• Premier League

Revenue demands probe into Pompey's finances

Portsmouth are to be put under the spotlight once again © Getty Images

Enlarge

Related Links

• News: Peter Storrie quits Portsmouth
  
• News: HMRC drop Portsmouth legal challenge
  
• News: 12 parties interested in Portsmouth, says administrator
  

HM Revenue and Customs (HMRC) has insisted there must be a "full and independent investigation" into Portsmouth's finances - especially transactions which have taken place between the club and Balram Chainrai.

Chainrai took control of the club in January, effectively repossessing them from former owner Ali Al Faraj after he defaulted on a loan repayment.

The Revenue forced Portsmouth back into the High Court on Tuesday to contest the validity of the club's administration, and the case was adjourned until the week of March 15 after High Court judge Mr Justice Norris said there was a ''shadow cast'' over the appointment of Pompey's administrators.

The judge said: ''It will be necessary for it to be established that new money was given for the charges when granted. Unless that can be established the charges will be voided. The Revenue are concerned that no new money was given. The basis for that concern lies in evidence filed by the company in answer to the winding-up petition.

''The company is owned as to 90% by a company called Falcondrone Ltd. The ownership of Falcondrone itself has changed hands on a number of occasions. The grantee of the charges on October 6, 2009 and the January 7, 2010, is a British Virgin Islands company called Portpin Ltd, in the ownership of a Mr Balram Chainrai, a wealthy Hong Kong businessman.

''In evidence which the company itself filed in response to the winding-up petition, the company's head of finance (Tanya Robins) said Portpin Ltd, Mr Chainrai's company, had provided 'initial short-term funding to Falcondrone.'

''It might therefore be said that a shadow is cast over the existing appointments of the administrators and it is clear that that shadow should be removed as quickly and as cheaply as possible. There is not time nor money to enter into an extended examination of the validity of the appointment.''

After the hearing, administrator Andrew Andronikou said: ''I'm satisfied with the outcome of the hearing. I think we have all heard the substance of the hearing, but there's not really much for me to add. I just want to go back and focus on the issues in hand.''

Gregory Mitchell, representing HMRC, told High Court judge Mr Justice Norris: "The question we ask, and supporters and members of the public ask, is how is it possible that this once-great club has become insolvent with liabilities exceeding assets by a figure of £65 million?

"We say that there are serious questions which arise and require a full investigation into the financial dealings between the various owners of the club, which at the moment are shrouded in mystery. If this club can be rescued by a process of administration, then that is to be welcomed by all, including HMRC.''

It was stated that HMRC supports the club entering administration, but has grave concerns about how the club got to this stage.

"Have these administrators been validly appointed?'' Mitchell asked the court. "The question of validity is a fundamental issue and that has to be determined one way or the other as quickly as possible.''

Mitchell said if the administration was invalid, then the administrators could not act for the club. HMRC also want to know if the administrators were "completely independent''. They had been appointed by a company registered in the British Virgin Islands and HMRC "knew very little about them''.

It is claimed that there are close connections between the company and Hong Kong businessman Chainrai. "We understand that any funds will come from Mr Chainrai and our concern is that there should be a full and independent investigation of the position and the transactions between the club and Mr Chainrai," Mitchell added.

Mr Mitchell said although HMRC welcomed the administration if properly funded, there were concerns about where funds to meet the debts will come from.

"We say that if there is no proper evidence of funds having been provided to the administrators to meet the club's financial needs, then there is a real danger the administration will fail to achieve the proper purpose.''

It is thought that Chainrai is to buy the ground off the club for £10 million, and then lease it back for a fee of £1.2 million-per-season.

Meanwhile, a Portsmouth insider has told Soccernet that they fear the Revenue has an agenda to shut them down to make an example of a football club. Her Majesty's Revenue and Customs has long been angered by the rule which means all football debts must be paid in full, while it has to wait at the back of the line with the rest of the creditors. This almost always results in the tax man having to accept a fraction of the debt.

Portsmouth's nine-point deduction for entering administration, which was also due to be rubber-stamped on Tuesday, will now be suspended pending the result of the court hearing.

© ESPN Sports Media Ltd.