The Appointments Commission has warned Downing Street of its objections to Chai Patel, who made his fortune from private nursing homes and clinics, Sir David Garrard, a property developer, and Barry Townsley, a stockbroker. All three have been embroiled in controversy over their business dealings.

Although the prime minister can overrule the watchdog, he risks undermining the credibility of peerages if he insists on ennobling his nominees without approval.

The commission, whose chairman is Lord Stevenson, the City grandee, has a duty to “satisfy itself that the person would be a credible nominee irrespective of any payments made to a political party”. Its intervention over the nominees is the first since it was created in 2001.

Blair was widely criticised in the autumn when a leak of his 11 nominations for working peerages revealed that four were party donors. The others were former MPs, a trade union leader and loyal officials. There are 28 nominations in total from all parties.

Downing Street aides will hold further negotiations with the commission in the next fortnight but they are resigned to losing Patel and Townsley and are preparing a new list of names. Townsley has already let it be known that he no longer wishes to be considered for a peerage.

The commission also informed Downing Street last month that it wanted to block the Conservatives’ nomination of Robert Edmiston, a car importer and Tory donor.

A Downing Street source said strong representations would be made for Garrard — who has given £200,000 to Labour — and the Tories would “try to resolve concerns” over Edmiston.

Patel has been criticised over the treatment of patients at nursing homes which he used to run. At one, in Twickenham, southwest London, elderly residents were allegedly left in heavily soiled beds and there was a high rate of accidents.

Patel was referred to the General Medical Council over the allegations but was cleared last year after challenging the basis of the complaint at the High Court.

He has declared gifts of at least £10,000 to the Labour party but is thought to have given substantially more as the donations were made before 2001, when it became obligatory to disclose the exact value of donations.

Garrard, who has also sponsored a city academy, was recently involved in a business deal involving Allders, the department store chain, which left the pension fund in tatters. He has given £200,000 to Labour and was previously a Conservative party donor. He was knighted in 2003 for charitable services.

Townsley, who has given Labour at least £16,000, has also backed a city academy and is a colourful City stockbroker who sold his firm for £10m a few years ago.

In the 1980s he was at the centre of a major share-dealing scandal and was found guilty by the stock exchange of “gross misconduct” and barred from the trading floor for six months.

He has recently become embroiled in a Serious Fraud Office investigation into a firm he previously advised.

Edmiston is a committed Christian who has donated tens of millions to the charity Christian Vision and runs a Midlands-based business importing cars from the Far East.

He made a personal donation of £250,000 to the Conservative party in 2004 and is the chairman of the Midland Industrial Council, which gives the Tories a six-figure donation each year.

The Power Commission, an independent investigation into the electorate’s disillusion with British politics, has proposed a £10,000 cap on individual donations to prevent donors “buying” honours.

Last week, Garrard and Patel declined to return calls. Edmiston was on annual leave and could not be contacted.

DR CHAI PATEL, 51, founder and chief executive of the Priory group, which includes the south London celebrity rehabilitation clinic. Patel, an adviser to the Department of Health, has contributed at least £10,000 to Labour

SIR DAVID GARRARD, 67, property developer and co-founder of Minerva, donated £200,000 to Labour and also gave £2.4m to Bexley Business Academy in southeast London, a flagship for Tony Blair's city academy project

BARRY TOWNSLEY, 59, financier. Gave sponsorship of £1.5m to Stockley city academy in Hillingdon, west London. He also gave £6,000 to the Labour party and £10,000 to Frank Dobson’s failed campaign for London mayor in 2000

ROBERT EDMISTON, 59, car importer and Tory nominee for peerage. Gave £27m to Christian Vision charity and in 2004 gave £250,000 to Conservatives. Edmiston has also sponsored Grace city academy in West Midlands

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