Professionalising valuers

Recently, the Ministry of Corporate Affairs (MCA) invited comments on the Draft Valuers Bill, 2020 (Bill) as recommended by the committee of experts headed by M. S Sahoo, Chairperson, , naA (IBBI). The proposed recommendations suggest the development of a full-fledged profession of valuers akin to other professions such as Chartered Accountant and Company secretary.

Need for valuers

Valuation of assets is necessary for the various transactions happening in a market economy. The Insolvency and Bankruptcy Code 2016 requires the assets to be valued fairly, so that the interests of the corporate debtors and stakeholders are protected. Overestimation of assets at the time of sanctioning of loans is being attributed as one of the several reasons for the growing Non Performing Assets (NPAs) in India. Errors in valuation can be disastrous to the economy.

Valuation in India is undertaken as compliance and statutory requirement for purposes like banking, securities, tax, company and insolvency. Based on different valuation requirements under various laws, the valuation work was heterogeneously conducted by several professionals. As a result, the valuation profession developed as an independent multi-disciplinary profession. Most of the existing valuers take it up as part-time vocation, often an extension of their primary profession.

Providing a separate legal and institutional framework to valuers profession will result in creating a distinct profession and identity to the valuers. It also helps in quality control, setting minimum qualification, regulation of the profession and to provide accountability to users of the valuation services. Not to forget, it also creates a new avenue for the young Indian population looking for a corporate career.

Section three of the Bill provides for the establishment of a National Institute of Valuers by the Central Government. At the outset, the Bill broadly specifies the duties and responsibilities of the Institute of Valuers. The duties include the introduction and implementation of measures in order to develop and regulate the profession of valuers. The Bill seeks to protect the interests of the users of the valuation services.

The Bill also seeks to establish a governing council which shall be responsible for functioning and regulation of the National Institute. Additionally, the Bill also proposes to set up a Valuation Standard Committee which is entrusted with the responsibility of recommending and periodically reviewing the valuation standards.

On the analysis of other key provisions, we note that the proposed law specifies the categories of persons who can undertake the provision of valuation services. The Bill provides for four categories of valuers namely valuation entities, associate valuers, fellow valuer and honorary valuer. The Bill lays down the eligibility criteria and the asset classes for which the valuation can be undertaken by each category of the valuer. Interestingly, the proposed Bill also indicates the usage of the prefix such as AV (Associate Valuer), FV (Fellow Valuer), HV (Honorary Valuer) in the names of the individual valuers similar to CA and CS.

The Bill makes the valuers accountable to the users of the valuation service. A detailed procedure for determining any deficiency of services and penalty for deficient services is given. Pursuant to the objectives of the proposed Bill, the construct of consumer rights in respect of the valuation profession is effectively addressed.

Having a separate law and institute for the regulation of valuers profession is surely a step in the right direction. However, at this stage, there may be several challenges in the passing and implementation of this Bill, in its present form. It is reported that the Valuers Association from Ludhiana has sent representation to the Government against the Bill. They have stated that the Bill violates the fundamental right to the profession of the Government Approved Valuers.

With certain relaxations on eligibility criteria and other changes in view of ease of compliance, the Bill promises a bright future in valuation profession in India similar to existing mechanism in several developed countries.

(Dr. Gagan Krishnadas is Law Faculty at the Administrative Training Institute, Mysore. Sushmita Ravi is a Corporate Lawyer. Views expressed are personal.)