CR-2024-000675 - [2025] EWHC 2069 (Ch)

I have covered his position on the payments out above and I now turn to consider the position of the payments in in Category A. These have been the subject of lengthy letters in the correspondence between the parties.

By way of background, it was explained that Mr Rizvi has a high digital profile and likes to portray himself as something of a guru when it comes to private investment and acquisition of businesses. His acquisition of certain companies lies behind the first five Category A payments.

The first payment of £620,532, received on 3 June 2021, is said to be the surplus left over from the acquisition of AHP, evidenced by a copy of the Company’s bank statement which contains an entry on 3 June 2021, referenced to “Hempsons…AHP Surplus”. Counsel characterized this and indeed all the first five Category A payments as very unusual because as acquirer/purchaser of the relevant business, you do not receive moneys. What has happened in these instances is that surplus funds were left over from those received from finance companies to fund the relevant acquisition (Close Brothers and Hitachi). Counsel made clear that he could not say that some of these funds were not Mr Rizvi’s own funds but that all one knows is that those finance companies financed the acquisition of AHP and there is a surplus, which Mr Rizvi pays into the Company.

Counsel took me through the explanations put forward by the Respondents’ in the correspondence for this first payment. I will not set out all the passages because they are long and, as Counsel submitted, somewhat prolix. I should add that the responses on behalf of the Respondents came from RD Capital Partners LLP, but were clearly written by lawyers with experience in this field. The key passages are in the response dated 18 October 2024 (‘the Initial Response’) to the letter before action of 18 September 2024 in section 2.1 (at p307-8 of the Hearing Bundle):

‘(g) On 3 June 2021, AHP Holdings loaned £620,532 to M/S RD Partners India, an Indian company with its registered address at 328, Khair Nagar, Meerut, 250002, Uttar Pradesh (RDCP India). RDCP India, in turn, on-loaned those monies to Mr Rizvi, who in turn on-loaned those monies to IAHP. To avoid multiple bank transfers, the funds were transferred direct to IAHP on behalf of and at the direction of Mr Rizvi.

(h)

While no loan agreements were entered into at the time, the receipt of the loan by RDCP India from AHP Holdings and the subsequent on-loan to Mr Rizvi are both evidenced by RDCP India’s audited accounts for the financial year ending 31^st March 2022, a copy of which is attached at Appendix 1.’

In fact, the relevant document is labelled as the first of two ‘Appendix 2’ (at p336) which reveals that RDCP India is not an Indian company but a partnership. The document is a somewhat poor photocopy of a print of an electronic document. The Liquidators do not accept the document was genuinely created in July 2022 and have requested sight of the metadata for the original and for the partnership deed. The request was acknowledged by the Respondents, but nothing has been produced.

In response to this dated 20 December 2024, (at p408-9) the Liquidators first explained that the effective source of the monies used to acquire AHP were Close Brothers and Hitachi, and continued as follows:

‘19. We note a complete absence in the Initial Response of contemporaneous documentation in respect of the substantial loans and connected party dealings in his case. In considering the Initial Response, we have been able to identify the following further contemporaneous matters.

20.

Paragraphs 2.1(b), (c), (d) and (e) of the Initial Response in respect of the 3 June 2021 Cat A Payment are irrelevant.

21.

Based on the information provided by Hempsons, the denial at paragraph 2.1(f) of the Initial Response cannot be correct – the source of the funds that were ultimately received by the Company appears to be working capital funds arising from the acquisition of 95% of the share capital of Ancient House Printing Group Limited.

22.

We have obtained the statutory accounts of AHP Print Holdings Ltd (then known as RDCP Investments 6 Limited) to 28 February 2022 to seek to validate paragraph 2.1(g) of the Initial Response:

a.

If this company was due £620,532 from RDCP India, this would be disclosed in these accounts.

b.

The only assets of this company are “investments” of £5,129,445 and “debtors” of £2

i.

A loan would not be an investment.

ii.

A loan would be a debtor. There are only £2 of debtors.

c.

the only related party transaction disclosed are the sum of £4,254,245 due to a related party, Ancient House Press plc.

23.

We note, despite the complexity of the financial arrangements, and that professional advice (financial and legal) was being received by the Company at the time, there is an absence of contemporaneous loan agreements, as acknowledged by paragraph 2.1(h) of the Initial Response. Paragraph 2.1(j) of the Initial Response is on this issue meaningless.

24.

The contemporaneous evidence available to the Liquidators (namely, the accounts of AHP Print Holdings Limited, records supplied by Hempsons, and the Company’s books and records) clearly show that the movement of these monies bears no resemblance to paragraph 2.1(g) of the Initial Response.’

Based on this, Counsel made the following submission. He invited assumptions that the Indian partnership existed and its accounts are accurate, but submitted there is still nothing anywhere to show that Mr Rizvi made this shareholder loan in the sum of £620k to the Company. Counsel characterised the explanation as an archetypal after the event reconstruction, but even if it is not, Mr Rizvi still needs to establish the personal loan from him to the Company, without which he has no set-off.

Counsel spent time on this first Category A payment because he submitted that the other payments in the first five are of the same ilk. In each case, it is said on behalf of Mr Rizvi that this strange arrangement with the Indian partnership meant that, one way or another, Mr Rizvi was lending substantial sums to the Company. The ‘money-go-round’ in each of the five instances was that funds were sitting in the client account of the solicitors acting for the vendor and/or purchaser of the target company. Mr Rizvi’s case is that the target being purchased (in one case the purchaser) agreed to loan money to his Indian partnership in India, his partnership agreed to lend the money to Mr Rizvi personally and he on-lent the money to the Company, albeit for convenience the money was paid direct to the Company. The Liquidators’ case is that this ‘money-go-round’ was pure fiction, alternatively not something which they recognise as creating any legal rights, let alone the supposed debtor/borrower relationship as between the Company and Mr Rizvi.

Counsel made it clear that even if the Respondents were present, they would not be able to point to any documentation at all to support any of these loans in the first five occasions. Furthermore, the explanation also begs the question why the target would be lending money at all, let alone to the Indian partnership and why the Indian partnership is relevant at all.

In this regard, my attention was invited to the further response from the Respondents in their letter of 24 February 2025 (which starts at p419) on the role of the Indian partnership at p437:

‘18.1 It is mistaken to suggest that Mr Rizvi’s relationship with RDCP India is “irrelevant” to whether the Category A Payments were genuine injections by him. On the contrary, if RDCP India functioned as a conduit, that fact is critical to establishing beneficial ownership. Even if the Liquidators dispute the precise route by which Mr Rizvi received these monies—whether via RDCP India or directly from external sources—the essential truth remains that IAHP did not acquire these funds from any external party in its own right. At the moment IAHP received them, the funds belonged beneficially to Mr Rizvi.

18.2

Whenever money originates from third‐party companies outside IAHP’s group—whether routed through RDCP India or paid directly to Mr Rizvi—the beneficial entitlement vests in Mr Rizvi prior to reaching IAHP. In other words, IAHP had no prior claim to these sums and did not receive them as a direct borrower or payee from an external company. Consequently, IAHP’s lender or “injection source” was Mr Rizvi, with RDCP India (if involved) acting merely as facilitator. If the Liquidators dismiss RDCP India’s role entirely, they must still demonstrate that someone other than Mr Rizvi directly funded IAHP—a proposition unsupported by any contemporaneous documentation.’

Mr Davies KC described this and the correspondence generally as sophisticated, in the sense that it is designed to present a veneer of verisimilitude but on analysis, it simply does not follow that because the Company cannot establish a beneficial interest in these moneys they must have been loaned by Mr Rizvi to the Company. What the Liquidators can say is that whoever owns these moneys, they are not owed to Mr Rizvi under some loan agreement and that is all they need to say to defeat the set-off argument.

The further point made is that, virtually throughout the correspondence, the Respondents appear to place the burden on the Liquidators to show that the Company has a beneficial interest in the monies paid in. However, the situation is that the Liquidators have inherited a series of inflows, but there is nothing to substantiate that they were lent by Mr Rizvi personally.

So far as the sixth payment in Category A is concerned, of £240,998.24, it is the Liquidators’ position that this sum is not available for set-off in favour of Mr Rizvi because it was never received by the Company. In the letter before action, it was explained that this sum does not appear in the Company’s bank statements and appears to be a manual journal entry.

The response is long but, in broad terms, it is said was that the £240k figure was a provisional manual journal entry but the correct amount should be £475,523.55. Counsel submitted this was, once again, a similar loan out of the surplus of moneys required elsewhere to acquire a target.

As Counsel also submitted, we appear to have gone from a journal entry not supported by any receipts at all, to a completely different argument as set out in the Initial Response. The response concludes with this contention:

‘(k) All available evidence validates the fact that these monies were advanced as loans by Mr Rizvi to IAHP, and that the balance of £475,523.55 remains owing to Mr Rizvi. Nothing has been provided by Horwich Farrelly Limited or the Liquidators to validate any alternative position.’

This explanation does not relate to the journal entry itself, but, more importantly, there are no contemporaneous documents at all to support this, whether board minutes, loan agreements, or anything else.

I was also shown the response from the Liquidators in the HF letter dated 20 December 2024, at paragraphs 54-59. I will not set out the detail which is based on records supplied by Gunnercooke, but what is said appears to support fully the conclusion at 59:

‘59. The contemporaneous evidence available to the Liquidators (namely, records supplied by Gunnercooke and the Company's books and records) clearly show that the movement of these monies bears no resemblance to paragraphs 2.1(d) of the Initial Response. Paragraphs 2.1(e), (f), (g) and (h) of the Initial Response are accordingly irrelevant, and paragraph 2.1(k) of the Initial Response on this point is risible.’

Counsel suggested that the lengthy and complex explanations put forward on behalf of the Respondents in correspondence were largely smoke and mirrors designed to divert attention away from an essentially simple situation where throughout the Respondents plundered the funds in the Company as their own to be deployed for their benefit and convenience, with virtually no corporate governance. It was also suggested that the length and complexity of the explanations were also laying the ground for challenges on the ground of a failure to make full and frank disclosure on this application.

Of course, I was acutely conscious that I do not know what the Respondents would be able to say if they had been given notice of this application, although there must be some doubt as to whether they can make any material addition to what has already been said on their behalf in correspondence. I was also well aware that it might be said that the extensive correspondence itself demonstrated that notice to the Respondents was required. That, however, leads to the considerations which I consider a little later, concerning the interim relief.

So far as corporate governance is concerned, Counsel also relied on the evidence from Mr Worsley of the former external accountants to the Company, Hazlewoods. Mr Worsley was engaged to prepare the 2021 accounts and carried out work to prepare the 2022 accounts, but due to Mr Worsley’s concern about the management charge of £500,000 to RDCP Care, it was agreed that Hazlewoods would not complete the assignment and the relevant accounts and corporation tax filings would be made by the internal RDCP team.

The principal points made were as follows: