This article is a review and critical analysis of a report submitted by a committee of experts constituted in April 2019 to examine the need for an institutional framework for regulation and development of asset valuation professionals
In India, the practice of valuing assets – a key component of the economic system that also stretches to several casual circumstances – may be a sprawling field, where many professionals take up work as a sort of secondary employment.
While the industry currently has no centralized institutional and regulatory framework, professional associations have administered self-regulation.
The Draft Valuers Bill, 2020’s recommendations include the constitution of a National Institute of Valuers as a primary regulatory body – a completely new concept, unique within the world, as noted in the committee report. At the secondary level, professional valuer organisations shall act as frontline regulators, responsible for the development of the profession
Valuers claim that the report, which was submitted in April 2020 to the Ministry of Corporate Affairs, has not taken into account various provisions that are enshrined in the Wealth Tax (WT) Act, 1957 and govern the industry and is an example of government overreach.
There are a variety of grievances – from being denied recognition as valuers to liability being excessively fixed on them. The committee was headed by this chairman of Insolvency and Bankruptcy Board of India (IBBI), M.S. Sahoo.
For some valuation professionals, the new rules represent to be an encroachment under pre-existing regulation. For instance, under the Constitution of India (Allocation of Business) Rules, 1961, the Ministry of Finance has exclusive powers over various subjects which are intrinsically linked to valuers and valuation. According to them, the company affairs ministry cannot restrict, reject, cancel or disallow a registered valuer to practice under Section 34AB of the WT Act.[1]
Denying valuers direct enrolment into the NIV (National Institute of Valuers) is against their fundamental rights of valuers say, as they are already listed under the WT Act.
Many who were part of IOV have filed petitions against the Bill in Tamil Nadu and Karnataka as they feel let down. In 2017, when IBBI came up with a proposal to have registered valuers under Companies Act, it was thought that this registration is only for a specific purpose under company law. As desired by them we passed a resolution in our governing council to line up a registered valuers organisation with the name PVAI Valuers professional organization.
One of the main issue is that current system doesn’t exactly absorb the old one with ease.
IBBI’s committee of experts that drafted the Bill, has publicly stated that there’ll be no free walk-in for non-registered valuation professionals within the proposed institutional framework.
Though the exact training that practicing professionals will have to undergo as a part of the new system is not laid out in the draft Bill, valuers who have put in 15 years or more need to now undergo training again for 50 hours then take a test, with negative marks for a wrong answer. The minimum pass mark has been set at 60%.[2]
With the draft Bill claiming that each one the prevailing Acts are included within the Bill, all the valuers practising under these Acts are being asked to register again with IBBI. This has caused turbulence as it will put the valuers out of practice once the Act is passed in parliament.
It’s a misnomer to think that valuers don’t have a regulatory body on the lines of the Bar Council of India or ICAI for chartered accountants. The definition and regulation of valuers is laid out clearly under Section 34 AB of the Wealth Tax Act, 1957. There are around 12,000 approved valuers registered under the WT Act in India. Every year a three-day programme is conducted to stay all members updated on the sector .
Under the new proposed rules, valuers have been asked to promote and start companies under Section 8 of the Companies Act, 2013 and under Section 52 of the Draft Valuers Bill, 2020 to be controlled by IBBI
By allowing those who have completed higher secondary education to take up a graduate valuation programme under Section 49 (1) (a), 49 (1) (b) of the draft Bill, the proposed rule also allows non-technical persons into the profession. This has been seen by existing professionals as conflict.
On the question of professional fees (what can be charged by a valuer), the new Bill is silent, while it is specified for those working under the WT Act. The fee, it says, has to be market-determined. There will be chance of unfair competition among them for work.
The IBBI rules framed under Section 247 of the Companies Act 2013 for valuers was contested in various high courts challenging bringing valuers practicing under Income Tax Act, 1957 into its ambit. In response, the government in its counter had stated its stand that IBBI registration is only for valuation of properties under the insolvency process which comes under the Companies Act.
In case of a complaint against the valuer, inspection will be carried out by a law officer or VPO. The Bill allows for monetary penalty up to Rs 2 lakh or three times the amount of loss caused or likely to have been caused. This, not there in any Bill for other professionals. Also, visits to the office of a valuer every year is an overreach by government.
So, the new guidelines on the whole, is increasing competition in the market. The changes are being made for entry of companies, foreign bodies and their subsidiaries as they cannot be valuers under the present laws of the land.
Notes:-
[1] The wire columns
[2] Report of Committee of Expert For Valuation Bill,2020
Author Bio
Very relevant article with in depth analysis. In near future Valuation in India will be done by only Private Companies. No individuals will come up in this profession. Pre-existing Valuers like us lost our jobs, upgraded our qualification and still waiting for five years of experience. Hopeless with such unethical sudden decisions taken by Government.