IBBI Upholds Suspension of Registered Valuer for Non-Transparent Land Valuation in CIRP Process

Mr. Kumar, registered as a valuer for Land and Building under the Companies (Registered Valuers and Valuation) Rules, 2017, had conducted a valuation of the debtor’s land assets situated in Hosur and Solan. However, the IBBI found that the valuation report failed to meet the disclosure standards required under Rule 8(3)(g) of the Valuation Rules, leading to the suspension of his registration for a period of three months.

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The Show Cause Notice (SCN) issued to Mr. Kumar alleged that the valuation report submitted for the CIRP lacked verifiable data sources. In particular, the report did not include circle rates, market comparables, or concrete evidence to substantiate the assessed values. IBBI held that this omission rendered the report non-transparent and non-compliant.

Further scrutiny revealed that Mr. Kumar had applied a cumulative discount of 40% on the assessed market value to arrive at a fair value and then added another 30% discount to compute the liquidation value, actions which significantly changed the final figures. The IBBI noted that while discretionary judgment is a part of valuation work, the report lacked clarity on the rationale and documentation supporting such heavy discounting.

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In his appeal dated 8th May 2025, Mr. Kumar argued that his report reflected industry-standard practice and professional judgment, especially in a market where reliable data, such as registry records, was not readily accessible due to the COVID-19 pandemic. He contended that neither the Committee of Creditors (CoC) nor the Resolution Professional had objected to his valuation when it was originally submitted. He also claimed that similar omissions were common among other valuers during the same assignment.

Mr. Kumar further contended that there is no statutory mandate requiring inclusion of circle rates or market comparables and that his working papers, disclaimers, and supporting surveys were appropriate for the circumstances.

The Appellate Authority, however, found that Mr. Kumar’s arguments did not overcome the deficiencies identified in the original order. The Board reiterated that Rule 8 of the Valuation Rules sets out the mandatory components of a valuation report, including the need to disclose the nature and source of data relied upon. This is critical to maintain the trust of stakeholders and uphold the integrity of the CIRP.

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The absence of comparable plot details and documented rationale for applied discounts was seen as a serious lapse. The Authority noted that valuation reports form the basis for vital decisions, including resolution plan approval and asset realization, and therefore must adhere to high standards of clarity and accountability.

In its final order, the IBBI comprising Chairperson Ravi Mital, concluded that the original disciplinary action was justified and dismissed Mr. Kumar’s appeal. The three-month suspension of his registration as a valuer remains in effect.

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