Delhi High Court
Mr. Siddhaant Mohta & Ors. vs Delhi Gymkahana Club Ltd. & Ors. on 18 October, 2024
Author: Sanjeev Narula
Bench: Sanjeev Narula
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 23rd July, 2024
Pronounced on: 18th October, 2024
+ CS(OS) 224/2022 & CRL.M.A. 15396/2024, I.A. 15514/2022, I.A.
29675/2024
MR. SIDDHAANT MOHTA & ORS. ..... Plaintiffs
Through: Mr. Amir Singh Pasrich, Ms. Mohana
Malhotra, Mr. Karan Bahmani,
Advocates.
versus
DELHI GYMKAHANA CLUB LTD. & ORS. ..... Defendants
Through: Mr. Prateek Kumar and Ms. Raveena
Rai, Advocates for D-1.
Ms. Shivani Gupta and Mr. Kartik
Dabas, Advocate with complainant,
Col. A. Khanna in Crl. M.A.
15396/2024.
+ CS(OS) 458/2022 & I.A. 18790/2022, I.A. 9767/2023
PREM SHANKAR JHA & ANR. ..... Plaintiffs
Through: Mr. Dinesh Dwivedi, Senior
Advocate with Mr. Ashish Mohan,
Mr. Prateek Dwivedi, Mr. Krishnam
Mishra, Mr. Nishant Singh and Ms.
Sagrika Tanwar, Advocates.
versus
DELHI GYMKHANA CLUB LTD & ORS. ..... Defendants
Through: Mr. Prateek Kumar and Ms. Raveena
Rai, Advocates for D-1.
+ CS(OS) 523/2022 & I.A. 18791/2022
PRANATI CHESTHA KOHLI ..... Plaintiff
Through: Mr. Ashish Mohan, Ms. Sagrika
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 1 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
Tanwar and Mr. Anmol Chawla,
Advocates.
versus
DELHI GYMKHANA CLUB LTD & ANR. ..... Defendants
Through: Mr. Prateek Kumar and Ms. Raveena
Rai, Advocates for D-1.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J.
LA. 6198/2022 in CS(OS) 224/2022. I.A. 12402/2022 in CS(OS) 458/2022
and I.A. 14158/2022 in CS(OS) 523/2022 (for interim relief)
1. The Plaintiffs through the above captioned interlocutory applications
under Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908,1
seek a stay on the operation of the notice and letter dated 8th March, 20222
and the order dated 31st March, 20223 issued by Defendant No. 1–Delhi
Gymkhana Club Limited. By these communications, the Plaintiffs’ Green-
Card user rights have been suspended and subsequently terminated.
2. The factual background in all these suits is nearly identical with the
Plaintiffs raising similar legal grounds of challenge. Given the substantial
overlap in both facts and legal submissions, it is appropriate to address the
applications collectively through a common order. However, certain
nuanced arguments, specific to individual Plaintiffs, will be examined
separately within this order to ensure a tailored consideration of those
distinct claims.
1
“CPC”
2
“Suspension notice”
3
“Termination order”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 2 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
3. To provide a comprehensive understanding of the dispute, the factual
details from CS(OS) 224/2022 will be discussed in depth, as they are
representative of the controversy at hand.
Factual Background
4. The Plaintiffs comprise a group of aggrieved individuals from a larger
pool of 125 persons who were granted Green Card user rights in the Delhi
Gymkhana Club Limited (Defendant No.1).4 They assert that their suit has
been instituted in a representative capacity, as many others have similarly
suffered due to the actions of the Club.
5. The controversy originated when the Plaintiffs applied for
membership with the Club, a process that began sometime before 2019. For
instance, Plaintiff No. 1 (Mr. Siddhant Mohta) in CS(OS) 224/2022 applied
for membership on 11th August, 2016, at the age of 25, paying a registration
fee of Rs. 1,50,000/-. This application came after his mother, an Indian
Foreign Service (IFS) Ambassador, returned to India following her posting
in Warsaw, Poland. Plaintiff No. 1 contends that due to his mother’s
diplomatic posting, he was unable to apply earlier for the status of “Green
Card Holder.” By the time he returned to India, he had already crossed the
age limit of 22 years, the threshold by which children of members usually
apply for membership under Article 13(3)(b) of the Articles of Association 5
of the Club. Pertinently, Plaintiff No. 1’s mother holds a permanent
membership with the Club. Following several representations to the Club, a
Green Card was issued to him on 7th August, 2019, upon verification of his
records. He subsequently paid dues totalling Rs. 5,31,000/- as required by
4
Hereinafter referred to as “the Club”
5
“AoA”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 3 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
the relevant Sub-Committee and General Committee of Defendant No. 1.
6. Similarly, Plaintiff No. 2, the sister of Plaintiff No. 1 and daughter of
the former Ambassador who is a permanent member, was also impacted.
Due to their mother’s overseas posting in Warsaw, Plaintiff No. 2 had
likewise crossed the age of 22 by the time she could apply for membership
under Article 13(b) of the AoA. Upon her return to India, and after making
representations to the Club, she too was granted Green Card status upon
payment of the requisite fees.
7. In a similar vein, the other Plaintiffs also provide various reasons for
their delayed applications, having crossed the prescribed age limit of 22
years. Some attribute their delay to personal or professional commitments
abroad, while others cite extenuating family circumstances. Despite these
diverse situations, it is their collective case that each Plaintiff 6 applied for
Green Card holder rights only after turning 22. They argue that these delays
were beyond their control and were not intended to circumvent the rules
established by the Club.
8. The Plaintiffs assert that Green Card holder rights and membership
are integral aspects established through the minutes of the Annual General
Meeting7 and Extraordinary General Meeting.8 They further contend that
these rights are recognized under sub-articles 13(3a) and 13(3b) of the AoA
and bye-laws of the Club.
Plaintiffs’ Contentions
9. Mr. Amir Singh Pasrich, counsel for the Plaintiffs in CS(OS)
224/2024, raises several contentions which are summarised herein below:
6
CS(OS) 224/2022 and CS(OS) 458/2022
7
“AGM”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 4 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
9.1 The Plaintiffs could not apply for membership immediately upon
turning 21, as required by the AoA of the Club, primarily because their
parents were posted abroad. Nonetheless, the AoA does not prescribe a strict
deadline for submitting membership applications. Therefore, denying them
the benefit of Green Card holder status merely due to timing issues would be
unreasonable.
9.2 The Green Card benefits have been granted by the Committees of the
Club to the progeny of its members. The Club has routinely granted Green
Card user rights to maintain the “Family” since the Memorandum of
Articles9 contemplates membership of the sons/daughters of permanent
members. Reliance in this regard is placed on Articles 13(3b), 13 (3c) and
also Articles 13 (4) of the AoA. In the past, several General Committees
have eased the requirement that applications must be submitted within one
year of turning 21, because no cap is provided for in the application made
after reaching the age of 21. Such applications have been accepted routinely
in the past commencing from 1950s. An artificial cap was apparently
decided upon by the previous General Committees. Upon receiving
appropriate applications, the General Committee considered the same and
granted user rights (Green-Card Holder Rights) which are like a license to
use the Club on such terms as the relevant General Committee may think fit.
The concerned applicant would then be granted the “Green Card” and
membership rights or rights of user though they were not members of the
company within the meaning of the words in the Companies Act, 2013.
Cardholders paid the amount determined by the General Committee, along
8
“EGM”
9
“MoA”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 5 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
with a monthly or annual subscription fee, even if they were not using the
Club, in order to preserve their rights, which are akin to a contractual
obligation.
9.3 The Membership and Disciplinary Sub-committee10 of the Club
reviewed the cases of the Plaintiffs and others in similar situations in 2019,
including those who had pursued Green Card applications for years, alleging
delays due to the Club’s lack of records. After deliberation, the General
Committee issued a notice on 17th May, 2019, offering Green Card rights
upon payment of a fee based on age-related delays. The penalty structure
was as follows:
“Under 25 years: ₹2 lakhs + ₹1.50 lakhs + GST
26-35 years: ₹3 lakhs + ₹1.50 lakhs + GST
36-45 years: ₹5 lakhs + ₹1.50 lakhs + GST
46-55 years: ₹6 lakhs + ₹1.50 lakhs + GST
56 years and above: ₹7 lakhs + ₹1.50 lakhs + GST”
9.4 The notice issued by the duly elected General Committee was
transparent and targeted a specific category–those who had missed earlier
opportunities and had been unable to use the Club’s facilities for years. A
total of 125 individuals paid an aggregate amount of approximately ₹4.50
crores (excluding GST), contributing to the Club’s funds. This arrangement
was based on mutual agreement, with clear terms and conditions, as detailed
in paragraph 17.13 of the plaint. Notably, there have been no complaints of
fraud or misrepresentation from any of these 125 individuals.
9.5 The Club came under investigation by the Ministry of Corporate
Affairs11 starting on 16th March, 2016, regarding its membership procedures
10
“MSDSC”
11
“MCA”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 6 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
and alleged legal violations. This led to the MCA filing a petition under
Sections 241 and 242 of the Companies Act, 2013 (CP No. 71/2020) in
April 2020. An interim order on 26th June, 2020 found a prima facie case
that the Club’s affairs were being conducted prejudicially to the public
interest. On appeal (Company Appeal No. 94/2020), the NCLAT, through
its order dated 15th February, 2021, upheld this finding, suspended the then-
General Committee, and directed the appointment of an Administrator by
the Union of India. It also prohibited the acceptance of new memberships or
enhancements until the company petition’s disposal and placed wait-list
applications on hold.
9.6 Following the NCLAT’s order, an interim Administrator was
appointed in early 2021. Subsequently, on 30th July, 2021, Defendant No. 2
was appointed as the interim Administrator by the MCA. Defendant No. 2
appears to have been influenced by an audit objection, which claimed that
the receipt of ₹4.50 crores violated the provisions of the Companies Act,
2013.
9.7 Defendant No. 2, without granting a hearing or considering alternative
views, directed the Club’s Secretary to issue the impugned notice dated 8 th
March, 2022, suspending all 125 Green Card holders, including the
Plaintiffs. On 22nd March, 2022, Defendant No. 2 announced that the matter
was assigned to a one-member inquiry committee led by a former judge of
High Court of Bombay – Hon’ble Mr. Justice Dama Seshadri Naidu. The
notice stated that the first phase of the report was submitted on 28th January,
2022, with the second part pending and to be published on the Club’s
website upon receipt.
9.8 Consequently, the Green cards of all 125 individuals were suspended
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 7 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
unilaterally, without any notice or hearing.
9.9 The Plaintiffs’ rights were subsequently suspended on 8th March,
2022 and terminated on 31st March, 2022, by an order from the Club’s
Administrator. The Plaintiffs argue that both the suspension and termination
are untenable, as they had lawfully acquired their Green Card rights in
accordance with the Club’s articles, paying substantial fees determined by
the Membership and Disciplinary Sub-committee and later approved by the
General Committee in 2019. These payments were made through normal
banking channels, with some individuals not even residing in India at the
time.
9.10 No illegality or violation warranted such drastic action of termination
of Green cards. Defendant No. 2 acted overzealously, taking precipitous
action based solely on an interim report by the retired Judge, without
referring to past agreements and without proper legal authority or a court
order.
9.11 The Defendants have conveniently ignored the fact that Green Card
holders are consistently recognized in the Club’s in the AoA, particularly
Articles 13(3a), 13(3b), and 13(3c) as well as the Club’s bye-laws,
specifically Bye-laws 10, 23(d)(iii), and 54(c)(i) as well as in several AGMs
and EGMs. Given this recognition and the fact that the Green Card category,
encompassing over 5,000 members, remains in place, undermines the
Defendants’ claim that the issuance of Green Cards is “illegal and outside
the scope of the AoA”.
9.12 The Defendants argue that the actions taken by Defendant No. 2 and
subsequently confirmed by Defendant No. 4 (the new General Committee)
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 8 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
were based on the findings of the Naidu Committee Report12 and the
NCLT’s final judgment dated 1st April, 2022. However, that decision could
not have been based on the final judgment of the NCLT since it was issued a
day before that judgment, rendering the Defendants’ reliance on the Naidu
Report and NCLT both premature and unsubstantiated.
9.13 The Plaintiffs are not shareholders of Defendant No. 1. Section 244 of
the Companies Act, 2013 requires at least 10% of a company’s shareholders
to initiate proceedings before the NCLT. In contrast, the Plaintiffs’ rights
stem from an offer, their acceptance through payment, and the continued
payment of subscriptions, creating an implied contract based on the AoA
and the parties’ conduct. The NCLT did not consider these aspects, nor were
the Plaintiffs made parties to that proceeding.
9.14 The Defendants targeted only 125 Green Card holders alleging
illegality without any evidence. The Naidu Committee’s reports lack
reasoning to demonstrate any violation of law, AoA provisions, bye-laws,
resolutions, sections of the Companies Act or any other law. References to
“cheating” in the report are vague and unsupported, failing to specify the
nature, extent, or means of alleged deception. These allegations lack the
particularity required under Order 6 Rule 4 of the CPC which mandates
detailed pleading when alleging “misrepresentation” or “fraud.”
9.15. At this interim stage under Order 39 Rules 1 and 2 of the CPC, the
Plaintiffs seek restoration of the status quo before the termination of their
Green Card rights. There is no legal basis for the termination under any law.
The Defendants did not terminate membership under Article 19 of the AoA.
No breach of contract by the Plaintiffs was cited as a reason for termination
12
Dated 28th January 2022 and 30th March 2022
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 9 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
of the contract. No provisions of Chapter II of the Indian Contract Act,
187213 covering coercion, lack of free consent, fraud, or misrepresentation,
were invoked. The rescission under Section 27 of the Specific Relief Act,
1963,14 has not been relied upon. Cancellation under Section 31 of the
Specific Relief Act was not sought through a court declaration.
9.16 Terminating a contract outside the law and without reliance upon
Article 19 of the AoA in the present case is a violation of law. The AoA
refers to members loosely to cover all types of members including
permanent members, dependent members, UCPs, green card holders, foreign
diplomats, etc. If that be the case, only Article 19 of the AoA relating to
Termination of ‘membership’ can be applicable in this case. Article 19 of
the AoA is reproduced below for convenience:
“Termination of membership
19. In addition to the case provided for in Article 17 a member shall cease
to be a member of the Club in any of the following ways: –
(1) By his being adjudicated insolvent.
(2) By his being dismissed from Government Service.
(3) By his being found guilty by a competent tribunal of an offence
involving, in the opinion of the Committee, gross misconduct.
(4) By his not paying his Club bills after the warning as provided in
Article 28 for default in payment of Club bills.
(5) By decision of a majority vote of not less than two thirds of the
members present at a General Committee Meeting especially convened for
the purpose, and at which not less than twelve members shall be present.”
None of the 5 cases from the AoA [Article 19 (1) to (5)] was invoked by the
Defendants.
9.17 The Defendants argue that the contract is determinable. However,
once the plaintiff payments were accepted, that contract could not be
13
“Indian Contract Act”
14
“Specific Relief Act”
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 10 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
‘determinable’ under any theory of law without recourse to a Court. The
defendants did not rely upon Section 27 or 31 of the Specific Relief Act or
seek a declaration of illegality by a court of law. Without such declaration
vis-à-vis the Plaintiffs termination could not have been effected except under
Article 19 of the AoA, and there is no reliance upon that.
10. Additional Submissions by Mr. Dinesh Dwivedi, Senior Counsel for
the Plaintiffs in CS(OS) 458/2022, are as follows:
10.1 The present suit is a declaratory suit under Sections 34 and 35
of the Specific Relief Act, which allows for the filing of a suit when there is
a denial of “any right as to any property.” In such cases, both temporary and
permanent injunctions can be granted as per Sections 34, 35, 38(1),
38(3)(b)-(c), 40(1)-(2), and 41(h) of the Specific Relief Act. The Green Card
represents their entitlement to use and enjoy the Club facilities. The denial
of this right, which is based on the AoA, Club Rules, and General
Committee policies, justifies the suit. Furthermore, neither Section 38, nor
Sections 40 and 41 of the Specific Relief Act, bar the granting of relief.
Since the Club has breached its obligations under its own rules, the suit is
maintainable.
10.2 The Club’s affidavit dated 18th May, 2024 refers to policy
decisions by the General Committee on 24th March, 2007, and 27th March,
2019, which explicitly acknowledge the issuance of Green Cards. The only
issue, therefore, is whether these cards can be legitimately issued.
10.3 The validity of the order must be assessed based solely on the
reasons stated within it. The order provides only one reason: that the
issuance of Green Cards is “outside the AoA.”
10.4 The Impugned order does not differentiate between applicants
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 11 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
who applied within one year, two years, five years, or even later; it groups
them all together. This indicates that the decision rests on a singular issue.
10.5 Attempting to distinguish applicants based on delays–whether
one, two, or five years–is futile, as Articles 13(3)(a-c) of the AoA does not
set any such limitation.
10.6 There is no objective basis for determining what constitutes a
reasonable delay. How can the Court impose a cutoff period–whether one,
two, or five years–when neither the Club nor the AoA provides such
guidance? Doing so would mean adding reasons to the order that do not
exist. Imposing a limitation period would amount to overstepping into the
Club’s management domain, especially since the Club itself does not
distinguish applications based on delay. Articles 13(3)(b) and 13(3)(c) do
not prescribe a time limit for applying for membership, and therefore, the
Court need not do so either. The history of Green Cards, as shown in the
documents annexed, demonstrates that the Club and its General Committee
have consistently interpreted the AoA to permit the issuance of Green Cards.
10.7 The Club cannot prevent dependents from applying for
membership, as Clause 13(3)(b) and (c) explicitly allow dependents to apply
upon reaching adulthood. Preventing such applications would constitute a
breach of these clauses.
10.8 The Club is a members’ club, not a separate legal entity distinct
from its members. It serves as a self-governing institution designed to
provide services to its members, governed by AOA framed for their benefit.
Therefore, those managing the Club best understand the intent behind
Clauses 13(3)(b) and (c).
10.9 Past practice is a reliable indicator of the framers’ intent
Signature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 12 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
regarding the AoA. Consistent interpretation and application by the Club’s
management provide weight to this understanding.
10.10 The framers of the AoA intentionally left room by not imposing
a limitation period for membership applications after turning 21. It would be
unreasonable to impose such a limitation now on the grounds of
“reasonableness.” Additionally, it is uncontested that the Club does not
qualify as a State under Article 12.
10.11 The ‘White Paper on membership issues’ released in October,
201415 acknowledges that the Club can set a time limit for membership
applications under Clause 13(3)(b), but it has chosen not to do so. The term
“Green Card” simply refers to dependents who turn 21.
10.12 The General Committee has broad powers under Clause 22 of
the AoA to pass resolutions in the members’ interest. Additionally, the bye-
laws recognize Green Card holders as members, indicating the Club’s
acceptance of dependents becoming Green Card holders upon reaching 21.
10.13 In this context, singling out 125 individuals for removal solely
because they are Green Card holders is unjustifiable. The retention of
thousands of other Green Card holders undermines the claim of their
supposed invalidity.
11. Mr. Ashish Mohan, counsel for Plaintiff in CS(0S)-523-2022,
contends as follows:
11.1 The Plaintiff, a dependent member since birth due to her
father’s membership (No. U-1133), turned 21 in 2017 while studying in the
United States. Upon returning to India in December 2017, she approached
the Club to apply for a Green Card but was informed that the process wasSignature Not Verified
Digitally Signed CS(OS) 224/2022, CS(OS) 458/2022 &CS(OS) 523/2022 Page 13 of 42
By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
temporarily suspended. She reapplied in December 2018, and the
Membership & Discipline Sub-committee accepted her application on 4th
February 2019, as communicated via email.
11.2 The Plaintiff was deemed “overage” by just 5 months, due to
the Club’s suspension of the Green Card process. Despite this, the Club
accepted INR 62,040/- as penalty charges plus GST, along with ₹1,77,000/-
as registration fees, and the Plaintiff has been paying her annual subscription
fees ever since.
11.3 The Plaintiff was issued a Green Card in line with Club policy
after meeting all the conditions set by the Club.
11.4 On 8th March, 2022, the Plaintiff’s Green Card was suspended
without prior notice. She learned of the suspension through a notice
circulating on WhatsApp and displayed on the Club’s notice board, listing
her among 125 individuals whose user rights were arbitrarily revoked.
11.5 On 22nd March, 2022, the third Administrator, Mr. Om Pathak,
issued a circular alleging “misconduct and mischief” by the 125 Green Card
holders, including the Plaintiff. This circular was also issued without giving
the Plaintiff an opportunity to present her case.
11.6 In July 2022, the Plaintiff received a letter dated 14th July,
2022, from the Club stating that her Green Card had been terminated by an
order dated 31st March, 2022. This termination was executed without giving
her an opportunity to present her case or providing a copy of the said order,
highlighting the arbitrary nature of the Club’s actions.
11.7 It is undisputed that: (i) the Plaintiff was never notified of any
doubts regarding her Green Card; (ii) no allegations or charges were
15
“White Paper 2014”
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By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
communicated to her; (iii) she was not informed of any proposed actions;
and (iv) she was not granted a hearing to respond. The decision is therefore
illegal, having been made in complete disregard of the principles of natural
justice. The Plaintiff relies on the judgment in Siddharth Gupta v. The
Delhi Golf Club Limited & Anr.,16 which emphasized the need for natural
justice in membership termination. Similarly, the judgments in Charles
Mantosh & Ors. v. Dalhousie Institute & Ors.17 and Jagdish Chander
Sachdeva v. Royal Bombay Yacht Club & Ors.,18 reinforce that failure to
provide a hearing in such cases renders the action null and void.
11.8 The Third Administrator, Mr. Om Pathak, was appointed solely
to manage the Club’s affairs until the final disposal of the Company Petition
before the NCLT. His mandate did not extend to adjudicating on Green Card
issues, making his actions in suspending and terminating the Plaintiff’s
Green Card beyond his authority.
11.9 In 2019, the Club invited the Plaintiff to complete the
formalities for Green Card issuance. She complied, and her application was
accepted unconditionally, forming a concluded contract upon payment of the
required fees. Since then, the Plaintiff has fulfilled her obligations by paying
the annual subscription fees. Thus, the Club became contractually bound to
the Plaintiff through its conduct, acceptance of payment, and AOA. Based
on this contractual relationship and legitimate expectation, the Plaintiff is
entitled to all user rights and privileges recognized under the Club’s
Articles, bye-laws, and established practices.
12. Mr. Prateek Kumar and Ms. Raveena Rai, Counsel, raise the
16
18th December, 2015, CS(OS) 2805/2015
17
AIR 1993 Cal 232Signature Not Verified
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By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
following contentions for the Club:
12.1 The suit is misconceived, false, and fundamentally
unmaintainable. Issuing Green Cards to the Plaintiffs was illegal and beyond
the scope of the Club’s AoA. Green Card holders do not qualify as members
of the Club. The AoA explicitly states that a dependent ceases to be a
member upon turning 21, at which point they must formally apply for
membership if they wish to continue using the Club’s facilities. There is no
provision within the AoA that allows dependents to retain Club privileges
simply by paying a penalty or delay fee if they miss this age requirement.
Therefore, the Plaintiffs’ claims have no legal basis.
12.2 The Club is currently scrutinizing the legality of all
membership categories in accordance with both the AoA and the MoA. As
per the AoA, any dependent son of a permanent member must apply for
membership immediately upon reaching the age of 21. There is no
mechanism for a delayed application accompanied by the payment of a
penalty. The NCLT, in its final judgment dated 1st April, 2022,19
acknowledged that the issuance of Green Cards was a strategy to supplement
the Club’s considerable expenses. This approach, while initially devised to
include children of permanent members and UCP members, inadvertently
increased the Club’s membership count. However, Green Cards were
intended for individuals between 21 and 62 years of age, often with the
collection of a penalty fee. This practice clearly demonstrates that the Club
was not indulging in unjust enrichment, but rather collecting funds from
non-members who sought prolonged access to Club facilities.
18
2004 SCC OnLine Bom 872
19
“final judgement”
Signature Not Verified
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By:AKANSHA SINGH
Signing Date:18.10.2024
16:18:26
12.3 In light of the recommendations made by the Naidu Committee
in Report issued in two parts, first on 28th January, 2022 and 30th march,
2022, an order dated 31st March, 2022, was issued under the authority of the
Administrator appointed by the Union of India. This order declared the 2019
issuance of Green Cards to the Plaintiffs as illegal, void ab initio, and in
direct violation of the AoA. Consequently, the Plaintiffs’ memberships were
terminated with immediate effect. Additionally, the Administrator directed
that the amounts collected as penalties be refunded to the affected
individuals.
Analysis and Findings
13. The contentions advanced by the Plaintiffs’ counsel distil into several
key issues that require this Court’s careful consideration in determining the
grant of interim relief. These issues are deliberated upon and addressed as
follows:
Was the issuance of Green Cards to the Plaintiffs in 2019 in contravention
of the Articles of Association (AoA) of the Club?
14. Article 13(3a) of the AoA permits the children of Club members
between the age of 13 to 21 years to use the Club as ‘Dependants’. Article
13(3b) of the AOA requires such dependants to apply to become a full
member upon reaching the age of 21 years, should they wish to continue to
use the Club. The said Articles read as follows:
” 13 (3a) Members whose sons and daughters, between the age of 13
and 21 are permitted to use the Club as dependents, shall pay an
additional monthly subscription of Rs. 40/- p.m. for each child using
the Club. However, for absentee dependent children, a member shall
pay Rs. 20/- p.m. for each child.
13(3b) On reaching the age of 21, the son of a member having
previously used the Club under Article 13(3a) must apply to become
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a full member, should he wish to continue to use the club”
15. A plain reading of Articles 13(3a) and 13(3b) of the AoA reveals that
these provisions serve a limited purpose: they establish the age limit up to
which the children of Club members may use the Club’s facilities as
dependents. This privilege does not confer any rights upon the dependents
themselves but is, in fact, an ancillary benefit extended indirectly to the
members. In other words, it is a courtesy extended to members, not an
independent claim available to their children. This provision allows their
children temporary access to the Club, contingent upon payment of nominal
monthly charges. The privilege is inherently transient, expiring when the
dependent turns 21. It carries no expectation of permanence, no entitlement
to preferential treatment, and no guarantee of continued access. These
provisions, therefore, ensures that access to the Club is subject to clear
boundaries, reinforcing that any child of a member wishing to continue
using the facilities must initiate the formal membership process to acquire
full membership. The absence of any vested rights for dependents highlights
the temporary nature of the arrangement. This guards against the creation of
parallel or informal categories of access that might undermine the structured
membership framework envisioned by the AoA. As such, the dependent’s
enjoyment of Club privileges is, by design, ephemeral and terminates by
default unless formal membership is sought through application and
approval. Furthermore, the term “apply” implies that there is no guaranteed
or automatic right to access the club until dependents achieve full
membership thus, negating the idea of a Green Card. The Green Card
system creates an alternative method that bypasses this restriction imposedSignature Not Verified
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by the AOA, making it prima facie in violation of Article 13(3b) of the
AoA.
16. The AoA of Defendant No. 1 make no provision for a distinct
membership category termed ‘Green Card’ holders. This concept appears to
have originated informally, without any legal provision in the Club’s
governing documents. Records indicate that the idea of Green Cards was
first introduced in 1981, as evidenced by the Club’s newsletter from 9th
January, 1982. However, there is no record of any corresponding approval
or discussion in the minutes of the General Committee, the AGM, or any
EGM. The absence of such formal recognition prima facie raises serious
questions about the legitimacy of the Green Card system. A perusal of the
White Paper, 2014 would reveal that Green Cards were a means to allow
overage dependents to continue using the Club’s facilities. This directly
contradicts Article 13(3a and b) of the AoA which strictly limits the use of
Club facilities by dependents to the ages of 13 to 21. Therefore, prima facie
the Green Card system itself operates outside the legal framework of the
Club and creates an unauthorized class of users that undermines the
structured membership principles outlined in the AoA. Pertinently, the key
issue here pertains specifically to the issuance of Green Cards to overage
dependents. The Naidu Committee Report, commissioned by the Club’s
Administrator, clearly held that no policy existed under which Green Cards
could lawfully be issued to dependents who had crossed the age limit.
Consequently, the issuance of the 125 Green Cards to these “overage”
dependents was found to be illegal and void ab initio. Moreover, the
statutory auditors of Defendant No. 1 had raised concerns in the financial
statements for the years ending 31st March, 2020, and 31st March, 2021,
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explicitly stating that the issuance of Green Cards was not in accordance
with Articles 13(3a), 13(3b), and 13(3c) of the AoA.
17. Following these observations, the Administrator, upon reviewing the
Naidu Committee Report’s findings, took action to suspend and
subsequently terminate the Green Cards, as reflected in the order dated 31 st
March, 2022. Moreover, the NCLT’s final judgment dated 1st April, 2022,
further observed that the issuance of Green Cards was an unauthorized
method devised to unjustly enrich the Club by circumventing the AoA’s
provisions. The judgment highlighted that the increase in members through
Green Cards was solely a way to enhance revenue in breach of both the AoA
and the MoA. The Green Cards were issued for individuals aged 21 to 56
upon collecting a penalty, establishing a clear deviation from the Club’s
rules.
18. In addition, the Plaintiffs contend that Green Card holders are
repeatedly recognized in the Club’s bye-laws–specifically in Rule 10,
23(d), and 54(c)–as well as in various AGM and EGM resolutions. They
argue that this recognition in the admitted bye-laws negates the assertion
that the issuance of Green Cards to the Plaintiffs is illegal or outside the
scope of the AoA of Defendant No. 1. According to the Plaintiffs, if the
Club’s bye-laws explicitly acknowledge the status of Green Card holders,
the practice can hardly be deemed unlawful.
19. However, this argument fails to withstand scrutiny. While it is true
that certain bye-laws reference Green Card holders, these bye-laws were
introduced by the General Committee through Resolution 3(a) dated 3 rd
August, 2016. The mere fact that the bye-laws acknowledge the existence of
Green Card holders does not, by itself, legitimize the practice of issuing
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Green Cards, particularly where such issuance is in clear violation of the
Club’s foundational document, the Articles of Association. It is crucial to
recognize that the AoA is the superior governing instrument, and any bye-
laws or resolutions adopted by the General Committee cannot operate
outside or override the express provisions of the AoA. The Plaintiffs’
reliance on the bye-laws does not address the central issue: issuance of
Green Cards to overage dependents in violation of the AoA, which strictly
limits dependent access to the Club to those between the ages of 13 and 21.
Therefore, while the General Committee may have introduced bye-laws
acknowledging existence of Green Card holders, this in no way confers a
special status or cures the illegality of the practice under the AoA. The bye-
laws merely reflect the General Committee’s recognition of an informal
practice that was already in place; they do not, and cannot, elevate that
practice to one in conformity with the Club’s constitutional framework. It is
not in dispute that the General Committee had been issuing Green Cards for
some time; and the introduction of bye-laws by the same body does little to
validate the practice when it was never within the scope of the AoA to begin
with. In essence, the Plaintiffs’ argument overlooks the fact that internal
resolutions and bye-laws cannot substitute or bypass the need for formal
compliance with the AoA. Therefore, issuance of Green Cards was illegal
and outside the scope of the AoA.
20. Given this, the Court, on a prima facie basis, concludes that the
issuance of Green Cards to individuals who had crossed the age of 21 was
without legal basis, falling outside the scope of the AoA. Consequently, the
issuance of Green Cards in 2019 was ultra vires and void ab initio, as
corroborated by the Naidu Committee Report and affirmed by the NCLT.
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Further, it has also observed from the observations made in the White Paper
2014 that the Green Cards were also issued to 353 persons similarly placed
with the Plaintiffs. Accordingly, General Committee20 (Defendant No.4 in
CS(OS) 224/2022) has further directed that such Green Card holders be also
identified and upon identification the GC shall take appropriate action.
21. Therefore, since the exercise of issuing Green Cards to overage
children of members itself has been deemed illegal and violative of AoA, the
same cannot be restored and privileges given to erstwhile Green Card
holders, including the Plaintiffs herein, prima facie cannot be continued in
light of observations made in various inspection reports.
Can historical practices or internal club policies have the authority to
override the express provisions of the AoA? Can such practices confer
enforceable legal rights on the Plaintiffs?
22. The Plaintiffs argue that since the 1950s, multiple General
Committees have routinely relaxed the requirement for dependents to apply
for membership within one year of turning 21, creating a practice of granting
Green Cards even to those who applied much later. They maintain that this
routine practice essentially established a policy, whereby user rights were
conferred through the Green Card system on terms the General Committee
deemed fit. This practice involved the payment of fees and subscriptions,
which the Plaintiffs argue functioned as a contractual arrangement, even
though Green Card holders were not considered ‘members’ within the
meaning of the Companies Act, 2013. The Plaintiffs also argue that their
induction, as Green Card holders, occurred under a scheme developed by the
20
“GC”
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General Committee, whereby penalties were levied and they were granted
user rights while continuing to wait for regular membership in the queue.
23. However, in the Court’s opinion, while the General Committee may
have devised a scheme to grant user rights, such a scheme cannot contravene
the explicit requirements of the AoA. Article 13(3b) of the AoA mandates
that dependents apply for full membership upon reaching the age of 21
“should he wish to continue to use the club”. The Plaintiffs’ assertion that
the issuance of Green Cards does not affect their place in the membership
queue does not negate the requirement to acquire full membership in order
to retain user rights beyond the age of 21. Their reliance on historical
practices does not change the legal standing of the AoA as the Club’s
constitution. Moreover, Company Law principles dictate that a company’s
AoA is binding, and any deviations or alterations to its provisions must be
implemented through formal amendments, not through informal practices or
customs. The absence of any formal documentation amending the AoA to
recognize a “Green Card” category of user rights invalidates the Plaintiffs’
claim that such rights were legitimized through long-standing practice. The
Naidu Committee Report and NCLT findings highlight that the Green Card
system was inconsistent with the AoA. The argument that past General
Committees routinely relaxed the rules fails to establish a legal basis when
such practices conflict with the governing rules.
24. Additionally, the General Committee’s powers under the AoA do not
extend to creating new categories of user rights that contradict the AoA’s
express provisions. The imposition of terms, penalties, and minimum spend
requirements on Green Card holders does not legitimize these rights if their
very existence contravenes the AoA. The Plaintiffs’ continued payment of
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subscriptions and penalties, while framed as adherence to a scheme devised
by the General Committee, does not confer any legal right to the user
privileges they seek. The AoA provides a clear structure for membership,
and the Plaintiffs’ induction as Green Card holders was outside that
structure. The mere fact that they remain in the queue for membership does
not entitle them to user rights that are not recognized by the AoA. Grant of
such interim user rights would, in effect, be akin to conferring membership
without voting rights, but with full privileges–a status that the AoA does
not contemplate. Such an arrangement would undermine the structured
membership process and would, in essence, provide the Plaintiffs with
benefits similar to those of full members without requiring them to meet the
criteria set out by the AoA.
25. To conclude, the argument that the scheme of Green Card user rights
was within the General Committee’s powers and recognized since 1958
holds no legal ground when set against the binding nature of the AoA. The
past practices of the General Committees, even if routinely followed, cannot
override the explicit requirements of the AoA. Without a formal amendment
to the AoA to incorporate the Green Card system, prima facie the issuance
of Green Cards, including to the Plaintiffs, was not only unauthorized but
also void ab initio.
26. As to the second question outlined above, the Plaintiffs argue that the
issuance of Green Cards to them in 2019 is consistent with past Club
practices, where overage dependents were granted user rights upon payment
of a penalty. They contend that previous policies, particularly the one
introduced in 2007, set a precedent that should apply equally to them. In
essence, they seek parity with prior exceptions made by the Club. However,
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this argument fails to acknowledge a critical legal principle: mere past
practices or exceptions do not establish a vested legal right, especially, as
already noted above, when such practices contradict the governing
documents of the Club. The AoA serve as the constitution of the Club, and
any policy, historical or otherwise, that conflicts with the AoA lacks legal
validity.
27. Additionally, the Plaintiffs’ attempt to draw parallels with past
practices fails in light of the specific findings of the Naidu Committee and
the Club’s auditors. Both identified the 125 individuals granted Green Cards
under the 2019 policy as a distinct and separate category whose rights were
terminated in accordance with the AoA. The auditors flagged this group in
the Club’s annual reports for the financial years ending 31 st March, 2020,
and 31st March, 2021, indicating the legal and financial irregularities
associated with this category. This clear demarcation further emphasizes that
the Plaintiffs’ claim to parity with past practices does not stand on strong
legal footing.
28. In J Daulat Singh v. Delhi Golf Club Limited,21 this Court
categorically held that even if certain individuals were granted membership
“out of turn,” it does not create a legal right for others to claim the same
treatment. The Court observed:
“Even if it is presumed that the defendant club has wrongly conferred full
membership on certain persons on an out-of-turn basis, no legal right
thereby would accrue in favour of the plaintiff to get the membership.”
29. This principle squarely applies to the present case. The fact that the
21
AIR 2002 Del 501
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Club may have previously granted Green Cards to other overage dependents
does not confer a legally enforceable right upon the Plaintiffs to receive
similar treatment. The provisions of Article 14 of the Indian Constitution,
which enshrine the right to equality, are not applicable to private clubs
because the said provision is directed against “the State” and entities that
perform public functions or exercise significant governmental control.
Moreover, the equality clause itself is a positive concept that does not grant
rights based solely on the assertion that a wrong was committed in other
instances. Therefore, the Plaintiffs’ claim for parity based on historical
policies or customs must be rejected. The 2019 policy was neither in
accordance with the AoA nor approved through the proper channels.
Historical practices, even if routine, do not create legal rights that override
the clear provisions of the Club’s constitutional documents. The Plaintiffs’
reliance on past customary practices does not establish an entitlement to the
user rights they seek.
30. Upon a specific query from this Court, the Club, through an affidavit,
furnished data regarding applications from dependents who had crossed the
age of 22 (overage dependents) and sought the issuance of Green Cards
during the period between the suspension of the 2007 policy and the
commencement of the 2019 policy. According to the affidavit, the Club
received 31 such applications during this intervening period, of which 30
were ultimately included among the 125 individuals whose Green Cards
were granted under the 2019 policy and subsequently terminated.
Furthermore, after the 2019 policy took effect, 76 overage dependents
applied for Green Cards and were granted the same, but all of these, too,
have been terminated. Additionally, the affidavit reveals that 19 overage
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dependents applied before the suspension of the 2007 policy and were later
granted Green Cards under the 2019 policy, which have also been
terminated. This leaves only one instance where a Green Card issued during
the intervening period has not yet been cancelled. The Plaintiffs cannot
derive any legal claim to parity or establish any valid custom or practice
based on such isolated and inconsistent instances. A solitary surviving Green
Card issued during the transition period is insufficient to create a legal
precedent, custom, or enforceable right for the Plaintiffs. Moreover, the
practice in question lacks the consistency and formal acknowledgment
required to transform it into a binding custom.
31. Even if the Plaintiffs were attempting to draw parity with the Green
Cards issued under the 2007 policy, their claims would remain equally
untenable. The 2007 policy was not a perpetual entitlement; it was a
discretionary policy framework that the Club chose to suspend in 2013. A
policy that has been expressly discontinued cannot serve as a legal basis to
claim parity. From the moment of suspension, any expectation of continued
issuance of Green Cards became unfounded. Pertinently while discontinuing
the earlier policy of 2007, the earlier GC of the Club had noted that such a
policy required new rules which were to be approved in an EGM. It is
relevant to point out that the Naidu Committee Report has noted that after
discontinuation of the earlier policy no approval from the EGM of the Club
was taken to promulgate the 2019 Policy. It has also been noted that without
carrying out amendments to the AoA of the Club no policy such as the 2019
Policy could have been given effect to. The Plaintiffs’ Green Cards,
however, were issued under the 2019 policy, which lacked both the
necessary procedural approval from an EGM and any basis within the AoA.
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The issuance of Green Cards under the 2019 policy, which has now been
declared void ab initio, cannot be validated by referencing a separate and
discontinued policy framework. As such, the Plaintiffs cannot invoke the
2007 policy to justify the continuation of privileges that were granted
improperly under an invalid 2019 policy. Further, irregular or discretionary
grants made under a defunct policy do not create enforceable legal rights for
others in similar circumstances.
32. It is also crucial to note that the ongoing review and restructuring of
memberships, as directed by the NCLT, includes examining the legality of
all such memberships. The termination of the Plaintiffs’ rights was a
corrective action aligned with the NCLT’s mandate to restore lawful
governance, and it does not preclude future action against others similarly
situated. The Plaintiffs cannot, therefore, claim immunity based solely on
the fact that other Green Card holders have not yet been subjected to the
same scrutiny.
32. In conclusion, the Plaintiffs’ argument on parity fails to recognize that
only those policies and practices which align with the AoA can be legally
upheld. The argument of discrimination or parity, therefore, stands on no
better footing and must be dismissed.
\
Contractual Rights and Company Law: Do the Plaintiffs have enforceable
rights as Green Card holders?
34. Mr. Dinesh Dwivedi, Senior Advocate, appearing on behalf of the
Plaintiffs in CS (OS) No. 458 of 2022, does not assert any contractual rights.
Instead, his claims are based on the AoA, the Club’s rules, and policy
decisions made by the Club. In contrast, Mr. Amir Singh Pasrich,
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representing the Plaintiffs in CS (OS) Nos. 224/2022 and Mr. Ashish Mohan
representing the Plaintiff in 523/2022, asserts that their rights arise both
from a contractual foundation and under Company Law.
35. However, this argument overlooks several critical aspects. Firstly, the
beneficiaries of the 2019 policy, which granted Green Card rights, do not
qualify as “members” under the AoA. The AoA clearly define membership
and the accompanying rights, including voting rights as shareholders. The
Green Card holders, however, represent a separate, novel category that falls
outside this definition. While the AoA forms a binding contract between the
members and the Club, as established in Naresh Chandra Sanyal v.
Calcutta Stock Exchange Association Ltd.,22 this contractual relationship
extends only to members who have completed the requisite process for
membership. Green Card holders, however, are not recognized as members
within the meaning of the AoA and, as such, do not share the same
contractual relationship with the Club. The privileges afforded to Green
Card holders, including the use of Club facilities, are informal and
discretionary, not founded in the AoA. Since Green Card holders do not
meet the criteria for membership, they cannot claim the protections or rights
that flow from the contractual obligations of the AoA.
36. Furthermore, even if we assume, for the sake of argument, that a
contract of grant of privilege of use of the club under the concept of ‘Green
card holder rights’ exists between the Plaintiffs and the Club, this contract is
terminable in nature and cannot be specifically enforced. According to
Section 14(d) of the Specific Relief Act contracts of a determinable nature
cannot be specifically enforced. Additionally, Section 41(e) of the Specific
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Relief Act prohibits the granting of an injunction to prevent the termination
of such contracts. This legal principle has been reaffirmed in cases like
Ramswaroop Sunderlal Goyal v. North India Association,23 where it was
held that the conduct of private contracts, such as club memberships, cannot
be supervised by civil courts on a day-to-day basis, and thus cannot be
enforced through injunctive relief. In light of the above, the Plaintiffs cannot
claim enforceable membership rights under the AoA or Company Law.
Additionally, the Club, as a private entity, retains the prerogative to regulate
admission and usage of its facilities, limiting membership as it deems fit.
Membership or usage of the Club’s facilities cannot be claimed as a matter
of right. In fact, the Green Card arrangement was a discretionary policy of
the General Committee, not a legally binding contract that guaranteed
membership or permanent usage rights.
37. Moreover, the AoA forms the bedrock of the Club’s constitution and
serves as the definitive guide for membership criteria and rights. Article
13(3a) of the AoA specifically limits the use of Club facilities to dependents
up to the age of 21. It provides a clear directive that any dependent wishing
to continue using the Club beyond this age must apply for full membership.
While the Plaintiffs emphasize that no explicit “disqualification” clause
exists post-21, the requirement to apply for full membership upon turning 21
inherently sets a boundary. The AoA does not vest the General Committee
with the power to create alternative categories of user rights or to
circumvent this provision at their discretion. The Plaintiffs’ assertion that
their situation should be viewed as contractual rights under the AoA
22
1971 (1) SCC 50
23
Mumbai 2013 (4) Mh.L.J. 239
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overlooks the fundamental principle that contractual rights in a company
context are subject to the company’s constitutional documents. The General
Committee, while empowered to make policy decisions, cannot contravene
the explicit provisions of the AoA. The Plaintiffs’ suggestion that the
Committee acted within its discretion to grant them Green Card user rights
ignores the fact that any such decision contradicts the AoA, rendering it
legally untenable.
38. The Plaintiffs’ reliance on past practices as a basis for asserting
contractual rights is also conceptually misplaced. The AoA serves as a
binding contract among the members of the Club, regulating their rights and
obligations. As such, any practices that contradict or deviate from the
express terms of the AoA are ultra vires–beyond the powers granted under
the Club’s constitution. While the Indian Contract Act recognizes the
principle of implied contracts formed through conduct (such as long-
standing practices), these practices must be within the with lawful
obligations of the Club and cannot contravene an existing framework–here,
the AoA of the Club. In this case, the continued grant of user rights to
dependents over the age of 21 without requiring formal membership, as
mandated by Article 13(3b), was not merely an informal accommodation.
The reliance on such practices to claim rights overlooks the fundamental
legal principle that implied contracts cannot override express contracts.
Where the AoA prescribes specific rules governing access and membership,
no custom, however longstanding, can be invoked to defeat or bypass those
terms. The Plaintiffs’ argument that past practices confer enforceable legal
rights fails under the Indian Contract Act. For such practices to create an
implied contractual obligation, they must be lawful and consistent with the
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express terms of the governing contract–in this case, the AoA.
39. The Naidu Committee Report and the NCLT’s final judgment further
reinforce this position. The Committee identified the practice of granting
Green Card rights as an unlawful extension of privileges, in breach of the
Club’s constitution. The NCLT supported this finding, mandating a
restructuring to ensure compliance with the AoA and MoA. Thus, the 2019
General Committee’s actions, while potentially consistent with past
practices, do not acquire legitimacy simply by virtue of repetition. A series
of actions contrary to the AoA cannot give rise to a legally enforceable right.
40. In conclusion, the Plaintiffs’ invocation of contractual and Company
Law rights, founded on past practices and General Committee discretion,
fails to acknowledge that any such rights must operate within the framework
of the AoA. The AoA’s clear requirements for dependents turning 21,
coupled with the findings of the Naidu Committee and the NCLT’s
directives, render the Plaintiffs’ claims legally unsustainable. The Club’s
governing documents, not historical practices, define the bounds of
members’ rights.
Did the Administrator (Defendant No. 2) act within the scope of his
authority in suspending and terminating the Plaintiffs’ Green Card rights?
41. The Plaintiffs argue that the Administrator exceeded his mandate by
unilaterally terminating their Green Card rights. However, it is essential to
examine the scope of the Administrator’s authority as granted by the
NCLAT. The NCLT, in its order dated 26th June, 2020, formed a prima facie
view that the affairs of Defendant No. 1 were being conducted in a manner
prejudicial to the public interest and authorized the Central Government to
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appoint nominees to the Club’s General Committee. This led to a direction
for appointment of Defendant No. 2 (the Administrator) by the NCLAT on
15th February, 2021 which modified the order dated 26th June, 2020, with a
clear mandate to rectify the Club’s management.
42. Upon taking charge, the Administrator noted concerns raised by the
statutory auditors in the financial statements for the years ending 31 st March,
2020, and 31st March, 2021. The auditors observed:
“During the previous years, 125 children of Club members who were
beyond 21 years of age, were issued green cards. In our opinion, the
issue of green cards to the dependents was not in accordance with
articles 13(3a), 13(3b) and 13(3c) of the Articles of Association of the
club and some of the conditions mentioned in the notice including
nonavailability of dependent cards were not complied by some of the
candidates.”
43. To investigate further, the Administrator constituted an inquiry
committee headed by Hon’ble Justice Dama Seshadri Naidu. The Naidu
Committee Report, submitted in two parts (on 28th January, 2022, and 30th
March, 2022), concluded that the issuance of Green Cards was “a sham” and
had been done in “clear violation of the AoA.” Acting on this report, the
Administrator issued a notice on 8th March, 2022, suspending the Green
Cards and later issued an order on 31st March, 2022, terminating these cards
as illegal and void ab initio. The order further directed that any penalties
collected be refunded.
44. The NCLT’s final judgment of 1st April, 2022, supported the
Administrator’s actions, directing the restructuring of the Club to conform
with its AoA and MoA. Following this, the newly appointed General
Committee (Defendant No. 4) reviewed and ratified the Administrator’s
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decision on 11th July, 2022, opting not to interfere with the termination of
the Green Cards and ordering a refund of penalties to the affected
individuals.
45. The Court finds that these actions were not only within the
Administrator’s scope but also necessary to enforce the NCLT’s directive to
rectify the Club’s management. The subsequent ratification by the General
Committee establishes the legitimacy of the Administrator’s actions,
confirming that the termination was part of a broader corrective process.
Were the principles of natural justice breached by the suspension and
termination of the Plaintiffs’ Green Card rights without prior notice or a
hearing?
46. The Plaintiffs assert that the suspension and termination of their
Green Card rights occurred without notice or an opportunity to be heard,
thus breaching the principles of natural justice. However, it is crucial to
consider the context within which these actions were taken. The
Administrator’s actions were based on the findings of the Naidu Committee
Report, which was conducted as part of a larger mandate from the NCLT to
rectify the Club’s management. The NCLT’s involvement stemmed from a
petition filed by the Ministry of Corporate Affairs, which flagged
mismanagement within the Club. The Administrator was appointed
specifically to address these governance issues, including the improper
issuance of Green Cards. The NCLT, in its final judgment, directed the
restructuring of the Club in accordance with its AoA and MoA, implying a
need for systemic corrective measures.
47. In this broader context, the decision to terminate the Green Cards was
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not an individual action but part of an effort to bring the Club into
compliance with its own governing rules. While the Plaintiffs were not
individually heard, the Naidu Committee’s inquiry provided a
comprehensive review, and the subsequent decisions by the Administrator
and the General Committee were rooted in this inquiry’s findings.
Therefore, any alleged procedural lapse must be viewed in the light of the
NCLT’s mandate for restructuring and compliance. The Court thus finds that
the principles of natural justice, were not substantially violated given the
corrective nature of the actions taken.
48. The Plaintiffs have also relied on the judgement of this court in
Siddharth Gupta v. The Delhi Golf Club Limited & Anr.,24 on this issue.
However, this case is clearly distinguishable. In the Siddarth Gupta case, the
plaintiff was already granted formal membership by the Delhi Golf Club
through a clear and documented nomination process. His challenge arose
when his membership was revoked unilaterally without following the
procedure outlined in the Articles of Association. In contrast, the Plaintiffs
in the present case were not full members of the Club but held Green
Cards–a category not recognized under the AoA. Green Card holders were,
at best, users with temporary privileges, pending formal membership.
Therefore, the Plaintiffs cannot claim the same rights as formal members,
nor can they equate the termination of their Green Card privileges with the
revocation of formal membership, as was the case in Siddarth Gupta which
emphasized the need for natural justice in membership termination.
Moreover, in Siddarth Gupta, the plaintiff sought to preserve his existing
formal membership until a final determination was made. In the present
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case, the Plaintiffs seek to maintain privileges granted under a policy that
has been invalidated. Similarly, the judgments in Charles Mantosh & Ors.
v. Dalhousie Institute & Ors.,25 and Jagdish Chander Sachdeva v. Royal
Bombay Yacht Club & Ors.,26 has also been relied upon by the Plaintiffs.
However, the facts of these cases are distinguishable and do not apply to the
present situation. In Jagdish Chander Sachdeva, the Appellant, a permanent
club member, was expelled for failing to move to alternate accommodations
while his original premises were under repair, without being given a hearing,
as per Rule 43(vii) of the Club Rules. Similarly, in the Charles Mantosh
case, the Appellant’s membership was terminated due to alleged
misconduct. However, it is important to note that the Plaintiffs in the current
case had no rights/contract to begin with to claim violation of natural justice
principles. The contract concerning the Green Card is prima facie void ab
initio. Therefore, the Plaintiffs’ membership has not been ‘terminated’ in the
conventional sense; rather, it has been declared invalid from the outset and
thus no rights including those under principles of natural justice can flow
from there.
Have the Plaintiffs established a prima facie case to warrant the grant of an
interim injunction?
49. In light of the above discussion, the Plaintiffs have failed to establish
a prima facie case for interim relief. Their Green Card rights, as issued in
2019, were found to be outside the scope of the AoA and void ab initio. The
NCLT’s findings and the Administrator’s actions further erode the
24
18th December, 2015, CS(OS) 2805/2015
25
AIR 1993 Cal 232
26
2004 SCC OnLine Bom 872
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Plaintiffs’ claims. In light of the NCLT’s final judgment, which identified
and sought to correct the Club’s mismanagement, the Plaintiffs lack legal
entitlement to the interim relief they seek. The Administrator’s actions were
in line with the NCLT’s directives and aimed at restoring the Club’s
governance. Hence, the Plaintiffs’ claims for interim relief do not have a
sufficient legal foundation.
Balance of Convenience and Irreparable Harm: Does the Plaintiffs’
Potential Loss of Green Card Privileges and Access to Club Facilities
Constitute Irreparable Harm?
50. The Plaintiffs contend that the suspension and termination of their
Green Card privileges will cause them irreparable harm, as they will lose
access to the Club facilities they have enjoyed and paid for over the years.
Furthermore, the Plaintiffs point out that the Defendants have acknowledged
that those who did not seek refunds would remain in the queue for regular
membership and this arrangement does not interfere with the normal process
of admission as full ‘members’ under Section 2(55) of the Companies Act,
2013. The balance of convenience lies in their favour. However, these
arguments require closer examination against the factual background and
legal context of the situation.
51. Firstly, it is an admitted fact that most Plaintiffs failed to apply for full
membership upon turning 21, as required by Article 13(3b) of AoA. Many
of them had not utilized Club facilities for extended periods due to the
expiration of their dependent cards and did not seek membership thereafter.
For instance, Plaintiff No. 1 (Siddhant Mohta) applied for Green Card
privileges at the age of 28, Plaintiff No. 3 was 28 years old in 2019 when
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they applied, and Plaintiff No. 5 was 37 years old.27 Notably, the oldest
individual who sought Green Card privileges under the 2019 policy was 69
years old. These facts reveal a considerable gap between when the Plaintiffs
became ineligible for dependent status and when they attempted to regain
access to the Club, raising questions about the urgency and nature of their
alleged harm.
52. Secondly, the Club has taken steps to mitigate any potential harm to
the Plaintiffs. The Ministry of Corporate Affairs (MCA)-appointed General
Committee directed the refund of penalties paid by the Plaintiffs under the
2019 policy and offered to refund the registration fees should the individuals
choose not to remain on the membership waitlist. The Plaintiffs (in
CS(OS) 224/2022) themselves have filed an application (I.A. No. 15514 of
2022) before this Court, requesting that Defendant No. 1 not refund the
penalty amounts, indicating their intent to continue pursuing membership.
Consequently, this Court issued an order dated 21 st September, 2022,
instructing the Club not to refund the penalties to the Plaintiffs, though this
direction was made without prejudice to the Club’s rights and contentions.
53. Given these circumstances, it becomes apparent that the Plaintiffs’
potential loss of Green Card privileges does not constitute irreparable harm.
The Club’s willingness to refund penalties and registration fees
demonstrates an effort to address any financial detriment the Plaintiffs might
face. Additionally, the Plaintiffs’ current status in the membership queue
remains unaffected, as they can still pursue regular membership if they so
choose.
27
Plaintiffs in CS (OS) No. 224 of 2022
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54. The public interest aspect further tips the balance away from the
Plaintiffs. This Court, in Prem Nath Vasistha v. Union of India,28
recognized that granting preferential membership to dependents of existing
members is a discriminatory practice that runs counter to the principles of
equal opportunity, especially when the Club operates on government-leased
land at nominal rates. The Plaintiffs’ claims, if upheld at this stage, would
perpetuate this preferential treatment, thereby contravening broader public
interest considerations.
55. Thus, the balance of convenience does not favour the Plaintiffs. Their
delayed applications, the availability of financial remedies, and the public
interest implications significantly weaken their claim of irreparable harm.
Consequently, their request for interim relief lacks the necessary foundation
and must be denied.
Ms. Pranati Chesta Kohli’s case
56. Among the Plaintiffs, Pranati Chestha Kohli claims that her situation
warrants unique consideration. She turned 21 years old in 2017 and was in
the United States for her under graduation at that time. However, as soon as
she came to India in December 2017, while she was still 21 years old, she
approached the Club to apply for Green Card. She claims that at that time,
she was informed that the process of issuing Green Card was at halt for the
time being. She again approached Club after coming back to India in
December, 2018 and applied for the Green Card. Her application for Green
Card was accepted by the Membership & Discipline Sub Committee on 04 th
February, 2019 as informed via email, dated 18th February, 2019. She
submits that she was considered as ‘overage’ by merely a period of 5 months
28
W.P. (C) No. 7540 of 2020 (Order dated 13 th July, 2023)
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after turning 22 years, that too with no fault of her own as the process of
issuing Green Card was at halt when she approached the Club on turning 21.
Ms. Kohli asserts that this makes her case different from that of the other
124 Green Card holders as the delay in her application was not caused by
her but rather due to the suspension of Green Card issuance.
57. It must be noted that Ms Kohli’s application for membership was
submitted, along with the penalty and registration fee under the same 2019
policy that governs the other Plaintiffs. The Green card granted to her was
also issued under this policy. Therefore, Ms. Kohli’s case does not differ
materially from that of the other Plaintiffs. Her attempt to distinguish herself
falls flat, as her application was part of the same category of Green Card
holders flagged by the Naidu Committee Report and subsequently
terminated in accordance with the AoA. Ms. Kohli has attempted to
differentiate her case by arguing that the delay in her Green Card application
was not her fault. However, this delay is irrelevant since the practice of
issuing Green Cards has already been determined to violate the AOA. Given
that the issuance of Green Cards has been declared void ab initio,
irrespective of the delay in applying, her attempt to set herself apart based
on a justified delay fails to hold weight.
58. The Court, therefore, sees no basis for treating Ms. Kohli’s situation
differently from the other Plaintiffs. Her argument for being a “special case”
lacks any distinguishing legal merit and, like the others, cannot confer a
right to relief under the present suit.
59. Before parting, it is noted that written submissions have also been
filed on behalf of Col. Ashish Khanna, SM (Ret) in CS (OS) 224/2022
alleging that the Defendants No.1, 3 and 4 have committed perjury by giving
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false statements in their written statement as well as in the affidavit dated
18th May, 2024. Further allegations of concealing material facts from this
court have also been made. Col. Ashish Khanna, SM (Ret) has also filed an
application bearing 15396/2024 making similar allegations thereby seeking
initiation of criminal proceedings under section 340 of the CrPC and
sections 191, 192, 463 and 471 of the Indian Penal Code, 1860. This Court
at this stage is only dealing with the above captioned applications under
Order XXXIX, Rule 1 and 2 of the CPC and is not inclined to enter into the
claims of perjury as alleged by Col. Ashish Khanna, SM (Ret). All rights
and contentions regarding the same are left open and shall be dealt with
during the adjudication of application bearing 15396/2024.
Conclusion
60. The Plaintiffs have failed to make a compelling case for the grant of
an interim injunction. Prima facie, the issuance of Green Cards is in clear
violation of the Club’s AoA, lacking formal authorization or recognition
within its governing framework. The Plaintiffs’ reliance on historical
practices and informal policies cannot substitute for compliance with the
AoA, which unambiguously requires dependents to apply for full
membership upon reaching the age of 21. A system that circumvents this
process–however longstanding–remains beyond the bounds of the Club’s
constitutional framework. The Administrator’s actions, including the
suspension and termination of the Plaintiffs’ Green Card privileges were
within the scope of directions issued by the NCLAT. These steps were part
of a necessary initiative to address systemic mismanagement and bring the
Club’s operations in line with its foundational documents. The new General
Committee’s ratification of these measures underlines their legitimacy and
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continuity with the NCLT’s mandate to restore order and accountability
within the Club’s governance.
61. While the Plaintiffs claim a lack of notice and hearing, the broader
context cannot be ignored. The corrective measures were not punitive but
remedial–designed to eliminate irregularities, restore institutional integrity,
and ensure compliance with the AoA. In such circumstances, alleged
procedural infirmities cannot override the pressing need for reform,
particularly where unauthorized privileges were granted outside the Club’s
governing framework. The balance of convenience tilts decisively in favour
of the Defendants. The Plaintiffs have neither demonstrated irreparable harm
nor established a legal right to the privileges they seek to retain. The offer of
refunds further undermines the urgency of their claims, reducing any
potential financial detriment. In sum, granting interim relief would serve
only to perpetuate practices already deemed unlawful.
62. In light of the foregoing, the applications for interim injunction are
dismissed.
CS(OS) 224/2022, CS(OS) 458/2022 & CS(OS) 523/2022
63. List before the Roster Bench on 11th November, 2024.
SANJEEV NARULA, J
OCTOBER 18, 2024
ab
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