‘Parivarwaad, members are auditors’: Why Centre wants to acquire Delhi Gymkhana Club
The Delhi Gymkhana, which shares a wall with the Prime Minister’s residence, has been under investigation for around three years.
The central government has cited “parivarwaad” (nepotism), financial irregularities, misuse of allocated land and issues related to membership as the primary reasons behind its move to acquire the Delhi Gymkhana Club.
The ministry of corporate affairs (MCA) filed a petition, seen by the Hindustan Times, with the National Company Law Tribunal (NCLT) seeking to take over the premier club.
The NCLT heard the petition through video-conferencing on Friday and set the next date of hearing for May 13, granting time to the Delhi Gymkhana board to file its response. The board sought the time to counter the government’s charges.
“Some people who had applied for membership of the club and some member, filed a complaint with the MCA a few years ago,” said President of Delhi Gymkhana Club, Lt. Gen (retd). DR Soni. “We have been undergoing investigations by the MCA over the last three years.We received a petition, filed by UoI (Union of India) vs Delhi Gymkhana Club on 22nd, to appear before the NCLT, over video-conferencing, on 24th. The petition was incomplete in content and thus, our team of lawyers have sought more time to prepare our case, as the Club is currently in complete Corona lockdown.”
“We need time to open our offices and prepare our case. The present Club management that has been petitioned by NCLT is barely six months old, while the alleged issues pertain to earlier times, so we have sought time,” he added.
The Delhi Gymkhana, which shares a wall with the Prime Minister’s residence, has been under investigation for around three years. The first inspection report of MCA was submitted in March 2019 and a supplementary report in March 2020.
According to the petition filed by the Government of India on Thursday, Delhi Gymkhana was registered under sections 25 and 26 of Companies Act in 1913, making it a “limited company” that is formed to promote art, commerce, science, religion, charity or any other useful theme.
“The land was allocated to Delhi Gymkhana for sporting activities,” a person familiar with the matter, an official at MCA, said on condition of anonymity. “Instead only 2% of their accounts show expenditure on sporting activities. The club is being used for all purposes other than sporting activities. It has not produced a single international medal-winning athlete. This is misuse of land for purposes other than what it was allocated for.”
“The government has alleged a misclassification of features,” said a former Gymkhana official. “It has alleged that money collected was not used for the purposes it was meant for. Hence, the government said the club was violating the terms of the land allotment.”
The petition states that 30% of the expenditure of the company is in the form of catering consumables, wines, beverages and cigarettes.
Moreover, it adds that Rajiv Jain, a member of the club, informed the President of the club that the “statutory auditors”, SN Dhawan and Company, appointed in 2013, are “ineligible” as they are “permanent members of the club”.
“The auditors are members of the club,” confirmed the MCA official. “That is a conflict of interest.”
The government’s petition also alleges arbitrary grant of membership. Membership is given after due election with a waiting list that stretches over years. The registration fee for government members is ₹1.5 lakh and for non-government members, ₹7.5 lakh. Government members pay ₹5 lakh for a lifetime membership once elected, and non-government members, ₹22 lakh.
The government has alleged that the club is charging an “exorbitant amount for pending membership application where the moratorium on membership is at least three decades”. No interest is paid on the registration fee.
Other than the 5,600 permanent members, and the categories mentioned in the club’s Articles of Association (AoA) , the club has also been granting non-permanent memberships to eminent people, holders of green cards, non-resident Indians, women, and Use of club membership pending elections (UCPs) (those whose membership has lasted 6-7 years and allowed to use the club pending an election other than those mentioned in the AoA), according to the petition.
According to the petition filed by the Government of India on Thursday, Delhi Gymkhana was registered under Section 26 of Companies Act in 1913, making it a “limited company”. The petition adds that under section 25 of the Companies Act, 1956, it has to prove to the ‘satisfaction of the central government that it is formed to promote art, commerce, science, religion, charity or any other useful theme’. Moreover, the petition also mentions that under Section 8 of the Companies Act, 2013, ‘sports, education, research and social welfare were added to the above list’.
“It is to be noted that these green card holders have been enjoying preference in grant of memberships,” states the petition. “They primarily consist of dependents over 21 years of age of permanent members.”
“Added to this is the fact that of the permanent members, 50% would be reserved for children of present members,” said the MCA official. “Others would have to wait 30-40 years to become members, while the children’s membership would be fast-tracked to five years by using a special queue. This is parivarwaad.”
The government has also alleged misuse of power by officer holders .
“In the interim, it has been proposed appointing an administrator from the government with a team of advisors till the Club is claimed by the government. Then elections can be held and the unauthorised members can be removed,” the MCA official said.