IBBI Suspends Valuer for Inconsistent Reasons on Asset Exclusion

The Insolvency and Bankruptcy Board of India (IBBI) issued an order suspending the registration of a registered valuer, Mr. Poovannan A, for six months due to inconsistent and questionable professional conduct regarding a valuation report in a corporate liquidation case. The valuer was appointed to assess the assets of M/s. Jeypore Sugar Company Limited but completely excluded the Rayagada asset from the valuation. In his March 2021 valuation report, Mr. Poovannan A cited a legal opinion mentioning a court stay order on the sale of the asset as the reason for its exclusion. However, in his subsequent replies to the inspection report and the Show Cause Notice (SCN), he shifted his reasoning, claiming the exclusion was due to the Liquidator’s failure to furnish relevant documents. The IBBI found this change in stance—from citing a legal constraint to citing non-cooperation—to be a significant inconsistency that undermined the professional credibility of the valuation report. The Authority also noted that under Section 36 of the Insolvency and Bankruptcy Code (IBC), assets subject to court determination of ownership must still be included in the liquidation estate and require valuation. Concluding that the valuer’s shifting explanations demonstrated inadequate professional judgment and a failure to maintain the expected professional standards and objectivity, the IBBI ordered the suspension of his registration for six months.

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./30/2025 03.10.2025

ORDER

This Order disposes the Show Cause Notice (SCN) No. RV-13012/3/2024-IBBI/404/715, dated 07.05.2025 issued to Mr. Poovannan A (RV) under rule 17 read with rule 15 of the Companies (Registered Valuers and Valuation) Rules, 2017 (Valuation Rules). Mr. Poovannan A is registered with IBBI as a valuer of Land and Building (L&B) with the registration number IBBI/RV/04/2018/10441.

1. Issuance of Show Cause Notice (SCN) and hearing before the Authority

1.1 Rule 17(1) of the Valuation Rules provides that based on findings of an inspection, if the authorised officer is of the prima facie opinion that sufficient cause exists to cancel or suspend the registration of a valuer, it shall issue a SCN to the valuer.

1.2 In this regard, an Inspecting Authority (IA) was appointed to conduct inspection of Mr. Poovannan A in respect of the valuation report dated 18.03.2021 submitted by him in the liquidation proceeding of M/s. Jeypore Sugar Company Limited (Corporate Debtor/CD).

1.3 Based on the findings in the inspection report, a prima facie opinion was formed that sufficient cause exists to consider actions under sub-rule (5) of rule 17 of the Valuation Rules and accordingly SCN dated 07.05.2025 was issued to Mr. Poovannan A alleging contravention of Sub-section (3) of section 36 of the Code, Sub-regulation (3) of Regulation 35 of Liquidation Regulations and Rule 7(g) of the Rules read with clauses 6, 12 and 14 of Model Code of conduct for Registered Valuers provided in Annexure I of the Rules.

1.4 Mr. Poovannan A submitted reply to the SCN on 26.05.2025. The matter was referred to this Authority for disposal of the SCN where Mr. Poovannan A availed the opportunity of personal hearing through virtual mode on 17.09.2025.

2. Examination of contraventions alleged in the SCN

The contravention alleged in the SCN, the response of RV and the findings of the Authority are summarised as follows:

Issue regarding Valuation of assets situated at Rayagada Asset of the CD:

2.1 It is observed that Mr. Poovannan A was appointed as the valuer vide appointment letter dated 15.02.2021 for the valuation of assets of CD during the liquidation process. In the valuation report dated 18.03.2021, Mr. Poovannan A has submitted that the value for the ‘Rayagada asset’ is not considered by him.

2.2 On page No.7 at point V & VI of the valuation report, it was mentioned that:

“At the time of inspection, it was informed by the clients Representative that the properties relate to M/s. Jeypore Sugar Company Limited, as per revenue records available in rayagada to the extent of 784.9 acres but the actual possession by the company is approximately 570.45 acres.

As per legal opinion by Adv. S.Maheshwar Rao dated 24.06.19, in view of the stay order, no part of the company can be sold and also in O.L.R case bearing No.60/74 the Hon’ble High Court of Odisha, cuttack vide W.P.(c).No 44900/2015, covered the entire land of the company, Hence, the liquidation value for the assets of Rayagada Asset is not considered for valuation.”

2.3 Further, on page No. 13 of his valuation report, at point 20 titled ‘Conclusion’, the total liquidation valuation of the assets is given as under:

Table III – TOTAL LIQUIDATION VALUE OF THE ASSETS

2.4 In this report, Mr. Poovannan A has not considered the assets of Rayagada unit for valuation during the liquidation process of the CD, on the basis of a legal opinion which cites a stay order on sale of the asset or part thereof.

2.5 In his reply dated 19.09.2024 to the draft inspection report, on page 4, it was mentioned by Mr. Poovannan A as below:

“…I have neither excluded RAYAGADA assets from liquidation Estate nor decided not to assign any value for the said asset RAYAGADA assets because it is reported to be legally tainted. But has only remarked that I have not valued the said RAYAGADA assets and could not consider its value. I have mentioned that value of the assets of RAYAGADA is not considered and could not include it in the overall value. I hereby convey my intent that in case all the relevant documents are made available to me to my satisfaction, it is possible for me to undertake and carry out the valuation and assign value and consider the value of RAYAGADA assets as well.”

Further, at page 5 of Mr. Poovannan A’s reply to the draft inspection report it was mentioned as below:

“May I earnestly submit that there has been glaring gross failure on the part of the Liquidator or the Customer CD officials, in furnishing to me any of the relevant document, refused to submit documents citing the reasons of legal opinion or ongoing litigation. This was the sole reason for my inability to value the said RAYAGADA assets.”

I was absolutely helpless that even after travelling to RAYAGADA and vigorously following up and chasing the customers representative, neither RP not the CD representative could furnish any relevant document.”

However, there is no evidence on record to substantiate that Mr. Poovannan A has made any efforts to obtain the relevant documents from the Liquidator.

2.6 On one side, the reason for non-valuation of the assets of “Rayagada asset” was mentioned in Mr. Poovannan A’s valuation report dated 18.03.2021 to be a legal opinion which cites a stay order on sale of the asset or part thereof. On the other hand, the reason for the same has been mentioned in Mr. Poovannan A’s reply dated 19.09.2024 as non-furnishing of relevant documents by the Liquidator or the CD representative. Mr. Poovannan A’s reply at S. No. 8 above is inconsistent with Mr. Poovannan A’s valuation report at S. No 5 above.

2.7 As per Section 36 of Insolvency and Bankruptcy Code, 2016 (“Code”):

“36. Liquidation estate. – (1) For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3), which will be called the liquidation estate in relation to the corporate debtor.

……

(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following:

…

(e) assets subject to the determination of ownership by the court or authority;”

2.8 As per the referred Clause (e) of Sub-section (3) of Section 36, the assets subject to ownership determination by courts remain part of the Liquidation Estate and require valuation. Thus, Mr. Poovannan A’s reasoning that there is a stay order for sale of the assets or part thereof does not justify the complete exclusion of the assets from valuation considerations of the CD.

2.9 Sub-regulation (3) of Regulation 35 of IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations), states:

“…The Registered Valuers appointed under sub-regulation (2) shall independently submit to the liquidator the estimates of realisable value of the assets or businesses, as the case may be, computed in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017, after physical verification of the assets of the corporate debtor.”

Further, clause 6, 12 and 14 of Model Code of Conduct for Registered Valuers provided in Annexure I of Rules state as under:

“6. A valuer shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment.”

“12. A valuer shall act with objectivity in his/its professional dealings by ensuring that his/its decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the valuation assignment or not.”

“14. A valuer shall maintain complete independence in his/its professional relationships and shall conduct the valuation independent of external influences.”

2.10 The SCN alleged that the exclusion of the Rayagada assets from valuation was in violation of Clause (e) of Sub-section (3) of section 36 of the Code, Sub-regulation (3) of Regulation 35 of Liquidation Regulations and rule 7(g) of the Rules read with clauses 6, 12 and 14 of Model Code of Conduct for Registered Valuers provided in Annexure I of the Rules.

Submission of Mr. Poovannan A.

2.11 Mr. Poovannan A in his response to the SCN submitted that multiple correspondences were made with the Liquidator, including a letter dated 22.02.2021 seeking land documents, and emails received on 25.02.2021 regarding the clarifications sought for the Rayagada unit. However, documents related to Rayagada assets were not provided despite specific requests, including during the site visit on 28.02.2021. The timeline of valuation process is summarized below:-

2.12 Mr. Poovannan A in his response to the SCN further submitted that with regard to the inconsistency noted in his reasoning, citing legal opinion in the valuation report and non- furnishing of documents in the inspection reply, both are interrelated causes leading to the exclusion of Rayagada assets. The non-availability of authentic documents necessitated reliance solely on a legal opinion indicating pending ownership litigation, which made valuation speculative and against the principles of prudent valuation. Mr. Poovannan A also submitted that in view of this legal uncertainty, he exercised professional judgment to avoid crude estimations unsupported by reliable data.

2.13 Mr. Poovannan A in his response to the SCN reiterated that due care, diligence, and professional judgment were exercised in accordance with the Model Code of Conduct under the Valuation Rules. The exclusion of Rayagada assets was a result of objective constraints beyond the control of the RV and not influenced by any external factors.

Analysis and Findings

2.14 The Authority has considered the allegations mentioned in the SCN and the submissions of Mr. Poovannan and has also perused the records related to the issuance of valuation report dated 18.03.2021. The Authority observes that Mr. Poovannan has mentioned the following in his valuation report regarding the Rayagada asset of Corporate Debtor:

“VI. IMFL Bottling Unit- Rayagada:

At the time of inspection, it was informed by the Client’s Representative that the properties relate to Mis Jeypore Sugar Company Limited, as per revenue records available in Rayagada to the extent of 784.9 acres but the actual possession by the company is approximately 570.45 acres.

As per legal opinion by Adv. S. Maheswar Rao dated 24.06.19, in view of the stay order, no part of the company can be sold and also in O.L.R case bearing No.60/74 the hon’ble High court of Odisha, Cuttack Vide W.P. (c). No. 44900/2015, covered the entire land of the company. Hence, the liquidation value for the assets of Rayagada Unit is not considered for valuation.”

2.15 The Authority notes that in his valuation report he has not valued the property situated at Rayagada Odisha basis the legal opinion received by him from Adv S. Maheshwar Rao whereby it was said that because of the stay order of the Hon’ble High Court of Odisha, no part of the company can be sold.

2.16 However, in his reply to the draft inspection report and also in his submissions during the personal hearing, Mr. Poovannan has submitted that he could not conduct valuation of the Rayagada property of the Corporate Debtor because of unavailability of adequate documents and information with respect to such assets at Rayagada.

2.17 The Authority notes that there is significant inconsistency in the explanation tendered by Mr. Poovannan for not valuing the Rayagada assets of the Corporate Debtor, in the valuation report and to the Authority. Such inconsistency in submissions made by Mr. Poovannan A regarding the exclusion of Rayagada properties from valuation of the Corporate Debtor at different point of time, makes the valuation report of Mr. Poovannan questionable. A careful examination of Mr. Poovannan’s statements reveals a pattern of contradictory explanations, which undermines the credibility of the valuation report dated 18.03.2021 submitted by him in the liquidation proceedings of the Corporate Debtor.

2.18 The Authority also notes that Mr. Poovannan A when confronted with this inconsistency through the present SCN, had attempted to reconcile the contradictory positions by claiming that both reasons were “interrelated causes” leading to the exclusion. The Authority observes that this post-facto rationalization appears to be an afterthought intended to address the contradictions rather than a genuine explanation of his decision-making process as the statements in the valuation report do not suggest that the reason for not valuing the land was the unavailability of sufficient documents to form an opinion about the valuation of land.

2.19 The Authority finds that this shifting of stance demonstrates clear incongruency in Mr. Poovannan A’s reasoning and raise concerns about his conduct during the valuation of the Corporate Debtor’s assets. The fundamental reason cited by Mr. Poovannan A for excluding the Rayagada properties changed materially between his valuation report and subsequent submissions made before the Authority, indicating inadequate professional judgment at the time of the original valuation and giving some other reasons for not valuing the land to avoid regulatory consequences.

2.20 The Authority concludes that the inconsistency in Mr. Poovannan A’s submissions at different points of time undermines his professional credibility and demonstrate non­compliance with the professional standards expected of a Registered Valuer.

3. Order.

3.1. The valuation report is based on the professional opinion of the valuer backed by his expertise and skills. Therefore, it is necessary that all the relevant information considered by the valuer during the conduct of valuation are disclosed in the valuation report itself. Here, the reason for not valuing the Rayagada lands given in the valuation report is not consistent with the reasons being provided now.

3.2. In view of the foregoing, after considering the allegations made in the SCN, the detailed reply provided by Mr. Poovannan A and the materials available on record, the Authority, in pursuance of rule 15 and rule 17 of the Valuation Rules hereby suspends the registration of Mr. Poovannan A (IBBI/RV/04/2018/10441) for a period of six months.

3.3. In accordance with provisions of Rule 17(8) of the Valuation Rules, this Order shall come into force after 30 days from the date of issue of this order.

3.4. A copy of this order shall be forwarded to IIV India Registered Valuers Foundation where the RV is enrolled as a member.

3.5. Accordingly, the show cause notice is disposed of.

Sd/-
(Sandip Garg)
Whole Time Member
Insolvency and Bankruptcy Board of India

Dated: 03.10.2025
Place: New Delhi