Questioning land use (and enjoyment) risks opening a Pandora’s Box that India is not ready for, i.e., the possibility of redistributing assets, wealth or even club memberships.

 

It is time to start a debate about who we are and where we want to go. Do we, the people of India, consider ourselves capitalist-wanting-to-be-communist or at least socialist, or do we consider ourselves to be socialist-wanting-to-be-capitalist? This fundamental identity crisis must be resolved to decide how we view private ownership and our Constitutional freedoms, especially the freedom of trade and profession. Taxation aims to tax those who can afford it more, so taxation apart, should citizens with tax-paid assets and privileges like club membership be fearful of legal proceedings aimed at levelling the field, making reference to the plight of migrants as justification? Will the State or the Courts step in to set limits on use and enjoyment of private property and any other privileges which are not available to the general public, if so to what extent? These questions arise because the nation grapples with disparity. Readers of this column feel the burden and guilt of being privileged and some may want to advocate a “middle path”, but we have never defined what that is and how it can be achieved. With a Constitution that defines us as a Sovereign Socialist Secular Democratic Republic, the framers (and if I may also add the “amenders”) left it to Parliament, the government and the courts to determine what was meant by the term “socialist” and to what extent this would be enforceable. While the word provides occasional comfort for labour court orders and filters into judgements of the courts in writ proceeding, it is rarely resorted to as a means of deciding property rights, and the right to property still continues to exist in a less prominent, but certainly noticeable part of the statutory landscape since it was moved from Article 19(1)(f) to Article 300A of the Constitution in 1978. This move was helpfully explained by the Supreme Court from 1982 onwards when the court recognised that the right to property is not only a constitutional right, but it is “also a human right”. More recently in 2020 (in Vidya Devi v. State of HP), while reiterating that the State cannot dispossess a citizen of her property except in accordance with procedure established by law, the Supreme Court quoting a 2011 judgement (2011, 9 SCC 354) again opined “It is accepted in every jurisprudence and by different political thinkers that some amount of property right is an indispensable safeguard against tyranny and economic oppression of the Government. Jefferson was of the view that liberty cannot long subsist without the support of property. Property must be secured, else liberty cannot subsist was the opinion of John Adams. Indeed the view that property itself is the seed bed which must be conserved if other Constitutional values are to flourish is the consensus among political thinkers and jurists.”

This article considers property rights in the context of a recent pronouncement relating to the Delhi Gymkhana Club Ltd., but there is also a need for broader understanding in relation to the whole concept of property. There is of course a larger debate about property in the context of land acquisition, which also underpins our ideas of democracy, whereby the fundamental right was shifted to being a Constitutional right to avoid the paradox inherent in state development of land and property ownership, that paradox need not concern us here because there is at least presently no attempt to take over or acquire the Delhi Gymkhana Club Ltd. from its members under the now-not-so-new Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which as its name implied, calls for much procedure and much more money than ever before.

Let me begin with a disclosure before I introduce the case: I am a 1989 applicant for membership with use rights over the Delhi Gymkhana Club (or the “DGC”) deriving from my father’s permanent membership, but more than 30 years after my application, I am still not a permanent member of the club, because the club imposes strict limits on induction of progeny.Other much younger applicants have been taken in as per the club rules. How a club inducts members and whom it allows in should be an internal matter and barring cases of a club or such company being run to harm the public (like a club that operates to destabilize the government or to sustain a foreign power), I find it difficult to appreciate that a Gymkhana Club run by government servants can be labelled as one that is run “in a manner prejudicial to the public interest”. After having existed for over 100 years, the idea of urgent interim orders by a tribunal even based on a prima facie case seem to defy settled jurisprudence on what constitutes urgency. The case titled Union of India, Ministry of Corporate Affairs vs. The Delhi Gymkhana Club Limited & Others was strangely initiated by a government ministry (the “MCA” or Ministry for Corporate Affairs), not by any ordinary disgruntled member, group of members or disappointed applicant for membership. It was filed during the lockdown in March 2020 with urgent prayers for ad interim relief, alleging “fraudulent and rampant mismanagement” of the affairs of the Gymkhana Club Company “by the General Committee of the company, to a great detriment of significant public interest”. The Respondents include a Retd. Lieutenant General who was elected as the president of the club in 2019 and several similarly elected committee members who are mostly senior retired and serving IAS, IPS, ISS, Naval and Army officers—these folks who took office months earlier are accused of rampant mismanagement, though similar actions of their predecessors continued for over 50 years (at times when this club had the President of India as its patron), so where was the need for urgent interim relief? The only possible answer to this question can be a pressing need for someone to replace the general committee and decide what a club should be doing with its land, decide how the facilities could be “better” used or what percentage of the land should be used for sports. In simple terms that means an interim takeover of control of private land.

For those who don’t know what a club is, let me explain that it is like any other private company, it is established for the benefit of its shareholders and the DGC was registered as a company in 1913. Those shareholders, here called “permanent members”, elect a board, here called the “general committee”, every year and that general committee or “GC” decides how the company runs. The GC grants licences for guests, it has determined whether and if so to what extent the progeny of members may enter and use the club premises, the committee similarly decides upon the right of an employee to use the staff canteen (both types of users are licensees so there is no legal difference). The committee decides how the benefits of the club can be enjoyed and by whom, how new persons can join or become (non-shareholder) “club members” and then how to admit permanent members much like a company decides upon a rights issue to existing shareholders or a school permits children of alumni additional points at the time of admission. Clubs, many established by and for the armed forces, exist all over India, from Amar Singh Club established in 1933 in Kashmir to the District Club of Nagarcoil established in 1958 in Kanya Kumari—will these all now be subjected to scrutiny for how they use their land?

The Ministry of Housing and Urban Affairs “which had allotted land admeasuring 27.03 acres” to the Delhi Gymkhana Club was made Respondent No.19. The 200-page petition replete with dozens of allegations was filed under Sections 241 & 242 of the Companies Act, 2013, alleging that the affairs of “the company” (the Gymkhana Club) had been conducted in a manner prejudicial to the public interest. To keep matters simple I have avoided the financial aspects to do with the running of the club and have focused on the use of its land, because despite much ado about membership, the interim relief has been granted primarily because of land use as explained below. Much of the petition and the consequent recent judgement of the National Company Law Tribunal (the “NCLT”) focus on the club’s use of 27.03 acres of land situated at No.2, Safdarjung Road, New Delhi and how it is used in a manner contrary to the public interest. Whilst taking up irregularities of prior committees, the MCA petition has somehow dived into allegations of committee members “knowingly committing fraud” (page 65 of the petition) and “the actions of the Company mentioned above culminate to fraudulent activities carried by the members of the GC” but there is no reference to the definition of fraud under Section 17 of the Indian Contract Act or violationsof the Indian Penal Code to justify use of this word. Worse still, the MCA in its written submissions said the club “has been converted into ‘Madhu-shaala’” or a house of entertainment. The potential implications of such allegations on a respectable membership comprised of a majority of serving and retired judges, IAS and senior armed force officers cannot be understated. That apart, several references in the petition mention that the Club has become a family fiefdom, even though under 25% of the membership is taken through that route. Much of the petition is devoted to the membership practices of the General Committee going back to the 1960s and 1970s, whereby the Club inducted new members in keeping with its mandate to retain about half of the total active membership to members of the armed forces of India or civil officers of the government. There is no challenge to this discriminatory practice but the petition questions allocation of usage rights to the progeny of its members. An unbiased reading of the petition may suggest to any member of a tribunal or a court that the issues should be examined, after all, it is a petition filed by the government no less, and the allegations must be considered carefully, if there are proven violations of the Companies Act, they must be explained, stopped, compounded or cured, but in my opinion none of us are ready to be judged on how we use our land if it’s not in violation of law.

Unfortunately, the approach of the NCLT has focused on the many acres of land, elitism and autocratic practices of the General Committee which are stated to be “at the expense of general public”. While the alleged violations should have been individually considered to reach any conclusion about violation of public interest, one of the corner-stones of the interim order is that “Since the democracy has become reality, this club should have left its doors ajar for many if not all, because not only has it bar and ball room and swimming pool with roof, but has wonderful library and many other sports facilities.” (paragraph 17) and “the right of forming association cannot be extendable to say that it has right to use acres of land of the state for lazing around barbing the club [sic] so that let-into others is next to impossible” (paragraph 18). The judgement continues “By this, knowingly or unknowingly, a class of people, in the name of privilege, have erected an unbuilt wall around the Club not permitting the people to have that whiff which they have been having for about decades” (Paragraph19). If this is the ratio decidendi or the heart of the judgement leading to strong measures of interim relief, it would be necessary to insert a comment that the above extracts have nothing to do with company law or Section 241 of the Act unless use of private property (and a Club that operates for its members on perpetually leased land is like any other private property) is against the public interest, meaning the interests of the people of India outside that club.

To explain how use by a club for sports, dining or even drinking alcohol does not seem to be against the interests of the general public, I must offer a comparison. Several houses are owned by Government of India as the head lessor, they have not been converted to freehold, but the occupants/lessees enjoy full ownership rights subject to some minor restrictive terms in the lease. If a company or another entity (such as a foreign government) owned one of those houses, the MCA or NCLT would hardly be justified in questioning the owner company for having too many parties in that house. The case before the NCLT was not filed by the landlord, namely the L&DO/MoHUA, it has been filed by the Ministry of Corporate Affairs itself, so misuse of the land cannot be relevant to that ministry even if there are alleged use violations. Even the L&DO in exercising its rights as landlord over hundreds of Delhi properties (such as buildings on Kasturba Gandhi Marg, Connaught Place flats, embassies on Shantipath, etc.) cannot question the usage of the premises as long as such use fits the lease (here the lease stipulates use for club activities) and in all these cases the rent is nominal but the price paid would have been significant. I submit that there is no scope in law to decide what amounts to being against the public interest as long as the relevant land is used as per the lease. Passing judgement on the usage of the land, the NCLT appears to have mistaken its role as a tribunal charged with upholding the Companies Act as against a court of equity balancing conflicting interests. Paragraph 20 of the judgement questions a club with over thirty active tennis courts, two swimming pools, squash, badminton, gymnasiums and other sports facilities, stating it has an “avowed object for promoting sports and other activities including pastimes, but no perceptible work or dedication towards promotion of sports”. The question is whose test should be satisfied to demonstrate a legally sustainable user and to avoid judgement day where a court or tribunalmay question the “pastime such as drinking wine and whisky”. That such a judgement can be called into question can be identified from the ratio which emerges from paragraph 21 onwards where the NCLT asks (rhetorically perhaps) “So, is it conscionable sitting over lands sprawling acres and acres just for recreation, when from one side people, citizens of our country, languishing in utter poverty without any basics—horrifying.” and then continued to mention that “State priorities are the needs of the people, what becomes public interest, when that becomes public interest, are decided by time and growing needs. Accordingly, State acts.” While the tribunal has also held “If any link is seemingly missing, then it is the duty of the judge to search for the misplaced link to link the chain”, there appears to be no reference to law or legal powers to determine how the public interest sustains in such a case where avowedly it is the “state fighting for larger cause and for public at large”. It is indeed difficult to appreciate how “largess of the state for pastimes and whiling away time drinking wine and whisky in a sprawling land” can justifiably be characterized as a “mockery of the system” unless the use of land can be questioned by the state or any court—and this has wide ramifications. Although the judgement repeatedly criticizes the exercise of pleasure by club members “on the land given on minimal rent by the State” and also dwells upon the value of the land to arrive at the conclusion that “some persons alone enjoying the state property is also prejudice to the public”, there is nothing mentioned to suggest how such use hurts public interest.

When the judgement emerged, I confess that I had initially believed, along with many others, that the Ld. NCLT must have rightly relied upon Section 241 to repair the club, or in the words of the NCLT as “a garage for repairing companies and to make them run”, to examine any violations of law and help the club resolve, repair, compound and remove them (that is the only way). Here lies the nub of the problem—what constitutes ownership of land and how it will be understood in the future—if the MCA petition is to be accepted, will India allow the Ministry to take over this land on the allegation (at page 184 of the petition) that “The prime location of the land worth thousands of crores to/[can] be better utilized for meaningful purposes to achieve the objects of the company as laid down in the MoA, in the interest of the public”.

It has become commonplace, especially on television channels for anchors to broadcast misuse by hospitals and schools proclaiming that they are on “government land”. But is it government land? Ownership is not about paper title, it is basically about possession, use and enjoyment rights. It is a bundle of rights some of which can be withheld by the State to control and regulate aspects of such use and enjoyment like residential use as against commercial or institutional use, exploitation of minerals or fulfilment of planning norms and municipal regulations. This does not mean that leased land may be called government property. In fact, it would be really odd if the lessor (which could be the DDA or the L&DO or even the Indian Army) could question what happens within the four walls of each tenement. The quoted extracts above reflect exactly this problem, the MCA brought a challenge inter alia based on use of land rather than statutory provisions of the Act. Oddly, the NCLT did not spend half as many pages examining each of the violations alleged by the Ministry of Corporate Affairs as it did on the use of the land. The courts and the government itself also must be wary of the socio-communist tendency to reapportion, distribute or take over land for government use. Land use (apart from zoning, planning and municipal regulations) cannot be the subject of an adjudication to balance public interest. The paramount criteria for public interest, particularly under Section 241 can only be harm or detriment. If any of us carry out activities and generally exercise our freedoms without violating other people’s rights, without affecting the unity and integrity of India, without defaming someone else or the State, it would be difficult to classify our activities as contrary to public interest. Questioning land use (and enjoyment) risks opening a Pandora’s Box that India is not ready for, i.e., the possibility of redistributing assets, wealth or even club memberships. It is for this reason that I respectfully disagree with the judgement of the learned National Company Law Tribunal and its approach to the Gymkhana Club’s elected committee’s use of land which clearly did not accord with the NCLT’s own views leading to the above-referred interim order.

Amir Z. Singh Pasrich is Founder and Managing Partner of I.L.A. Pasrich & Company, Advocates. He is co-chair of the India Working Group of the International Bar Association (IBA) and is an elected member of the IBA’s LPD Council, he is also Chairman of the Law & Justice Committee of the PHD Chamber of Commerce.