proceeded to cause a proper enquiry and came to unearth a number of issues of mismanagement and manner in which the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Money has been refunded based on decision of the GC meetings, this speaks for itself. The Central Govt. in this case has not only established by various acts of mismanagement and financial arbitrariness in collecting various amounts which are contrary to the Articles of Association to enrich the club and its members at the cost of third parties which we have very clearly held is not only violations of the provisions of the Companies Act but against public interest and prejudicial to the conduct of the affairs of the company. The Union Govt. represents the people and therefore, public interest becomes relevant and the manner in which the company is run is prejudicial to the interest of the company therefore, though it is beneficial to the member or members of the company, such company which is run in violations of the Companies Act and also run in a manner prejudicial to public interest in view of the specific material placed showing breach of the provisions of the Companies Act which are very serious in nature and the gross abuse of that position to collect amounts in breach is a clear case where the Company requires to be wound up. However, the petitioner have only indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder directing investigation under Section 212(1)(c) of the Companies Act, 2013 ( Companies Act ) should stand on its own feet and must be able to demonstrate that there exist material/circumstances which warrant investigation and that such material/circumstances have been been considered and an opinion is formed by the government to investigate into the affairs of the company on the basis such of material/circumstances. This opinion must be based on specific grounds and reasons which shall form a part of the order authorizing sanction. It is the specific case of the Petitioner that though an order sanctioning investigation ought not to be subjected to judicial review on merits, the same can be examined on ground whether the sanction complies with the mandatory requirement of; i) there is requisite opinion formed by the Central Government; and ii) existence of material and circumstances to indicate that the company's affairs are causing prejudice to the public interest. The Petitioners submit that in the present case the order of investigation is completely unreasoned, requisite opinion is not formed by the Central Government, there does not exist material/circumstances/fact ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances warranting such investigation and in compliance with principles of natural justice. In our opinion the impugned sanction dated 30.11.021 fails on all counts for reasons stated hereinabove. On a perusal of the impugned order it is evident that the Impugned Order is solely based on the suspicion raised by the Liquidator and Transaction Audit Report. On a bare perusal of the Transaction audit report has not brought forth any fact, material or circumstance in its report that could have led the Central Government to form the requisite opinion for the purposes of Section 212(1)(c). The same shows that the Impugned Order has been passed by the Respondent No. 1 without applying its mind and the opinion so formed by it is lacking in the pre-conditions to be satisfied under Section 212(1)(c). 69. There can be no quarrel to the proposition laid down in the aforesaid judgment. The pre-conditions for exercising statutory power have to be satisfied. 70. Another judgment relied by the Counsel for the Union of India is in the case of Parmeshwar Das Agarwal vs. Additional Director reported in 2016 SCC Online Bombay 9276, which was also a case where investigation was directed under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the Articles of Association. The inspection report reported that only 3% of the entire expenditure by the Company is devoted towards sports. The findings returned by the NCLT on the materials before it that the Company has not been able to follow-up its main object and the affairs of the Company are being mismanaged which is prejudicial to the public interest. The relevant findings of the NCLT we have already extracted above. The Company, which is a Section 8 company, is not able to manage its affairs to pursue its main object. We are not persuaded to accept the submission of the learned counsel for the appellants that there was no public interest involved in directing for filing of petition under Section 241- 242 of the 2013 Act by the Central Government. We are thus satisfied that there was sufficient materials before the Central Government to form an opinion that the affairs of the Company are being conducted in a manner prejudicial to the public interest. We thus do not accept the submission of the appellants that there was no public interest involved in carrying of the affairs of the Company and the Company is only for the benefit of its members and no public int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lub indefinitely. The Fifteen Members Committee have been appointed by the impugned order for perpetuity, which is not in the domain of NCLT while exercising power under Section 241 and 242. The learned Counsel for the Appellant has also relied on judgment and order of the Hon ble Supreme Court dated 30.09.2021 passed in Civil Appeal(s) arising out of an interim order dated 15.02.2021 passed in Company Appeal(s) challenging the order of NCLT dated 26.06.2020. It is submitted that Hon ble Supreme Court vide order dated 30.09.2021 had directed the Administrator to take necessary steps for installing the duly elected committee by conducting elections within four months, which order indicates that there was clear direction for installation of newly elected Committee and despite the aforesaid directions of Hon ble Supreme Court dated 30.09.2021, the NCLT has superseded the General Council of the Club for an indefinite period without any direction for installation of duly elected Committee by conducting election within a time period. 75. We need to first examine as to whether the order impugned is an interim order under Section 241 (4) or a final order under Section 242. 76. As noted abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int two of its nominees of its choice as Members in the General Committee to monitor the affairs of the Club along with other GC Members and give suggestions to the GC, and direct the Union of India to constitute a Special Committee with five Members of its choice to enquire into the affairs of the Club, utility of the land leased out by the State, with regard to constructions in progress without requisite approvals or with approvals, suggestions for changes in Articles and Memorandum of Association, membership issues including waitlist and about accelerated membership, adherence of the Club to the Rules governed by Section 8 of the Companies Act 2013 and other miscellaneous issues if any and file report of recommendations suggesting for better use of the club premises for the larger good in a transparent manner on equity basis within two months hereof. 76. This Bench further directs the general committee that it shall not proceed with construction or further construction on the site, it shall not make any policy decisions and it shall not make any changes to the Memorandum of Association or Articles of Association and it shall not deal with the funds received for admission of Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failing in our duty if we do not express our gratitude to Mr. K.M. Natraja, learned ASG representing the Union of India and Mr. S.N. Mookherjee, Senior Advocate representing the Respondents. But for their valuable assistance, this judgment may not have seen the light of the day. The appeals are accordingly disposed off. Judgment be communicated to the Tribunal. 80. Two Appeal(s) were filed against the judgment dated 15.02.2021 of this Tribunal being Civil Appeal No.__ of 2021 (Diary No.5221 of 2021) and Civil Appeal No.__ of 2021 (Diary No.5593 of 2021) Rajeev Sabharwal Anr. vs. Union of India Ors. Both the Appeal(s) were disposed of by the Hon ble Supreme Court vide order dated 30.09.2021. The Hon ble Supreme Court in the order dated 30.09.2021 observed We decline to interfere in these appeals as the same are directed against interlocutory order passed by the National Company Law Appellate Tribunal (in short, NCLAT ). . In the same order dated 30.09.2021, the Hon ble Supreme Court made following observations: Needless to observe that rejection of these appeals does not mean that the NCLT can decide the matter(s) on the basis of prima facie finding/opinion recorded by itself and by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Inspection Report runs into about 4000 pages, which Reports elaborately considered various aspects regarding affairs of the Club. Company Petition filed by the Union of India is also brought on Record, which in detail mentions various complaints received by the Government against the Club and order of inspections issued on 16.02.2016 under Section 206(5) of the Companies Act, 2013. Major complaints received against the Club has been enumerated in paragraph-12 of the petition, which included various violations of the Companies Act, 2013 and Companies Act, 1956. The Company Petition also refers to Supplementary Inspection Report dated 03.03.2020. The Petition extracts Preliminary Observations of the Supplementary Inspection Report in paragraph 22. The petition extract the observations made by Inspectors, after verifying the records of the Club and after considering the reply submitted by Club in response to summons issued to the Members and Office bearers. The Petition, which was filed by the Union of India under Sections 241 and 242 is a detailed petition, containing pleading with reference to Inspection Report and Supplementary Inspection Report. The NCLT has sought reply from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (UCPs) Rs. 10,000/- and Special category Members(i.e. corporate members) Rs. 15,00,000/- with additional Rs. 7,50,000/- devised a method of including new Members and started issuing Green Cards to children of the permanent members and UCPs Members as well. For these Members they have issued a notice on 17.05.2019 which has been extracted in Para 13.1 of this order where details of penalty and registration fee deposits for issuance of Green cards to children has been indicated. In pages 1026 to 1030 of Volume V of the supplementary report dated 03.02.2020 the reply of the company has been recorded. They have admitted that though besides the entrance fee has been specifically defined under Article 13 (1) of the AoA, the company has been charging registration fee of Rs. 1,50,000/- for permanent government Members, additional registration fee of Rs. 2,50,000/-, security deposit etc., for permanent non govt. Members the entrance fee is Rs. 25,000/-, registration fee is Rs. 7,50,000/-, additional registration fee is Rs. 10,65,000/- besides other amounts, for Green card granted to Member's of children, the registration fee is Rs. 1,50,000/-,for UCP i.e. Green card 104 holder for up-g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 25 under Companies Act, 1913 and section 8 under Companies Act, 2013 taken into consideration, to be a non-profit company, the company has to work on fulfilment of the conditions mentioned in the relevant section and the Central government grants a license subject to conditions and regulations which shall be binding on the association. Also, the first and foremost object of the company should be the major object of the company, which is promotion of various sports which falls under the words 'any other useful objects'. The company can carry out any related business as per its object clause however, it needs to align with the main object as stated in the MoA i.e. promotion of sports. 88. Supplementary Inspection Report has also noted the revenue from operations, other income and expenses and also observed that the Club has failed to carry out the objects of the Company. Following are the observations in the Supplementary Inspection Report: Observation on facts: The above mentioned Tables referring to the Income Expenditure of the company Indicates that the company has earned an income of Rs 51.81 crores, Rs. 56.35 crores, Rs. 50.18 crores, Rs. 65.90 crores and Rs. 86.20 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in paragraph 16A, are facts, which are culled out from the Supplementary Inspection Report and those facts are also reason for exercising the jurisdiction under Sections 241 and 242 by the NCLT. Detailed expression and observations have been made in the Supplementary Inspection Report with regard to Membership criteria of the Company in paragraph 3 of the Supplementary Inspection Report. The copy of Memorandum of Association and Article of Association have been filed as Annexure A-3 to the Appeal. Paragraphs 1 to 4 of the Article of Association, which deals with the Members, are as follows: Name of Members 1. The company for the purposes of registration is declared to consist of two hundred permanent members of the Delhi Gymkhana Club Limited, hereinafter called the Club. Increase of Membership 2. The General Committee hereinafter mentioned may, whenever the expansion of club required it, register an Increase of permanent Members upto 5600. Vice Patrons 3. The President of India shall be invited to become the Patron of the Club. The General Committee may, from time to time, invite other distinguished persons to become Vice Patrons or Honorary Members. Class of Members 4 (1) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscription in respect of Special Category Members . Clause 13 (3a) deals with Members whose sons and daughters, between the age of 13 and 21 and are permitted to use the Club as dependents . Clause 13(3b) deals with on reaching the age of 21, the son of a member having previously used the Club under Article 13(3a) must apply to become a full member . Clause 13 with its sub-clauses are as follows: Entrance Fee 13.(1) The Entrance fee for permanent membership. including that payable by Lady Subscriber, shall be Rs. 25,000/- payable in lump sum. Provided that persons who at the time of applying for membership are officers of the Armed Forces of India, or Civil Officers of Government, would be required to pay an Entrance Fee of only Rs. 10,000/-. The entrance fee for UCPs of members sons/daughters will in all cases be Rs. 10,000/-. 13. (1a) Provided that no entrance fee shall be payable in the case of the widow of a deceased permanent member who applied to be admitted as a Lady Subscriber within two years of her husband's death. 13. (1b) The entrance fee for Special Category membership shall be Rs. 15 Lakhs for upto two designated user, and an additional Rs. 7.5 Lakhs for a third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r day (ii) Squash or Swimming or Card Room Rs. 20/- per day (d) Separate charges may be levied for Billiards, Badminton, Table Tennis, Dances and special facilities/ entertainments as may be determined by the General Committee from time to time. Provided that in the case of Special category membership the charges indicated in the sub-paragraph shall be payable by the Company or Corporate body in respect of each of its designated persons actually using the facilities described herein. 93. With regard to Membership and the category of Members, elaborate examination has been made in the Supplementary Inspection Report and with regard to Green Card Holders, detailed observations have been made, observing that the Green Card Holders, which are not contemplated in the Article of Association, number of Green Card Holders ranged from 4000 to 5333 from 2015 to 2019. It is not necessary for us to refer to detailed Report with regard to Green Card Holders as captured in the Supplementary Inspection Report. With regard to Green Card Holders, following are observations in paragraph (e) at page 904 of the reply of Respondent No.1: (e) Thus, the GC for each financial year after 2014-15 had knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub. The said amounts were till financial year 2016-17 was treated as revenue of the Club, but subsequently is treated as liabilities. The amounts were deposited in various securities and huge interest was earned. It has been observed that Company being non-profit Company, Company has enriched itself by adopting the aforesaid mode, which is not in accordance with the Article of Association. Supplementary Inspection Report has also observed that the class of Members from Companies and Members from corporate entities have increased from the prescribed limit. Different queries which were forwarded, have been dealt by the Ministry in detail in Supplementary Inspection Report, which is filed as Annexure R-5 to the reply filed by Union of India, which contains detailed observations after examining the reply of the Company and the facts. The NCLT has also returned its finding as noted above, opining the violation of Memorandum of Association and Article of Association, along with financial irregularities and mismanagement. We, thus, are unable to accept the submission of the Appellant that no findings have been returned by the NCLT while exercising jurisdiction under Sections 241 and 242. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rregularities in allotment of Membership, actions take and the objects of the Club. The Fifteen Members Committee has also appointed Auditors namely Baker Tilly Business Advisory Services Pvt. Ltd., to conduct the Forensic Audit Report of the Club, who has submitted a Report. However, any further direction issued by the NCLT on the Status Report submitted by the Committee in compliance of the directions have not been brought on record. Question No.(VIII) 98. We have noticed the judgment of the Hon ble Supreme Court in Tata Consultancy Services Ltd. (supra) where the Hon ble Supreme Court considered the object and purpose of exercise of jurisdiction under Sections 241 and 242 by the NCLT. The Hon ble Supreme Court held in the above judgment that the court is ordained, generally to pass such orders with a view to bringing to an end the matters complained of . The Hon ble Supreme Court further made following observation Therefore, at the stage of granting relief in an application under these provisions, the final question that the court should ask itself is as to whether the order to be passed will bring to an end the matters complained of. 99. Thus, the principal objective of order u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court has passed an order extending the period for a further period of four weeks. By order dated 11.03.2022, further four weeks time was granted to dispose of the petition. Before the four weeks time granted on 11.03.2022, came to an end, order was passed by NCLT on 01.04.2022. Thus, the order dated 01.04.2022 passed by NCLT is within the timeline granted by the Hon ble Supreme Court. 101. However, the observations of the Hon ble Supreme Court in order dated 30.09.2021 as extracted above, clearly indicate that Hon ble Supreme Court had directed that in event the NCLT is unable to decide the main petition within the time allowed, Administrator may take steps for installing a duly elected Committee after four months. It is true that the NCLT disposed of the matter within the time allowed by the Hon ble Supreme Court from time to time. However, as noted above, after passing of order dated 01.04.2022, more than two and a half years have elapsed. One of the limbs of challenge of the Appellant is that the order of NCLT dated 01.04.2022, superseding the General Council is for indefinite period and the NCLT, ought to have directed a course of action for bringing an end to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Association is as follows: Management of the Club to be vested in a General Committee 20. (1) The Management of the business of the Club shall be vested in a General Committee consisting of a President and sixteen other members. (2) The President and other members of the General Committee shall be elected by ballot from among the permanent members at an Ordinary General Meeting taking place on or as soon as possible after, the 1st of November in each year, and no member shall be eligible for ejection unless he is at the time residing in Delhi. (3) Printed lists of members who are willing to serve on the Committee shall be posted in the Club for atleast ten days before the General Meeting; a ballot box shall be placed near the said list, and members may vote by placing, or causing to be placed a list of not more than sixteen names in the ballot box, which list shall be signed by the member voting. The ballot Box shall be closed eight hours before the start of the General Meeting. The General Committee shall appoint two members to scrutinize the voting papers and result shall be declared at the meeting. (4) Permanent vacancies in the General Committee or in the office of the Presi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent voting Member has also appeared in person and prayed for witness protection. It is submitted by her that she has supported the Government in unearthing the corruption and misdeeds in the Club, but she has not been provided any protection either by the Court or Government. 105. Col. Ashish Khanna has also referred to various Application, which he has filed before the NCLT, some of which are pending and some of which have already been decided. He has prayed that Company Appeal (AT) No.93 of 2022 be dismissed and order be passed in IA filed by Respondent No.18 in the present Appeal being Diary No.910110/10688/2024. 106. The present proceedings arises out of the Application filed by Union of India under Section 241 and 242. Prayers are quoted in paragraph 32 of the Application, which are as follows: PRAYER 32. That in light of the factual position detailed above and also in view of the emergent circumstances involved, it is most humbly prayed that the Hon'ble Tribunal be pleased to pass the following orders under Section 242 of the Companies Act 2013: Ad-interim Reliefs a) That the General Committee of Respondent No. 1 company be suspended with immediate effect, and a Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was unsuccessfully challenged before this Tribunal and also before the Hon ble Supreme Court. The allegations made by Respondent No.18 regarding SFIO investigation and proceedings under Section 447 of the Companies Act, are not subject matter of these Appeal(s) and need no consideration at the instance of Respondent No.18, who has also supported the impugned order passed by NCLT and has prayed that Company Appeal (AT) No.93 of 2022 be dismissed. Respondent No.18 is at liberty to raise other issues in appropriate forum and in appropriate proceedings. 108. Coming to the witness protection as was prayed by Respondent No.18 as well as Ms. Niji Sapra during oral submission. It is seen that Col. Ashish Khanna himself has filed a copy of the order dated 29.05.2024 passed by Metropolitan Magistrate-01, New Delhi District in Complaint Case No.959/2021 filed by Col. Ashish Khanna, where with regard to witness protection, following observations have been made: A Senior Officer or team of Officers, may be deputed to enquire into the allegations of coercion and threat on employees of Delhi Gymkhana Club and witnesses may be examined afresh. Furthermore, the complainant and the witnesses are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been claimed to be taken by the Fifteen Members Committee appointed in consequent to the impugned order dated 01.04.2022. We, thus, are of the view that ends of justice will be served in directing the existing Committee nominated by Central Government to conclude remedial steps and conduct the election of Delhi Gymkhana Club in accordance with Clause 20 of Article of Association. 112. In view of foregoing discussions and our conclusions, we dispose of these Appeal(s) in following manner: (1) The order dated 01.04.2022 passed by NCLT in Company Petition No. 71/(241-242)/PB/2020 is upheld. (2) The Committee nominated by the Central Government in pursuance to the order dated 01.04.2022 passed by NCLAT is directed to complete the all remedial measures, so as to end the matters complained of on or before 31.03.2025. (3) The Committee nominated by the Central Government in pursuance of the impugned order dated 01.04.2022, is directed to conduct the election of President and Members of the General Council in accordance with Clause 20 of the Article of Association within three months after 31.03.2025 and install the duly elected General Council accordingly. (4) The General Council of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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