IBBI penalise for appointing person other than Registered Valuer for carrying out Valuation
IBBI regulator for Insolvency Professional as well as Registered Valuer by virtue of order No. IBBI/DC/27/2020 dated 24th August 2020, barred Insolvency Professional to seek or accept any process or assignment or render any services under the Code for a period of three months.
Facts of the case:
CIRP of the CD commenced IRP was appointed by Hon NCLT, Kolkata Bench. Subsequently, he was confirmed as RP by the Committee of Creditors (CoC)
RP submitted that he had discussed the scope of work with individual registered valuers (RVs) and since three RVs , informed him that they were associated with and working under the Common umbrella name and for the purpose of communication only, the engagement letter was addressed to Entity which was not Registered Valuer under provisions of Companies Act. It was submitted that the appointment was for individual in personal capacity as RV. Accordingly, the non-disclosure and confidentiality undertaking was also taken from RVs in their individual capacity. Further, the separate invoices raised by the individual RVs have also been placed on record.
Further Insolvency Professional in his submission said that there was no business in the CD and the only known asset, a flat, was not owned by the CD and it was not feasible to appoint valuer of such heavy cost.
IBBI disregarded this contention and said it cannot be accepted since the Code and the Regulations, thereunder, mandate that only registered valuers can be appointed for conducting valuation during a CIRP. The cost relates to volume of work. In the present matter, there was only single flat given for valuation. Further, the cost can only be seen with respect to registered valuers who are duly registered with the Board. For an example of a patient going to an unregistered doctor as the registered doctor charges more fee. But in such a case what is the authenticity or credibility of the treatment. Hence the contention of the RP as to cost of valuation is not tenable.
From a bare reading of the provisions of the Code and the regulations made and Circular issued thereunder, it is undoubtedly clear that it is the duty of the RP to appoint registered valuers to determine the fair value and liquidation value of the corporate debtor.
The IBBI further clarified in explicit terms through the said circular that no insolvency professional shall appoint a person other than a registered valuer to conduct any valuation under the Code or any of the regulations made thereunder and reiterated by another circular that appointment of any person, other than a ‘Registered Valuer’, on or after 1st February, 2019, to conduct any valuation required under the Code or any regulations made thereunder is illegal and amounts to violation of the Circular aforesaid and the payment to a person other than registered valuer shall not form part of IRPC.
Professionals and corporates need to be careful with respect to engaging Valuer to carry out Valuation assignments. It is always recommended to seek from the Valuer his registration number from IBBI and asset class for which he is registered in order to avoid issues arising in future.
Author- Harshad S Deshpande | M.com, ACMA, CS, CISA(USA), CIMA(UK), ID, IP, RV | Practicing Cost Accountant , Insolvency Professional & Registered Valuer