Intellectual property rights (IPR) which are a subset of intangible assets, exists by virtue of Protection afforded by Law. In knowledge-based economies like US, intellectual assets such as intellectual property rights (IPR) play a crucial role in business performance and growth due to required awareness. An increasing share of the market value of firms appears to derive from their intellectual assets and firms ( like Paytm, Facebook, Twitter etc and best example is Reliance Jio Platforms ) are managing these assets more actively to further enhance their contribution to value creation.

Definition of IPR: with a perspective of “Valuation”

• International Valuation Standard 210 defines an intangible asset as “a non-monetary asset that manifests itself by its economic properties. It does not have physical substance but grants rights and/or economic benefits to its owner.”  
• Specific intangible assets are defined and described by characteristics such as their ownership, function, market position and image. These characteristics differentiate intangible assets from one another.’  For instance, if a brand logo is protected by copyright, it will be categorized as brand-IP, rather than artistic-IP, to mirror its commercial use. 
• IP rights that are frequently the subject of transactions and valuation reports are those associated with brands, technology, artistic works and data. These are collectively referred as IP-Assets.

Goodwill, Management Team, Reputation, Distributor Network, Users or Clientele, Trained Workforce – are the examples of unidentified  IP rights. – and hence, are never booked in the present accounting system. Being a registered valuer, this is a time to go for valuation of IPRs for required business decisions.

Valuation of IPRs: “Need”

Valuation of IPR is in great demand due to few of the following scenarios:

Purchase/sale of IP assets, both standalone and through M&A: IP valuation can play an important role in negotiations regarding the purchase price of individual assets and entire business entity as a whole. Usually, present accounting system do not record self-generated IP assets. Obtaining such IP assets might be the reason for the transaction. Examples of the same can be Brand created by a business, Logo or Copyright or R&D formula etc which are never accounted as such in the books, but still business carry these IP assets. Valuation of IP assets not captured in the accounting statements may be critical to arriving at an informed purchase price.

Licensing or Transaction purpose for Royalty rate etc : IP valuation can also form the basis for negotiations in a licensing context – valuation methods may be used to help determine an appropriate royalty rate or assess whether a rate obtained through other means is appropriate. Licensing can be a significant profit-driver, as they are often generated at minimal cost to the asset-holder. 

Fund raising from Bank or Venture Capital : Called Asset-Backed Financing: IP assets may be used to secure debt financing by pledging the asset in question as collateral. Also, if there is a stable revenue stream associated with the IP-asset like future royalty payments, that particular revenue stream may be securitized and sold in exchange for immediate financing.

IP litigation: Valuation is in absolute necessity at multiple stages of the dispute process – valuation of the asset(s) in issue may help a party decide whether or not to engage in litigation further, where a court finds infringement, valuation reports may also be used to calculate a damages award. Current judiciary do not have any technical knowledge on valuation aspects. Courts should hire business valuers or litigating parties must hire business valuers to reach to a quantification aspects. Fair Value of IPR in the hard time of dispute is a great support.

Bankruptcy and liquidation: Bankruptcy or liquidation scenarios can precipitate asset sales that require valuation. By law, it is mandatory to appoint two independent valuers for company under CIRP.

Compliance: IP valuation may be conducted for regulatory or other compliance reasons, for example, for financial accounting or tax planning purposes. Indian Accounting Standards provides that, if the asset including Intangible asset is purchased or constructed or created, expenses which are incurred from R&D to the final stage of success trial or till the time of recognition of IP rights can be accounted and depreciated also. For IFRS and US GAAP also, fair value reporting require valuation and assessment of diminution in value of assets. Fair Value accounting requires “Fair Value of such IP rights which are accounted in the books. 

Internal decision-making and portfolio management: Lastly, various valuation methods may also be used to assist with internal management and investment decisions, including decisions regarding the use, sale, abandonment, development or maintenance of a business’s IP assets.

For all these critical decision makings, Valuation of IPR is stressed upon by current business and that has changed the business dynamics. 

Value Drivers:

I, being a registered valuer, can share some important value drivers which are invariably considered by a valuer when valuing IPRs:-

• Business Cycle: R&D, testing or Commercial stage
• Profitability: Connected revenue stream analysis.
• Market Share: Proportion to total market size.
• Emerging Technology: Technology check
• Barrier to Entry: Relative importance considering new entrants 
• Growth Prospects: Techno Economic Viability
• Legal protection: Backing by present IP Regulations of the country
• Remaining Life: Future expected contribution from that IP-Asset

Evolution Process of IP Asset Valuation:

If we look at history, the valuation of IPRs has been evolved from following 5 stages. These stages are cumulative, implying that firms today deploy IPRs for a broad range of purposes and each stage has a different implication for its valuation. Stage 5 is a matured market economy like US, where Valuation of IPRs are the pre-requisite for any business.

Creation of IP Pathway w.r.t Valuation Need

• Creation of IPR : Stage 1 : Business Assumes there is NO Need of Valuation
  • Only as Defense tool. 
  • No understanding of Valuation aspects

• Superiority Aspects : Stage 2 : Feels that IP is valuable
  • Enforcement against infringers 
  • Feels superiority over other non-registered firms 

• Business Strategy : Stage 3 : IPR value is recognized as Independent Asset class
  • Realization of IPR as a weapon: Importance is recognized. 
  • Business now takes advantage of IPR in generating profits.

• Management Strategy : Stage 4 : Valuation of IPR very important
  • This stage the Valuation of IPRs are realized
  • Management attempts for the best portfolio of IPRs
  • Firms to attract venture capital investments

• Financial Asset : Stage 5 : Valuation of IPR is Essential and Utmost required
  • Matured business know that, IPR are the real value Creators
  • Valuation Reports for available IPRs a PRIORITY and recognition of the same as Financial Assets

Conclusion:

In recent times, the scenario is very much different. Now, India has valuation standards and valuation regulator (IBBI) to monitor the professional standards and quality of reporting. Backing and Enforcement of IPR Law has improved the situation. 

IP asset can also play a role in enabling small start-up firms to attract venture capital. Ownership of a patent can demonstrate to potential investors that a small firm has a novel invention with which it may be able to differentiate its products or services from those of its competitors, as well as the legal means to prevent competitors from implementing their invention in the market place. Use of IP Assets as collateral for bank loans, called as IP-Backed Securitization is a New Normal across the world where Valuation of IPRs play a vital and pivot role. This is a welcome change in the area of IP Rights and connected Valuations which has lead to novel business dynamics of present world.

The next question comes to the Indian Business Community “Have you get your IPRs valued??”

Introduction:-

This article is a result of two distinct legislatures enacted in the two different times, one in the year 1872 and the other in the year 2017.

Indian Contract Act, 1872 has the sections 73 and 74 which are on the damages and loss due to breach of contracts. Both these sections are enshrined with words of the Indian legal system on the damage recovery definitions. ICA governs the judiciary mechanism for right to receive towards loss or damage due to breach of contracts but not the quantification thereof. 

Companies Act, 2013 w.e.f. 18th October 2017 and Companies (Registered Valuers and Valuation)  

Disputes over the value of a business or other ownership interests are sometimes unavoidable. The accurate assessment of economic impact and value and damages in these legal matters often depends on sophisticated analytic, economic, financial and quantitative analysis.

Our concern: –

The causal relationship between the breach and the losses flowing from the breach is a matter for the lawyers to argue and the tribunal to determine mainly from these two sections. However, it is also critically important to have assessment of damages on a fair basis. 

There is no question that estimating the damages in long-term, complex agreements will be difficult and that courts, tribunals and arbitration panels will be confronted with reports that will make their eyes glaze over and their heads hurt. Currently, there is not regulation as to involving a valuation report for quantification aspect. India has now a legal back up and matured rules to govern valuation industry. Still, it has to be done, unless we just want to label all such damages as “speculative”.

How to Measure the damage and what is Quantum of Damage?

• Summary of Present Indian Contract Act:-

My understanding of ICA gives me impression that, any application of damage has to pass through two tests:-

a) Remoteness of damage

b) Measure of damage

On a breach of contract by a defendant, a court generally awards the sum that would restore the injured party to the economic position they expected from performance of the promise or promises. This is also designed to prevent the breaching party from being unjustly enriched. It is important to note that, the burden lies on the injured party to prove his loss.

Questions of quantum of damages are only concerned with the amount of damages to be awarded and is based on contract terms and quantitative techniques of measurement which is in recent world termed as “Valuation” which represents both art and science!

Recover-ability of a damage has to be evaluated with the term Remoteness of damage as, remote and indirect losses are not generally affirmed by the courts. 

• Remoteness of damage is different from the term measure and quantification of damage. Remoteness of damage is based on facts of each case. The damage shall be assessed on the basis of the natural and probable consequences of the breach. Both the parties must have actual knowledge of the breach consequences. 

The defendant is only liable for reasonably foreseeable losses– those who would have reason to foresee the likelihood of future infringement if a normally prudent person in his place had this information when contracting.

• There is Landmark Judgement:- Hadley v. Baxendale – governing basic principle of damage award. 

Basic principles underlying the award of compensation are that the injured party should as far as possible be placed in the same position in terms of money as if the contract had been performed by the party in default

• In commercial world the as per the terms of contract, valuation would be required in the following instances:-

• Business and contractual disputes, 

• Enterprise valuations, 

• Shareholder conflicts, 

• Diminution of value claims, 

• Damage calculations

Process Walk-through:-

In the valuation world, normally running business related valuations are done based on Income Approach. Here, cash flows are worked and the same is discounted to get the present value. Cash flow need understanding of business operations and value drivers. The appropriate measure of profitability has to be defined and the lost cash flows associated with the breach of contract can be determined. 

It is important that the valuer carefully consider what discount rate is appropriate, as the discount rate will vary on a case by case basis.  The discount rate might be determined as the weighted average cost of capital of the plaintiff, the required return on the plaintiff’s equity, the required return on the defendant’s unsecured debt obligations, or some other rate more appropriate to the specific facts and circumstances of the case.

In my view, for the valuation of breach of contract, the contract should be viewed as an asset and the claimant’s loss would be the change in value of that asset.

The damages assessment is faced with the challenge of identifying and isolating the various different causes of loss. If the valuer makes different assumptions or are given different factual information or instructions regarding the causal link between a breach of contract and a sequence of events, this can lead to vastly different assessments of damages. The ‘right answer’ in each case will be derived from legal, factual and then financial analysis.

Quantification by Subject Expert:-

Written reports can definitely reinforce one’s legal position. Registered Valuer’s report supports business-clients and Attorneys. Quantification of claims helps in damage claims, settlement negotiations and alternative dispute resolution and will provide a strong base for pleading for the quantification aspects before the arbitration forum / civil tribunals / Courts.  

Conclusion

Quantification requires an ability to understand and evaluate accounting information alongwith the sound commercial and professional judgement to bear in constructing a robust valuation report based on the evidence available.

It is the combination of documentary evidence, facts and circumstances of case and clear instructions from the representative advocate/ legal team that will feed into the calculation of damages and help the registered valuer to establish a robust assessment of the loss or damage.

Tribunals face an even tougher job when evaluating contractual loss or damage claim to determine an appropriate award. But, now is the time, tribunals can help themselves with the business valuers who are recognized for the task. Engaging with a registered valuers early, for example, in setting the issues or questions that a registered valuer can address, asking the parties’ experts to explain the reasons for the differences between their opinions and opinion of registered valuer – can go a long way in helping tribunals reach a “Fair damage award”.

In the world of “fair valuation”, it is certain that, a registered valuer having a sophisticated regulation for valuation – is a need of an hour.

Pre-Covid-19

At the outset, let me give the brief on IBC, 2016 and the scenario which was at the pre-covid 2019 time.

• Insolvency and Bankruptcy code, 2016 has been one of the options for a creditor in case of non-payment of dues which are accrued from corporate debtor (CD).
• Financial creditors prefer filing of petition under IBC, 2016 when they found minimal chance of recovery from the available secured assets (as they have edge under SARFESIA act if CD has good assets ) or when they found that, all the other options are not suitable for recovery looking to the percentage of recovery by FCs thorough IBC, 2016.
• At, Pre-covid time, the petition filing limit was Rs. 100000/- as per section 4 of the Code. So, in case of any default at least of the amount of Rs 1 lakh, the creditor has all the power under the act to file a petition which may lead to corporate insolvency resolution process. (CIRP)
• As established by Insolvency Law committee and by various pronouncements, the purpose of IBC, 2016 is not at all recovery but to have resolution, to maintain business as going concern and finally to protect assets of CD & thereby to protect interest of the stakeholders.

During Covid-19

Covid-19 is the scenario, where business and economy is literally in a shut done mode. Indian Boarders are closed – State wise and District wise social distancing is forced. It is needless to state here that, procurement, production, dispatch, sale, recovery etc. is currently at a halt. Due to long period closure, the liquidity has been hampered and hence, it is most likely that, business may not be in a position to repay the “Debt” in time.

Considering the present situation, Finance ministry has made the following actions:

(1) Threshold limit of application for IBC, 2016 has been increased to Rs 1 Crores by Finance Ministry. The Central Government vide Notification No. S.O. 1205(E) dated 24th March, 2020, in exercise of the powers conferred by the proviso to Section 4 of the Code has increased the said limit. And as per the Code, CG has the power to enhance the limit upto Rs 1 Crore ..which government has enhanced. (beyond Rs. 1 crores, CG has no authority but to pass the same before the parliament ). Intention of Honorable FM was to prevent MSME going under IBC, 2016.

Previously, this threshold was only Rs 1 Lacs. Meaning there by that, any person whether supplier or financer, had pending recovery of more than Rs 1 Lacs and for which there was default by the Corporate Debtor, he had the power to apply under IBC, 2016 before NCLT.

My views in favor:

Legislature like IBC, 2016 is backing up the creditors who lend money/goods/services to the business.

IBC, 2016 is a sward or a Stick which is providing a shield, disheartens the negative intent of business and hence, the very purpose is to have a Shield and not to Hit anybody!!

Triggering event is a “Default”. A meager amount of default of debt which is only Rs 1 lacs, should not be used as a recovery mechanism during / after the lockdown period considering the impact of covid-19. Covid-19 is a pandemic which is unprecedented and due to the same, business across the world including India are closed down. Naturally, there will be “default” which will trigger unnecessary cases under IBC, 2019.

To curb small cases, the Government has dealt with this default threshold so that, due to Covid-19, large number of cases does not go to NCLTs.  The Government expects to have so many petitions at the NCLT under IBC, 2016 if the present limit of Rs 1 lakh persists. The fantastic move is only to save a situation where, NCLTs are not jammed with small cases and to save over crowded situation before the adjudicating authority. It’s a “Capacity to process” issue that has resulted into increase of threshold limit to Rs. 1 Crore.

My views against:

In India, more than 85% of the business are in category of SME/MSME. Normally looking to their size of business, we all know that, per head / per vendor outstanding is generally lower than Rs. 1 Crores dur to their limited liquidity.

Taking a situation of an Operational Creditor who is SME/MSME, due to the recent increase in the threshold limit to Rs 1 Crores, they will not be in position to file any application under IBC,2016 for default of their collectibles.

To put it differently, if post covid-19, any business is not paying to such creditors having lower outstanding balance than the threshold limit of Rs 1 Crore, they will have the only option to have recovery outside IBC, 2016. This can definitely ruin the working capital of small and medium business units!!

Let me clarify on the applicability of this recent clarification of finance ministry that, as it is due to Covid-19, all the petitions, which are already filed and are pending before various NCLTs, will be heard as it is and will not be impacted. So, petitions already filed by FC/OCs before this notification, where the default amount is lower than Rs 1 Crores (new threshold) but higher than Rs 1 Lac, the same should be heard and will not be per se rejected.

(2) RBI’s move for Moratorium for Installments and Interest payment:

This has provided a BIG relief to field of IBC, 2016. Moratorium has saved the cases to go to IBC. As we all know, that overdue accounts are classified as regular and non performing, considering the period of non-payment or considering the period of default. RBI has suggested to give moratorium from 1^st March 2020 to 1^st June 2020 i.e. 3 full months wherein, no installment and no interest will be due and accrued.

Due to this move of RBI, business accounts which are unable to pay due to liquidity crunch will not be treated as NPA and hence, there won’t be a pressure on the Banks for recovery and filing of petition under IBC, 2016. In my view, this is a welcome indirect relief considering IBC, 2016.

(3)Moratorium of 3 months for CIRP period:

IBC, 2016 is a time bound legislature. Wherein, insolvency resolution professional has to observe the hanging sward of “timeline” which is not otherwise binding for any judiciaries.

Due to preserving “social distancing” and close down, NCLT suo moto ordered for extension of CIRP by the moratorium period of 3 months i.e. time of covid-19 close down has been given as moratorium by treating the same as blackout period. This has taken away the timeline issue of a resolution professional.

But, real challenge of a resolution professional is how to protect assets of the CD which is a main and utmost responsibility.

• Challenge will be for the followings-
• How to have going concern of CD’s business during / post lockdown?
• How to manage Liquidity and inventory management?
• How to protect employees from threat of corona virus and to manage robust safety? – a social responsibility too.

• The unanswered question is that, whether this moratorium of 3 month for Covid-19 will be over and above the total maximum available timeline of 330 days which also includes the time of proceedings and litigation time?  In my view yes.

But, it may be a matter of litigation, due to the latest Honorable SC ruling: M/s Manibhadra Polycot & Ors. Civil appeal no. 4392-4393 of 2019- wherein, honorable SC has specifically denied for any relaxation of timeline if demanded “time of extension” is not towards litigation.

(4) Finance minister has also announced a possible temporary suspension of section 7,9 and 10 of the IBC,2016.

This must be the learning from the China economy, were it is heard that, there are more than 200000 IBC cases filed post covid-19!

Nobody knows the real impact of covid-19 but considering vision of our government, it seems that, ministry is expecting a bad time of economy due to the pandemic. And for that, it has given us hint that, if situation demands, ministry will think for suspension of section 7-9-10, so that no more IBC, 2016 petitions can be filed before NCLT and NCLT can function smoothly with the existing cases.

Of course, if such a prohibition comes, it will be a terrible time for creditors who are facing issues with defaults. Banks and FIs have to make the accounts NPA as per the norms of RBI, but they can’t opt for IBC and again the old and time consuming options for recovery will be left out for them to recovery money which results into deterioration of assets of CD as in non-IBC regime, “Control is with CD and not with Creditors”!!

(5) What about the Fees of Insolvency resolution professionals?  There is a common question across RPs and the CoCs for payment of professional fees of a resolution professional which is generally on a monthly basis.

My views:

There is no doubt that, the lockdown has totally stopped the unit and business of corporate debtor. But the challenges for an RP is on many fronts which we have already understood in para 3 above. The RPs are even working from home and taking care of “protecting assets of CD” for the stakeholders.  Needless to say that at least professional fees as agreed on monthly basis must be paid to them which they surely deserve!!

(6) Resolution Applicant where his plan is agreed by the CoC and also approved by the AA?

We all know that IBC, 2016 focuses on the “Resolution and Reconstruction” of a corporate debtor. In the process of CIRP, the interested resolution applicants are bidding for the company/unit for fresh infusion of the funds and providing a going concern status to the ailing corporate debtor. The decision of the RA is based on the internal assessment and the same carry the perspective of business valuation if the same is merged with the existing business and/or considering synergy impacts.

The issue is that post-covid 19 there are high chances that, valuation of such ailing business and units may fall drastically or may loose market. So, for a successful resolution applicant, who is not been handed over the unit, he has to infuse funds and complete the legal formalities under IBC, 2016, may think about the potential loss due to covid-19 being unforeseen event. So, the question is, whether he can disown the quote/bid or can he apply for the reduction of quote (for the potential loss due to covid-19) even after the resolution plan is approved and RA is selected?

My views:

At present, the situation is that Resolution applicant has to honor the resolution plan fully if the same is approved by the Adjudicating authority. There is no clarification till date on this issue.

(7) Valuation to be reconsidered with the impact of Covid-19 on the Corporate debtors under IBC.

I think, one of the most badly impacted area under IBC,2016 is the Valuation. As we know, all the Corporate debtors who are under IBC,2016 need to be valued by two independent valuers – who give fair value and liquidation value for the CD.  Any case which is at stage of preparation of information memorandum etc, it the responsibility of RP to reconsider the valuation aspects and he can not shut his eyes.

Probably, resolution applicants may demand re-valuation of the corporate debtor considering impact of covid-19. And in my view, this may result into severe delay, additional valuation cost.

(8) “Market for Stressed assets” will be the need of an hour and will a real challenge for Resolution applicants during post Covid-19 era. I expect there will be huge reduction in number of resolution applicants due to rough time of liquidity crises. When the business itself is struggling with the liquidity, one should not expect them as the resolution applicants!

In my view, after Covid-19, government should dilute section 29A to a great extent, which basically deals with ineligibility of a resolution applicant and try to push and develop a platform which can be used by RPs for resolution.  

• Pre-Pack chapter under IBC,2016 for Resolution of stressed assets before the admission of CIRP – a very likely scenario in near future.

A Pre-packs procedure is a preplanned insolvency in which, corporate debtor arranges necessary finance by selling its assets or business units prior to filing of insolvency and shareholder and Creditors file reorganization plan of Pre-packs before the respective adjudicating authority or a forum for pre-packs. Currently, pre-packs are popular in UK, Germany, Japan and US and are successfully operated under Bankruptcy Law.

  My view in favour: Pre-packs can definitely result into speedy recovery with continuation of business and without hinderance. The same is expected at very low cost of resolution and saves time of government machinery like NCLT and litigation pain. I think, before CIRP process, corporate debtors would be having more power to bargain as they are having full controls at the stage of going concern. While under IBC, 2016 once the petition is admitted, creditors have the right of control.

My view against:  It will be having negative impact on the unsecure creditors and Operational creditors as the pre-package result into reduction of available assets of the corporate debtors. The reorganization normally result into solving secured creditors first. This will have impact of reducing assets available for other creditors and OCs.

I have tried to analyze the impact of Covid-19 and the government actions w.r.t areas of Insolvency and Bankruptcy Code, 2016. CA Darshan Patel, is a practicing FCA, IP, RV(SFA) and active in the field of IBC and valuations.

Disclaimer: These are my own views and should not be construed as any advice or promotion.

* * *

(after passing on official Gazette by CG, the same will be called as Valuers Act, 2020)

: Overriding Effect :

Valuers Act, 2020 has overriding effects – That means, the proposed act will override any other law if there is anything inconsistencies in other existing laws.

: What about Existing Valuations which are required by various laws?:

The first question comes to our mind is that, what about the present valuations carried on by different valuers, registered under different laws, having different skill sets and in majority of cases, there is no regulatory body for their governance And, Whether this new Act has any impact on the same?

The answer to that is YES !!!

Let me clarify on this, that, Valuers Act, 2020 is suggesting a new era of India where Governance is a pre-requisite. Government has the clear intent of making a common Valuation Institute / Governance / Authority /Regulations etc across India. So that, a valuer can be regulated, inspected and if need arise, can be punished for professional misconduct.

Far-reaching impacts can be understood from the below paras: –

• It has been drafted that, with effect from such date as the C.G. may appoint, the Companies (Registered Valuers and Valuation) Rules, 2017 made under Section 247 of the Companies Act, 2013 shall stand rescinded. Related changes are suggested in Companies Act, 2013.

• Valuation Services has been defined in great detail and it means the services relating to valuation of any asset or liability which is required under the following provisions of-

(i) the Banking Regulation Act, 1949

(ii) the Securities Contacts (Regulation) Act, 1956 : SCRA

(iii) the Wealth Tax Act, 1957

(iv) the Income Tax Act, 1961

(v) the Securities Exchange Board of India Act, 1992

(vi) the Insurance Regulatory and Development Authority Act, 1999

(vii) the Foreign Exchange Management Act, 1999

(viii) the SARFAESIA Act, 2002

(ix) the Prevention of Money Laundering Act, 2002 : PMLA

(x) the Limited Liability Partnership Act, 2008

(xi) the Companies Act, 2013

(xii) the Pension Funds Regulatory and Development Authority Act, 2013

(xiii) the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act,2015

(xiv) the Insolvency and Bankruptcy Code, 2016 or

(xv) any other law, as may be prescribed.

To my opinion, this proposed act has covered 15 different acts for the purpose of valuation. And, after passing of OG, valuer under this new act will have wide applicability.

At present, valuation practise, which is directly under regulation is as per Companies Act, 2013. Which covers valuation cases for various company matters and also for cases under IBC, 2016. Other 12 are out of the regulations and are presently handled by unregulated practitioners!!

: What is Proposed New Model of Governance?:

• National Institute of Valuers : NIV

It’s a special regulatory body under the new Act like, IBBI for IBC-2016. Till that time, IBBI will act at the Institute. Will notify the valuation standards and has role as a regulator, promoter, creating market for valuation services and to protect interest of users of valuation services. It has inspection & investigation rights. NIV decides about Asset classes, add or delete asset class etc – for the purpose of education, examination and Registration of valuers.

•         Valuation professional organizations : Like ICAI RVO. Shall not act as Valuer.

•          Valuers – Individuals and Valuer Entity. Total 4 class of valuers. a) Valuation Entity, b) Associate Valuer upto 5 years of practise as valuer under the act,  c) Fellow valuers having more than 5 years of practise as valuer d) Honorary valuer = person having extra ordinary contribution. But he shall not render Valuation services.

•  Valuer Institute – will deliver educational courses. Shall not act as Valuer.

: Some Important Proposals :

• Separate Degree “AV” “FV” and “HV” will be allotted to valuers as Prefix.
• Draft has the provision to allow Big4s as Multi-disciplinary firms !
• All Existing Valuers under Company law 2013 under companies ( Registered Valuers and valuation ) Rules, 2017 – shall be deemed to be an Associate valuers registered under this act.
• Valuer can get the opinion from the other valuer only when, that valuer is not dealing in same class of assets. Otherwise, the same may tantamount to outsourcing.
• Valuer can get the Expert Assistance from CA, ICWA, CS or any other person who is not a Valuer.
• Section 59(7) of the proposed draft, states that, a valuation report shall not carry a disclaimer or condition, which has potential to dilute the responsibility of the valuer under this Act or makes the valuation unsuitable for the purpose for which the valuation was conducted.
• Valuation report shall be admissible as expert evidence as per Evidence Act, 1872.
• Two Schedules are proposed for professional misconduct of Valuers.
• 1^st Schedule deals with deemed professional misconducts which are not sever but which may lead to penalty extending to Rs 2 Lakh or 3 times the amount of loss – Being higher of the two.
• 2^nd Schedule deals with deemed professional misconducts which are more sever and which may lead to penalty extending to Rs 10 Lakh or 3 times the amount of loss – Being higher of the two.
• Criminal complaint can be lodged against valuer for misconducts listed in 2^nd Schedule of the proposed draft.

It is expected to have full fledged Valuers Act, 2020 in the near future with required changes in the area of deletion of criminal liability, reduction of penalty clauses etc.

Surely, Modi Government has done a fantastic job to have an idea of having full fledged “Valuation Professionals” and a separate act dedicated for new breed of professionals.

Thanks for joining me!

Good company in a journey makes the way seem shorter. — Izaak Walton