THE COMPANIES ACT, 2013

IBBI as Authority for Registered Valuers

Regulatory Architecture — Section 247

— The integrated regulator of insolvency professionals and registered valuers —

IBBI as Authority for Registered Valuers — Section 247 and the Companies (Registered Valuers and Valuation) Rules, 2017

Introduction

Valuation is a central function in corporate transactions. From issuance of shares (Section 62), buyback of securities (Section 68), schemes of compromise and arrangement (Sections 230-232), to corporate insolvency resolution under the Insolvency and Bankruptcy Code, 2016, valuations determine the consideration, the price of securities, the fair-market value of assets, and the rights of stakeholders. Yet, until 2017, valuations in India were performed by chartered accountants, merchant bankers, and other professionals without a comprehensive regulatory framework — leading to inconsistent methodologies, conflicts of interest, and disputes about valuation accuracy in major corporate transactions and insolvency proceedings.

Section 247 of the Companies Act, 2013, introduced by the Companies (Amendment) Act, 2017, established the regulatory framework for Registered Valuers — a category of professionals authorised to perform valuations under the Act. The Companies (Registered Valuers and Valuation) Rules, 2017 (RV Rules) provide the detailed procedural framework: registration, conduct of valuations, valuation standards, professional ethics, and disciplinary proceedings. Critically, the Insolvency and Bankruptcy Board of India (IBBI) was designated as the 'authority' under the RV Rules — meaning IBBI registers and regulates Registered Valuers, similar to its role in regulating Insolvency Professionals under the IBC. This dual role of IBBI — overseeing both insolvency professionals and registered valuers — reflects an integrated approach to professionalising the corporate-law and insolvency ecosystem.

This article examines the IBBI's role as authority for Registered Valuers — the statutory framework under Section 247, the institutional architecture of IBBI as Authority, the categories of valuers (Securities or Financial Assets, Land and Building, Plant and Machinery), the registration framework, the Registered Valuer Organisations (RVOs) that conduct examinations and oversee members, the valuation standards (IVS aligned with International Valuation Standards), the conduct framework, the practical interaction with corporate transactions and IBC processes, and recent developments. The topic is essential for judicial aspirants and law students because Registered Valuer issues feature prominently in corporate-law litigation, IBC proceedings, and Tribunal disputes.

Part I — Section 247 of the Companies Act, 2013 — The Statutory Framework

The Statutory Provision

Section 247 of the Companies Act, 2013, as inserted by the Companies (Amendment) Act, 2017, provides:

'(1) Where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by a person having such qualifications and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company.'

Five Key Elements of Section 247

1. Mandatory professional valuation — for assets, net worth, or liabilities under various provisions of the Companies Act;Registered Valuer requirement — only persons registered as valuers under Section 247 can perform such valuations;Qualification framework — Central Government prescribes qualifications, experience, registration manner, and terms;Appointment by Audit Committee or Board — valuers are appointed by the Audit Committee, or in its absence, by the Board of Directors;Independence — the valuer must be independent and not have direct or indirect interest in the company or its assets.

Where Section 247 Requires Valuation

Multiple Companies Act provisions trigger Section 247 valuation requirements:

• Section 62(1)(c) — Further issue of shares to persons other than existing shareholders (preferential allotment) requires valuation by Registered Valuer;
• Section 68 — Buyback of securities requires valuation;
• Section 76(1) — Public deposit-taking by eligible companies requires valuation;
• Section 192 — Restrictions on non-cash transactions involving directors require Registered Valuer report;
• Section 230 — Compromise/arrangement schemes require valuation report from Registered Valuer;
• Section 232 — Mergers and amalgamations require Registered Valuer reports;
• Section 281 — Voluntary winding up requires valuation;
• Section 230(2)(c)(v) — Specific Registered Valuer requirements in the takeover/merger context;
• Various other provisions involving valuation.

Section 247(2) and (3) — Valuer Independence

Section 247(2) provides that the valuer shall be appointed by the Audit Committee or, in its absence, by the Board, in such manner as may be prescribed.

Section 247(3) provides crucial independence safeguards:

• Valuer cannot have direct or indirect interest in the company at the time of appointment or during three years before/after the valuation;
• Valuer must conduct valuation impartially and to the best of his judgment;
• Valuer is liable for any negligence or misconduct in the valuation report.

Section 247(4) — Penalty Framework

Section 247(4) prescribes penalties for non-compliance:

• Non-compliance with Section 247 — fine up to ₹25,000 to ₹1,00,000;
• Where valuation is wilfully, fraudulently, or unprofessionally conducted — up to 1 year imprisonment + fine ₹1 lakh to ₹5 lakhs.

Part II — IBBI as Authority Under the Rules

Designation of IBBI as Authority

The Companies (Registered Valuers and Valuation) Rules, 2017 designate the Insolvency and Bankruptcy Board of India (IBBI) as the 'Authority' for matters relating to Registered Valuers. This designation was made by Central Government notification under Section 247 read with Rule 1A. The IBBI was chosen because:

• It already had institutional infrastructure for regulating insolvency professionals;
• Its mandate aligned with valuation services that are critical to insolvency proceedings;
• It had operational expertise in registering, regulating, and disciplining professional intermediaries;
• Coordinated regulation of valuers and insolvency professionals creates synergies.

IBBI's Powers as Authority

As Authority under the RV Rules, IBBI has the following powers:

1. Registration — Register applicants as valuers in different categories (Securities/Financial Assets, Land and Building, Plant and Machinery);Recognition — Recognise Registered Valuer Organisations (RVOs) which conduct examinations and oversee their members;Examinations — Conduct or oversee valuation examinations through RVOs;Standards — Issue valuation standards and amend them periodically;Conduct — Issue codes of conduct for valuers and RVOs;Discipline — Take disciplinary action against valuers and RVOs;Investigation — Investigate complaints against valuers and RVOs;Penalty — Impose penalties for misconduct;Cancellation/Suspension — Cancel or suspend registration of valuers and RVOs;Inspection — Inspect activities of valuers and RVOs;Coordination — Coordinate with NCLT, NCLAT, MCA, SEBI, and other regulators.

IBBI Organisational Structure for Valuer Regulation

Within IBBI, valuer regulation is handled by:

• Chairperson — Overall strategic oversight;
• Whole-time Member (Valuation) — Specific responsibility for valuer regulation;
• Disciplinary Committee — Adjudicates complaints against valuers;
• Technical Committee — Recommends standards and policy issues;
• Registration Committee — Reviews registration applications;
• Specific officers and inspectors — handle daily operations.

Part III — Categories of Registered Valuers

Three Asset Classes

The RV Rules provide for three categories of Registered Valuers, each specialising in a distinct asset class:

Category 1 — Securities or Financial Assets

Valuers in this category are qualified to value:

• Equity and preference shares;
• Debentures and other debt instruments;
• Derivatives;
• Other financial securities;
• Fund interests, partnership interests;
• Shareholdings, capital structures of companies;
• Goodwill and intangible assets;
• Net worth and liabilities of companies.

Eligibility for Category 1: Chartered Accountants, Cost Accountants, Company Secretaries with prescribed qualifications and experience; certain other specified professionals.

Category 2 — Land and Building

Valuers in this category value:

• Land (urban, suburban, rural, agricultural, industrial);
• Buildings (residential, commercial, industrial, institutional);
• Real estate developments and projects;
• Mortgage-related valuations;
• Property rights and easements.

Eligibility for Category 2: Civil engineers, architects, town planners, valuers with prescribed qualifications and at least specified years of experience.

Category 3 — Plant and Machinery

Valuers in this category value:

• Industrial plant and machinery;
• Manufacturing equipment;
• Specialty machinery;
• Used and second-hand equipment;
• Inventories of plant and machinery;
• Specialised industrial assets.

Eligibility for Category 3: Mechanical engineers, electrical engineers, industrial engineers with prescribed qualifications and experience.

Part IV — Registration Process

Registration Through RVOs

Individuals and partnership entities seeking to register as valuers must:

1. Become a member of a Registered Valuer Organisation (RVO) — recognised by IBBI in the relevant category;Complete the Educational Course conducted by the RVO — typically 50-150 hours of training depending on category;Pass the Valuation Examination — conducted by IBBI through RVOs at periodic intervals;Apply for IBBI registration — through the RVO, with prescribed fees and documentation;Obtain Certificate of Registration from IBBI — valid initially for typically five years, renewable;Maintain Continuing Professional Education (CPE) credits — annual minimum prescribed.

RVOs as Self-Regulatory Bodies

Registered Valuer Organisations (RVOs) are recognised by IBBI as self-regulatory organisations for valuers in their categories. Major RVOs include:

• Institute of Chartered Accountants of India (ICAI) — for Securities/Financial Assets category;
• Institute of Cost Accountants of India (ICMAI) — for Securities/Financial Assets category;
• Institute of Company Secretaries of India (ICSI) — for Securities/Financial Assets category;
• ICAI Registered Valuers Organisation (ICAIRVO) — separate body of ICAI for valuer functions;
• Institution of Valuers (IOV) — for Land and Building, Plant and Machinery categories;
• Practising Valuers Association of India (PVAI) — multiple categories;
• Other recognised RVOs — registered with IBBI for specific categories.

Registration Conditions

Once registered, a valuer must comply with:

• Annual fees to IBBI and RVO;
• CPE requirements — annual minimum hours of professional development;
• Code of conduct — issued by IBBI and RVO;
• Valuation standards — issued by IBBI;
• Reporting requirements — disclosing material conflicts of interest, ongoing disputes, complaints;
• Compliance with all applicable Companies Act and IBC provisions.

Part V — Valuation Standards

IBBI Valuation Standards

IBBI has issued comprehensive valuation standards aligned with International Valuation Standards (IVS) issued by the IVS Council:

• ICAI Valuation Standard (IVS) Series — for Securities and Financial Assets;
• Land and Building Valuation Standards;
• Plant and Machinery Valuation Standards;
• Common standards on professional ethics and reporting.

Key Standards Concepts

• Fair Market Value — the price at which the asset would change hands between willing buyer and willing seller;
• Liquidation Value — value in case of forced or distressed sale;
• Going-Concern Value — value as part of an operating business;
• Value-in-Use — value to a specific user or use;
• Investment Value — value to a specific investor;
• Methods — Cost Approach, Sales Comparison Approach, Income Approach (DCF, capitalisation), each with sub-methods.

Mandatory Reporting Requirements

Every valuation report must include:

1. Identification of the valuer (name, registration number, category);Identification of the asset being valued (description, location, quantity);Date of valuation;Purpose of valuation;Methodology used;Key assumptions;Sources of information;Major risks and limitations;Conclusion of value with reasoned analysis;Valuer's certifications regarding independence, professional conduct, and standards compliance.

Part VI — Discipline and Misconduct

Grounds for Disciplinary Action

IBBI can initiate disciplinary action against a valuer for:

• Non-compliance with valuation standards;
• Conflict of interest violations;
• Negligent or inaccurate valuations causing harm;
• Wilful misconduct, fraud, or dishonest valuations;
• Non-compliance with IBBI directions;
• Failure to disclose material facts;
• Code of conduct violations;
• Repeated complaints or grievances against the valuer;
• Cessation of qualification or eligibility;
• Insolvency or other relevant personal circumstances.

Disciplinary Process

1. Complaint or self-detected violation initiates the process;Show-cause notice to valuer with prescribed period for response;Hearing by Disciplinary Committee — opportunity to be heard;Findings — based on evidence and submissions;Order — by Disciplinary Committee;Penalty — warning, censure, fine, suspension, cancellation of registration;Appeal to NCLAT — within 45 days of order.

Appellate Framework

Appeals from IBBI orders related to valuers go to the National Company Law Appellate Tribunal (NCLAT) — same appellate framework as for insolvency professionals. From NCLAT, further appeal lies to the Supreme Court on substantial questions of law.

Part VII — Notable Cases and Disciplinary Actions

IBC Valuation Disputes

(a) Disagreement between valuers (CIRP requires two independent valuers per Regulation 27 of CIRP Regulations); (b) Significant gap between liquidation value and going-concern value affecting resolution plan economics; (c) Valuer methodology errors leading to revaluation directions; (d) Conflicts of interest between valuers and resolution applicants; (e) Disputes about the appropriate valuation date and methodology. The case law on valuation disputes is rapidly developing as IBC matures.

Section 230 Scheme Cases

(a) Adequacy of Registered Valuer report under Section 247 standards; (b) Independence requirements; (c) Methodology adequacy; (d) Disclosure of assumptions and limitations; (e) Court's role in evaluating valuer reports as part of scheme approval. Indian courts increasingly apply rigorous scrutiny to valuation reports in scheme approvals.

IBBI Disciplinary Orders

(a) Failure to maintain required CPE credits — fines and suspensions; (b) Conflict of interest violations — censure or cancellation; (c) Methodological errors in valuations — corrective directions; (d) Failure to disclose material information — fines; (e) Wilful or fraudulent valuation — cancellation of registration. The disciplinary jurisprudence is establishing the standards expected of Registered Valuers in India.

Major Sectoral Cases

Part VIII — Coordination with Companies Act and IBC

Interface with Companies Act

Registered Valuers play a critical role across many Companies Act provisions:

Interface with IBC

In CIRP under the IBC:

• Section 5(13) IBC — Definition of liquidation value;
• Regulation 27 of CIRP Regulations — Two independent valuers must be appointed by the Resolution Professional within 7 days of CoC formation;
• Each valuer determines fair value and liquidation value;
• Where significant divergence between valuers, third valuer is appointed;
• Liquidation value is critical floor for resolution plan acceptability;
• Valuations factor into voting on resolution plans by CoC.

Interface with SEBI

Registered Valuers also feature in SEBI regulations:

• Buyback Regulations — pricing requires Registered Valuer report in some categories;
• Takeover Code — pricing of shares acquired through open offer;
• ICDR Regulations — pricing of preferential allotments by listed companies;
• REIT/InvIT Regulations — periodic valuation of assets.

Interface with Income Tax Act

Income Tax Act references include:

• Section 56(2)(viib) and (x) — issue of shares at premium / receipt of property below FMV;
• Section 9 — capital gains computations;
• Tax assessment of business assets, intangibles, etc.;
• Determination of fair market value for tax purposes.

Part IX — Practical Illustrations

Illustration 1 — Preferential Allotment

XYZ Ltd. wishes to allot shares to Investor A at ₹150 per share (face value ₹10). Issue: Section 62(1)(c) compliance? Held: (a) Section 62(1)(c) preferential allotment requires Registered Valuer report; (b) Company appoints Registered Valuer in Securities/Financial Assets category through Audit Committee; (c) Valuer conducts independent valuation using DCF or market-comparable methods; (d) Valuer issues Valuation Report stating fair value (e.g., ₹145 per share); (e) Allotment at ₹150 per share is permissible (above fair value). If allotment had been at ₹100 (below fair value), regulatory issues arise. The Registered Valuer report ensures arm's-length pricing and protects existing shareholders.

Illustration 2 — Merger Scheme

Acme Industries Ltd. wishes to merge with Bharat Enterprises Ltd. through a scheme of arrangement under Sections 230-232. Issue: Valuation requirement? Held: (a) Both companies must obtain Registered Valuer reports for Section 230(2)(c)(v); (b) Reports establish share exchange ratio (e.g., 1 Acme share = 2.5 Bharat shares); (c) Independent valuers from Securities/Financial Assets category; (d) Reports filed with NCLT as part of scheme application; (e) Court reviews valuation reports for soundness; (f) Stakeholder objections may include challenges to valuation; (g) Court approves scheme if valuation methodology is sound and procedural compliance is complete.

Illustration 3 — IBC CIRP Valuation

ABC Pvt. Ltd. is in CIRP. Resolution Professional appoints two Registered Valuers under Regulation 27. Issue: Process? Held: (a) Two independent valuers from Securities/Financial Assets category appointed; (b) Each valuer values: (i) Fair value (going-concern); (ii) Liquidation value; (c) Valuers' reports are confidential and shared with CoC only; (d) If divergence between valuers exceeds prescribed threshold, third valuer appointed; (e) Liquidation value sets floor for acceptable resolution plans (Section 30(2)(b) IBC); (f) Resolution Plans are evaluated by CoC against valuation benchmarks; (g) Final approved Plan must respect operational creditors' minimum entitlement based on liquidation value.

Illustration 4 — Buyback of Securities

Listed Co. Ltd. plans to buy back 10% of its equity at ₹500 per share. Issue: Valuation requirement? Held: (a) Section 68 buyback requires Registered Valuer report (where SEBI Buyback Regulations also require); (b) Registered Valuer assesses fair value as ₹485; (c) Buyback at ₹500 above fair value is permissible (premium to fair value); (d) Audit Committee approves engagement of valuer; (e) Board considers valuation report; (f) Shareholders consider report at general meeting; (g) Listing approval requires the report; (h) Stock Exchange and SEBI scrutiny; (i) Company conducts buyback as approved.

Illustration 5 — Disciplinary Proceeding

Mr. Mehta, a Registered Valuer (Securities/Financial Assets), is alleged to have valued shares of Promoter's Affiliate Co. without proper independence assessment. The valuation was used for Section 192 non-cash transaction with the Promoter Director. Issue: IBBI proceedings? Held: (a) Complaint received by IBBI; (b) IBBI Disciplinary Committee constituted; (c) Show-cause notice issued to Mr. Mehta; (d) He responds with documents and explanation; (e) Hearing conducted by Committee; (f) Investigation reveals Mr. Mehta failed to disclose his prior advisory engagement with the Promoter Director's family business; (g) Committee finds conflict of interest violation under RV Rules; (h) Order: 6-month suspension of registration + fine of ₹50,000 + censure; (i) Mr. Mehta may appeal to NCLAT within 45 days.

Part X — Critical Evaluation

Strengths of the Registered Valuer Framework

• Comprehensive professional regulation closes a major regulatory gap;
• Three categories address specific asset classes appropriately;
• RVO model provides specialised oversight by professional bodies;
• Standards aligned with international valuation practices;
• Disciplinary mechanism deters misconduct;
• Appellate framework through NCLAT provides judicial review;
• Coordinated regulation by IBBI alongside insolvency professionals creates synergy;
• Continuing Professional Education ensures ongoing competence.

Weaknesses and Reform Issues

• Limited number of registered valuers in some categories — particularly specialised industrial categories;
• Variation in quality of valuations across registered valuers;
• Difficulty in monitoring conflicts of interest in opaque relationships;
• Standards application is sometimes inconsistent;
• RVO oversight quality varies by RVO;
• Disciplinary process can be slow;
• Coordination between RV Rules and SEBI/RBI valuation requirements sometimes complex;
• Fees structure may discourage smaller-value engagements.

Reform Proposals

1. Increase number of registered valuers in specialised categories through targeted training programmes;Strengthen RVO oversight requirements and quality assurance;Enhanced disclosure of valuer engagements and conflicts of interest;Specialised digital tools to support valuation methodology consistency;Periodic peer review of major valuations;Coordinated regulatory framework between IBBI, SEBI, RBI, and other regulators;Updated standards reflecting emerging asset categories (digital assets, ESG-related valuations);Faster disciplinary process for serious misconduct;Greater transparency in IBBI disciplinary decisions and reasoning.

Part XI — Recent Developments

Digital Transformation

Recent initiatives in valuer regulation include:

• Online application and renewal processes;
• Digital examination platforms;
• Online CPE courses by RVOs;
• Digital reporting and submission of valuations;
• Enhanced data analytics for monitoring valuer performance.

Standards Updates

IBBI has periodically issued updated valuation standards:

• Updated approaches for valuing digital assets and intellectual property;
• Enhanced approaches for ESG-linked valuations;
• Specific guidance on stressed asset valuations under IBC;
• Enhanced reporting requirements;
• Coordinated standards with international IVS frameworks.

New Valuer Categories Discussion

There is ongoing discussion of expanding the three categories to include specialised areas:

• Intangible assets specifically (intellectual property, brands, customer lists);
• Real estate as separate from land and building;
• Specialised industrial assets (mining, oil and gas, infrastructure);
• Cross-category specialists for complex transactions.

Part XII — Exam-Focused Summary

Part XIII — Conclusion

The Registered Valuer regime under Section 247 of the Companies Act, 2013 represents a transformative reform in Indian corporate-law administration. Before 2017, valuations under the Companies Act were performed by chartered accountants, merchant bankers, and other professionals without specialised regulation, leading to inconsistent methodologies, undisclosed conflicts of interest, and disputes about valuation accuracy in major corporate transactions. The framework introduced by Section 247 and the Companies (Registered Valuers and Valuation) Rules, 2017 — and its coordinated administration through IBBI as Authority — created a comprehensive regulatory architecture: registration through RVOs, professional qualifications, valuation standards, conduct framework, and disciplinary mechanism. The three-category framework (Securities/Financial Assets, Land and Building, Plant and Machinery) ensures specialised expertise for different asset classes.

Two themes deserve emphasis. First, the IBBI's dual role — regulating both Insolvency Professionals (under the IBC) and Registered Valuers (under the Companies Act) — creates organic synergy. Valuations are central to insolvency proceedings, and the same regulator overseeing both functions ensures coordinated standards and disciplinary frameworks. The integration is operationally efficient and reflects an integrated approach to corporate-law professionalisation. Second, the alignment of Indian valuation standards with International Valuation Standards (IVS) reflects India's commitment to global integration. As Indian corporate transactions increasingly involve cross-border elements (foreign investment, M&A, bond issuance, joint ventures), aligned valuation methodologies facilitate international acceptance of Indian valuations.

For the judicial aspirant and law student, this topic is essential because Registered Valuer issues feature prominently in: (a) Corporate-law litigation involving Section 230 compromise/arrangement schemes, Section 232 mergers, Section 62 preferential allotments; (b) IBC proceedings where valuation is critical to resolution plan acceptability; (c) SEBI and securities-market disputes; (d) Tax disputes involving fair market value determinations; (e) Tribunal disciplinary proceedings against valuers themselves. Mastery of the framework — Section 247 statutory basis, the RV Rules procedural framework, IBBI's institutional role, RVO oversight, valuation standards, and disciplinary mechanism — equips the aspirant to handle complex commercial-law matters where valuation issues arise. As the framework matures and the body of jurisprudence develops, this area will continue to grow in importance.