The Insolvency and Bankruptcy Board of India (IBBI) appellate authority has dismissed an appeal filed by Mr. Nitin Ashok Garg, a registered valuer, upholding the IBBI’s decision to suspend his registration for a period of six months. The suspension was imposed due to alleged deficiencies in a valuation report submitted by Mr. Garg during the liquidation process of M/s. East Coast Energy Private Limited.
Mr. Nitin Ashok Garg is a registered valuer with registrations for Plant and Machinery Assets and Securities or Financial Assets. The original IBBI order leading to the suspension, dated February 21, 2025, was issued after considering a show cause notice (SCN) and the valuer’s response concerning his valuation assignment in the East Coast Energy Private Limited liquidation.
The SCN had raised several issues regarding the valuation report. One point concerned the valuation of current/non-current assets, where the valuer allegedly assigned zero or minimal value compared to substantial book values for items like bank deposits and short-term loans. However, the original IBBI order had concluded on this point that there was no lack of due diligence by the valuer in seeking necessary information from the liquidator.
The two main issues that formed the basis for the suspension, and subsequently the appeal, related to the valuation of steel material (as part of Plant and Machinery) and the failure to explicitly state the valuation standards followed in the report, allegedly contravening specific provisions of the Companies (Registered Valuers and Valuation) Rules, 2017 (Valuation Rules).
Regarding the valuation of steel material, the SCN alleged that the valuer’s report did not mention the market rate of steel in the area or indicate the reference rate used for valuing the asset. The original IBBI order found that the valuer had adopted a flat rate of ₹32,000 per metric ton for valuing different types of machinery and had not provided justification in the report for considering the rate of melting scrap for machinery valuation, concluding this violated Rule 8(3)(g) of the Valuation Rules, which mandates stating the nature and sources of information used.
On the issue of valuation standards, the SCN alleged that Mr. Garg had not mentioned the valuation standards followed in his report, in contravention of Rule 8(3)(h) of the Valuation Rules. The original IBBI order had rejected the valuer’s defence that being a member of an RVO (IOV Registered Valuers Foundation) that adopted International Valuation Standards (IVSC) was sufficient. The IBBI held that Rule 8(3)(h) specifically requires the valuer to mention the standard followed in the report itself.
Mr. Nitin Ashok Garg preferred an appeal against the suspension order before the IBBI appellate authority under Rule 17(9) of the Valuation Rules, arguing against the findings on steel material valuation and valuation standards.
In his appeal concerning the steel material valuation, Mr. Garg submitted excerpts from his valuation report, pointing to sections that described the poor condition of the machines, the use of dimensional weight analysis where labels were missing, and statements indicating that machines had lost their “utility value” and only “material value” (scrap value) remained. He argued that these points in the report justified considering the rate of melting scrap for valuing the machinery.
On the valuation standards issue, Mr. Garg argued in his appeal that his RVO (IOVRVF) had issued a notice in July 2018 making IVSC mandatory for all its members. Since this notice was freely accessible on the RVO’s official website, he contended that there was no requirement to attach or explicitly mention this document or the standards in the valuation report itself.
The IBBI appellate authority reviewed the original IBBI order and the submissions made by Mr. Garg in his appeal. The authority focused its analysis on the two main violations identified in the original order: the non-disclosure of material information/sources regarding the valuation rate for plant and machinery and the non-indication of the valuation standards followed.
The appellate authority emphasised the importance of Rule 8 of the Valuation Rules, which lists mandatory contents aimed at enhancing the credibility of valuation reports and stakeholder trust, given that critical decisions in insolvency and liquidation processes rely on these reports.
Regarding the valuation of steel material and the alleged violation of Rule 8(3)(g), the appellate authority found that the valuer’s submissions in the appeal did not cure the defect identified in the original order. The authority observed that the valuer failed to demonstrate in his valuation report the source of information for the rate (₹32,000/MT) used. Furthermore, the authority noted that it was not clear from the report itself how the rate of melting scrap was applied to all different types of machinery belonging to the corporate debtor. The authority found the report lacked clarity on this aspect.
Concerning the issue of valuation standards and the alleged violation of Rule 8(3)(h), the appellate authority firmly rejected the valuer’s argument that the RVO’s online notice was sufficient. The authority stated that the valuer cannot bypass compliance with the specific provisions of the Valuation Rules. Rule 8(3)(h) specifically and mandatorily requires the valuer to mention the valuation standard followed in his report. Membership in an RVO or the RVO’s general mandates, even if accessible online, do not substitute this explicit reporting requirement within the valuation report itself.
Based on its analysis, the appellate authority concluded that the valuation report submitted by Mr. Nitin Ashok Garg indeed fell short of having the mandatory contents required under Rule 8(3)(g) (sources of information for rates) and Rule 8(3)(h) (statement of valuation standards) of the Valuation Rules.
Consequently, the IBBI appellate authority found no reason to interfere with the original order dated February 21, 2025. Exercising the powers conferred upon it, the authority dismissed the appeal filed by Mr. Nitin Ashok Garg. This decision effectively upholds the six-month suspension of his registration as a registered valuer.
The order highlights the IBBI’s stringent stance on adherence to the mandatory reporting requirements for registered valuers, deeming such compliance essential for ensuring transparency, accuracy, and trustworthiness in the valuation reports that play a crucial role in insolvency resolution and liquidation proceedings under the Insolvency and Bankruptcy Code, 2016. No judicial precedents were cited by the appellate authority in its order, with the decision primarily resting on the interpretation and application of the provisions of the Valuation Rules.
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INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
[Authority delegated by the Central Government vide notification no. GSR 1316(E) dated 18.10.2017 under section 458 of the Companies Act, 2013 read with rule 2(1)(b) of the Companies (Registered Valuers and Valuation) Rules, 2017]
IBBI/Valuation/Disc.(A)/05/2025
01 May 2025
ORDER
This Order disposes the appeal preferred by Mr. Nitin Ashok Garg against the Order dated 21.02.2025 passed by Insolvency and Bankruptcy Board of India (IBBI). Mr. Nitin Ashok Garg (RV) is registered under Valuation Rules as a valuer of Plant and Machinery Assets, with the registration number IBBI/RV/02/2019/11590 on 16.05.2019 and in Securities or Financial Assets, with the registration number IBBI/RV/02/2019/12271 on 29.08.2019.
1. Brief Background
1.1 The IBBI, in accordance with rule 15 read with rule 17 of the Valuation Rules, had suspended the registration of Mr. Nitin Ashok Garg for a period of six months vide its Order dated 21.02.2025 (hereinafter referred as “Order”). The said Order disposed of the Show Cause Notice (SCN) No.RV-13012/2/2023-IBBI/364/415, dated 19.07.2024, issued to Mr. Nitin Ashok Garg in respect of his valuation assignment in the liquidation of M/s. East Coast Energy Private Limited (Corporate Debtor/CD).
1.2 In terms of Rule 17(9) of the Valuation Rules, Mr. Nitin Ashok Garg has now preferred an appeal against the Order dated 21.02.2025. He availed the opportunity of personal hearing before the appellate authority on 11.04.2025.
2. IBBI Order dated 21.02.2025.
2.1 The IBBI in its Order dated 21.02.2025 examined the allegations mentioned in the SCN dated 19.07.2024 and the reply of Mr. Nitin Ashok Garg on such allegations, which is presented here in brief as follows-
2.1.1 Issue regarding valuation of current/ non-current assets – The SCN alleged that Mr. Nitin Ashok Garg has assigned zero value or very minimal value to current assets such as bank deposits, current investment, short term loan etc in comparison to substantial book value. The RV in his response to the SCN had stated that analysis was done on limited data to extract party wise breakup from trial balance under different heads in Balance Sheet. The Authority on perusal of the materials available on record had concluded that there was no lack in due diligence on the part of RV in seeking necessary information and documents from the liquidator.
2.1.2 Issue regarding valuation of steel material – The SCN alleged that Mr. Nitin Ashok Garg has nowhere mentioned the market rate of steel price of the area in his valuation report and the valuation report does not reveal any indication regarding the reference rate considered for valuation of the asset. The RV in his response to the SCN had stated that he has reported all the facts to the best possible extent and Section 2.2.1 on page 80, 81, 82 of the report, details out major factors considered by the RV while evaluating. The Authority found that the RV had adopted a flat rate of ₹32,000/MT for valuing different types of machineries of the CD and had also not provided nay justification as how the rate of melting scrap be considered for the purpose of valuation of machineries of the CD. Therefore, the Authority found RV in violation of Rule 8(3)(g) of the Valuation Rules.
2.1.3 Valuation Standards not stated in the Valuation Report- The SCN alleged that Mr. Nitin Ashok Garg has not mentioned the valuation standards followed by him in his report in contravention of Rule 8(3)(h) of Valuation Rules. The RV in his response to the SCN had stated that report was prepared in accordance with the standards issued by the International Valuation Standards Council and the RV has fully adhered to these standards, being part of his Registered Valuers Organisation namely IOV Registered Valuers Foundation (IOVRVF) which has adopted these standards. The Authority notes that in terms of rule 8(1) of the Valuation Rules, a RV can make valuation either as per the internationally accepted valuation standards or valuation standards adopted by any RVO. Therefore, being member of IOVRVF does not imply that the RV could have followed any particular valuation standard. Further, provision of rule 8(3)(h) specifically mandated the RV to mention in his report the valuation standard followed by him. Accordingly, the Authority found RV in violation of Rule 8(3)(h) of the Valuation Rules.
3. Appeal by Mr. Nitin Ashok Garg.
3.1 Mr. Nitin Ashok Garg in his appeal has submitted the following:
a) With respect to valuation of steel material: On page 3 of the valuation report, following is mentioned:
“As on date of site visit, majority of the machines were in poor condition and found scattered all-over the plant land. To evaluate the same, weights were considered as mentioned over the label and wherever labels were missing, then dimensions were considered to arrive at the approx.. weight by using dimensional weight analysis.”
Further on page 6 of the valuation report, following is mentioned:
Further under section 2.2.1 on page 80,81 and 82 under Site Observation and Data Limitation, the following is mentioned:
The RV has submitted that the above excerpts from the valuation report justify as to why the rate of melting scrap was considered for different types of machineries of CD. The RV has emphasised that it is mentioned in the excerpts that the machines have lost their “utility value” and only “material value” exists.
b) With respect to valuation standards not stated in the Valuation report: The IOVRVF has vide its notice no RBC-16 of 2018 dated July 24, 2018 has made Internation Valuation Standard (IVSC) as mandatory compliance by all its members. Since, the said notice is freely accessible and available on official website of IOVRVF, there was no requirement to attach this document with the valuation report.
4. Analysis and findings
4.1 On perusal of the Order, it is observed that mainly the violations made out against Mr. Nitin Ashok Garg is on two counts, namely non-disclosure of material information including the nature and sources of the information used or relied upon for valuation of plant and machinery of the CD and non-indication of valuation standards followed by him in his valuation report.
4.2 It is pertinent to note that Rule 8 of the Valuation Rules explicitly provides as to what all mandatory contents should be there in a valuation report submitted by registered valuer. These mandatory contents helps in enhancing the credibility of the valuation report and the consequently the trust of the stakeholders. This is essential as the critical decision in a CIRP/Liquidation process under the Code is taken on the basis of the valuation estimates provided in the valuation report.
4.3 In the present matter, it is observed that the RV has failed to demonstrate in his valuation report, the source of information for the rate taken by him in valuation of the plant and machinery of the CD. Further, it cannot be understood from the perusal of the valuation report as to how the rate of melting scrap, as now contended by the RV in his submission to the SCN, has been considered by him for all sorts of the machineries of the CD. The valuation report is not clear in this aspect. Further, the submission of RV with respect to non mentioning of the valuation standards in his valuation report cannot be accepted. The RV cannot be allowed to have a bypass from the compliance of the provisions of the Valuation Rules.
4.4 Therefore, this Authority agrees with the findings in the Order dated 21.02.2025, that the valuation report falls short of having all the mandatory contents as required under Rule 8(3)(g) and 8(3)(h) of the Valuation Rules.
5. Order
5.1 In view of the foregoing, this Authority does not find any reason to interfere with the Order dated 21.02.2025. Accordingly, the Authority in exercise of powers conferred vide notification of Central Government no. GSR 1316(E) dated 18th October 2017, under Section 458 of the Companies Act, 2013 and in pursuance of Rule 17(9) of the Valuation Rules, dismisses the appeal.
Sd/-
(Ravi Mital)
Chairperson
Insolvency and Bankruptcy Board of India
Dated: 01.05.2025
Place: New Delhi
