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2021 (1) TMI 762 - Board - Companies LawValidity of grant of registration/recognition to PVAI-VPO as a registered valuer organisation - It had come to the notice of the IBBI that PVAI-VPO enrolled Mr. Dhaval Chheda as its member and issued him a certificate on completion of 50 hours of educational course as a member, despite Mr Chheda not being eligible to become a registered valuer. PVAI-VPO also allowed the application of Mr. Nikhil Chandak and Mr. Kapadia Jai Vikram to be forwarded to the IBBI for registration as registered valuers even though they were neither eligible to be enrolled as members of PVAI-VPO nor were eligible to be registered as registered valuers as per clause 9 of Model Bye-Laws of a Registered Valuers Organisation under Part-II of Annexure-III of the Valuer Rules - contravention of Valuer Rules read with section 247 and section 458 of the Companies Act, 2013. HELD THAT:- It is noted that during CIRP process, the valuation is to be done by the registered valuers. Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that in all CIRPs the resolution professional has to appoint two registered valuers within seven days of his appointment but not later than fourty-seventh day of insolvency commencement date. A valuer to be registered with the IBBI has to first enrol himself/herself with RVO recognized by the IBBI and complete the 50 hours mandatory educational programme. Subsequently, the valuer has to clear the valuation examination conducted by the IBBI and thereafter he may register with IBBI - The CIRP Regulations further envisage under regulation 35(1)(a) that estimation of fair value and liquidation value of the assets of the corporate debtor is required to be done in accordance with internationally accepted valuation standards after physical verification of the inventory and fixed assets of the corporate debtor. These values serve as a reference for evaluation of choices, including liquidation and selection of the choice decides the fate of the corporate debtor. In consequence of an error in valuation, a viable corporate debtor could be liquidated. Further, if market participants undertake transactions at a value which is not reflective of market or different from market price, the resources in the economy could be misallocated. Such outcomes are disastrous for the economy and also impinge economic growth. Thus, there exists a need for transparent and credible determination of value of the assets of the corporate debtor to facilitate comparison of choices and for taking informed decisions. Valuation standards and ethical principles ensure accountability and uniformity in valuation services. India has adopted a two-tier mechanism for regulation for valuer professionals where valuers are enrolled with an RVO as a member, and thereafter registered with the Authority. They are subject to a detailed Code of Conduct to maintain credibility of the process of valuation and ultimately the resolution process. Case of Mr. Nikhil Chandak - HELD THAT:- It is found that PVAI-VPO enrolled him as a member while he was in active service and imparted 50 hours educational course to him. Thereafter, PVAI-VPO recommended his application for registration as a registered valuer to the IBBI. At the time of his registration as a registered valuer, he was engaged in employment and this was admitted by him also in Part C of Form A of his application for registration. He also submitted an affidavit to the IBBI mentioning that he would resign from his employment on receiving the registration from the IBBI. In this regard, submission on behalf of PVAI-VPO that initially, it was unaware of the fact of employment of Mr. Chandak and later, when this information came to the knowledge of PVAI-VPO, his application was forwarded on compassionate humanitarian grounds is not tenable. The Companies (Registered valuers and Valuation) Rules, 2017 do not provide for recommendation of an application for registration on humanitarian grounds. It only provides for meeting the requirements of eligibility in terms of qualification, experience and other conditions. It is not a question of human survival and dignity where humanitarian grounds are to be applied - It has been clarified by the IBBI that RVOs can grant membership and provide educational course to those individuals who are eligible under the Valuer Rules and should not be in employment while applying for registration. In the present case, Mr. Chandak was in employment at the time of submission of his application and he also submitted an affidavit to that effect. Case of Mr. Dhaval Chheda - HELD THAT:- It is noted that the contention on behalf of PVAI-VPO during personal hearing that Mr. Chheda was granted membership of PVAI-VPO only for the limited purpose of imparting knowledge and he further admitted that the certificate was granted erroneously to him. It was also admitted by Mr. Chheda in his email dated 26th August, 2019 to the IBBI that he completed his graduation in the year 2018 and would be completing his post-graduation in the year 2020 whereas the certificate was issued to him in August 2019 by RVO without having the requisite years of experience. Case of Mr. Vikram Jai Kapadia - submission of Mr. Pendse, on behalf of PVAI-VPO, that Mr. Kapadia was simultaneously working with two firms at the relevant time is impractical and implausible - HELD THAT:- PVAI-VPO has not provided any justification for removal of the earlier experience certificate dated 23rd March, 2019 by the applicant, nor was he able to explain the contradiction in the experience certificate from Delta valuers dated 23rd March, 2019 and from Mr. Davendra Rangrej dated 2nd January, 2020. This shows that PVAI-VPO had been casual while verifying the contents of the experience certificate and thereafter recommending the application to the IBBI for registration. In the present case, PVAI-VPO is an RVO recognized under sub-rule (5) of rule 13 of the Valuer Rules. It allowed ineligible candidates to be enrolled as members of its organization even though they did not have proper credentials as per the eligibility norms, qualification and forwarded the applications of candidates who did not meet the length of experience required for an individual to be registered as a valuer to the IBBI. It failed in its institutional obligations in not scrutinizing the credentials of some of the candidates in a professional manner while enrolling, granting certificate of completion of educational course and forwarding the applications to IBBI for registration - it is also noted that PVAI-VPO took corrective course of action after taking notice of the aforesaid irregularities. In case of Mr. Nikhil Chandak, when PVAI-VPO came to know about his engagement in service, it refused to process his application initially, however, PVAI-VPO took his resignation letter with an affidavit and processed it further. Mr. Chandak was relieved within three days from service much before further processing by the IBBI. Thus, PVAI-VPO took corrective course of action. In the case of Mr. Dhaval Chheda, the contention that he joined the organization only for knowledge purpose and admission on behalf of PVAI-VPO that the certificate was issued erroneously due to oversight by PVAI-VPO for the first time is accepted. In case of Mr. Kapadia Jai Vikram, PVAI-VPO refused to entertain his application based on the period of experience after post-graduation. Subsequently, Mr. Kapadia submitted his experience after graduation but PVAI-VPO stopped supporting his application and advised Mr. Kapadia to directly approach the IBBI for representing himself due to variation in his statements. Further, the admission on behalf of the RVO that procedural irregularity committed by it for the first time was a bonafide and inadvertent error and occurred due to haste, lack of experience and understanding to deal with the procedural issues relating to emerging profession of valuers, calls for a lenient view. The Authority, in exercise of powers conferred under section 458 of the Companies Act, 2013 read with rule 17 of the Companies (Registered Valuers and Valuation) Rules, 2017 hereby warns the PVAI-VPO that it should be extremely careful, diligent and take effective steps to improve the process of enrolling the members, providing educational course and certificate thereof as also recommending the applications to the IBBI for registration as valuers in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017 - SCN disposed off.
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