Inconsistent Reasons for Not Valuing Rayagada Assets: IBBI Suspends Registration of Valuer for 6 Months [Read Order]

The Insolvency and Bankruptcy Board of India (IBBI) has suspended the registration of a Registered Valuer for a period of six months for providing inconsistent reasons for not valuing certain assets of a corporate debtor during liquidation proceedings.

A registered valuer of Land and Building, was appointed to value the assets of M/s. Jeypore Sugar Company Limited (Corporate Debtor) during its liquidation process. In his valuation report dated 18.03.2021, valuer excluded the assets situated at Rayagada from valuation. A Show Cause Notice (SCN) was issued to him alleging contravention of the Insolvency and Bankruptcy Code, Liquidation Regulations, and the Model Code of Conduct for Registered Valuers.

In his initial valuation report, it was stated that the Rayagada assets were not valued based on a legal opinion citing a stay order on the sale of the assets. However, in his reply to the draft inspection report, he claimed the reason for non-valuation was the non-furnishing of relevant documents by the Liquidator.

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The Authority observed that there was a significant inconsistency in the explanations tendered by valuer at different points in time. The Authority noted that assets subject to the determination of ownership by a court, as per Clause (e) of Sub-section (3) of Section 36 of the IBC, remain part of the Liquidation Estate and require valuation. Therefore, the reasoning based on a stay order did not justify the complete exclusion of the assets from valuation.

The Authority found that the valuer's shifting stance demonstrated a lack of independent professional judgment and was in violation of clauses 6, 12, and 14 of the Model Code of Conduct for Registered Valuers, which mandate due diligence, objectivity, and independence. The valuer's attempt to reconcile the contradictory positions by claiming they were 'interrelated causes' was deemed a post-facto rationalization that undermined the credibility of his valuation report.

The IBBI concluded that the inconsistency in the valuer's submissions undermined his professional credibility and demonstrated non-compliance with the expected standards. Consequently, the Authority, in exercise of its powers under rule 15 and rule 17 of the Valuation Rules, suspended the registration of valuer for a period of six months.

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