Generative adversarial networks (GANs) have shown remarkable success in the generation of data from natural data manifolds such as images. In several scenarios, it is desirable that generated data is well-clustered, especially when there is severe class imbalance. In this paper, we focus on the problem of clustering in the generated space of GANs and uncover its relationship with the characteristics of the latent space. We derive from first principles, the necessary and sufficient conditions needed to achieve faithful clustering in the GAN framework: (i) presence of a multimodal latent space with adjustable priors, (ii) existence of a latent space inversion mechanism and, (iii) imposition of the desired cluster priors on the latent space. We also identify the GAN models in the literature that partially satisfy these conditions and demonstrate the importance of all the components required, through ablative studies on multiple real-world image datasets. Additionally, we describe a procedure to construct a multimodal latent space which facilitates learning of cluster priors with sparse supervision. Codes for our implementation is available at https://github.com/NEMGAN/NEMGAN-P.