An Upper Tribunal (UT) has upheld The Pensions Regulator's (TPR) decision to issue a contribution notice (CN) for almost £2m to be paid into the Meghraj Group Pension Scheme.

The regulator highlighted the decision as the first substantive case heard by the UT in relation to TPR’s CN power and provided "helpful clarification", particularly that the amount of a CN is not limited to any loss suffered by the scheme.

Under the notice, former owner of the scheme’s employer, Anant Shah, will be required to pay £1,875,403 into the Meghraj Group Pension Scheme.

The case concerned the Meghraj Group of companies, after the sponsoring employer of the scheme, Meghraj Financial Services Limited (MFSL), entered a creditors’ voluntary liquidation in October 2014 leaving the scheme with a £5.85m deficit.

An investigation by the regulator subsequently found that a series of payments made from MFSL to its parent company, Meghraj Property Limited, followed MFSL’s disposal of its shares in a joint venture company with most of the sums paid out as dividends.

TPR said these payments should have been used to fund the scheme and the failure to do so was materially detrimental to the scheme’s members.

The regulator had previously argued at a hearing before the Determinations Panel in 2020 that it was reasonable to issue a CN against two targets: Anant Shah, a director of MFSL and his nephew Rohin Shah.

The DP agreed and in June 2020 issued a Determination Notice confirming a CN of £3,688,108 be issued against the targets jointly and severally.

Whilst each of the targets referred the decision upwards, the UT judgement agreed that it was reasonable Anant Shah pay a CN, which included 50 per cent of the sum that should have been paid into the scheme plus an uplift to take account of the passage of time since the acts in question.

The judgement also accepted TPR’s case more generally that the amount of a CN should be what is reasonable and that the amount of a CN is not limited to the loss to a scheme resulting from the acts, or inactions.

TPR settled its case against Rohin Shah before the hearing.

Commenting on the decision, TPR director of enforcement, Erica Carroll, stated: “We welcome this clear and helpful judgment, which supports our long-held views about how the legislation should be interpreted.

“It provides clarity on how CN sums should be calculated by confirming they are not limited by the loss to the scheme. This ends the speculation caused by past cases over whether these sums should be purely compensatory.

“The amount of this CN together with the previous settlement, will provide a substantial sum to help meet the scheme’s deficit.

“We will always consider taking action where we see savers’ money has been put at risk.”

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