TMI Blog2021 (1) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations, 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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. - IBBI/VALUATION/DISC./2/2020 - - - Dated:- 24-11-2020 - Dr. Mukulita Vijayawargiya, Whole Time Member ORDER In the matter of PVAI Valuer Professional Organization, under rule 17 of the Companies (Registered Valuers Valuation) Rules, 2017 This Order disposes of the Show Cause Notice ('SCN'), dated 17th June, 2020 issued to Mr. Avinash Pendse, who is Managing Director of the PVAI Valuer Professional Organisation ('PVAI-VPO') registered with the Insolvency and Bankruptcy Board of India ('IBBI') as a registered valuer organization in all the three asset classes vide registration number IBBI/RV/2018/007. 2. Background 2.1 The IBBI has been delegated by the Central Government to perform the functions of the 'Authority' under the Companies (Registered Valuers and Valuation) Rules, 2017 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e educational qualifications and experience requirements, in accordance with rule 4 of the rules and as specified in its recognition certificate, as valuer members. Clause VI (9) of the Governance Structure and Model Bye-Laws for RVO requires that an RVO shall not enroll an individual as a valuer member if he is not eligible to be registered as a registered valuer with the Authority. 3. Accordingly, recognized RVOs are advised to admit only individuals, who possess the educational qualifications and experience and meet other eligibility requirements, as valuer members. They are also advised to recommend only those valuer members, who have completed the recognized educational course and passed valuation examination of the relevant asset class, to the Authority for registration. (c) The issue of a valuer being in 'employment' at the time of enrolling for the educational course with the RVOs was clarified by the IBBI in the 5th meeting of the CEOs/MDs of the RVOs held on 9th July, 2018 wherein a clarification was sought as to whether, a valuer can be in employment, at the time of enrolling for the educational course with the RVOs. It was clarified that since the RVOs c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence details as per the said two experience certificates were not submitted by the applicant in Form A while applying for registration as valuer. The experience certificates from Delta Valuers and Appraisers LLP dated 23rd March, 2019 and from Mr. Devendra M Rangrej dated 2nd January, 2020 contradict each other as the applicant cannot be in employment with the two employers simultaneously. The contents of both these experience certificates were verified by PVAI-VPO. The RVO has an obligation to carefully scrutinize the application as per the applicable Valuer Rules, bye-laws and the decisions taken in the monthly meetings held with the CEOs/MDs of all the RVOs every month with IBBI. The RVO has failed in its due diligence while verifying the contents of the experience letter and thereafter recommending the application to the IBBI. (g) Therefore, based on materials available on record, it is observed that PVAI-VPO has contravened the following provisions of the Valuer Rules: (i) Rule 5(1) of the Valuer Rules prescribe that the authority shall, either on its own or through a designated agency, conduct valuation examination for one or more asset classes, for individuals, who pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -graduation. 4. Submissions by PVAI-VPO Written submissions made on behalf of PVAI-VPO in the reply dated 1st July, 2020 and oral submissions made on its behalf by Mr Pendse on 13th October, 2020 are summarized as follows: 4.1 It has been submitted at the outset that the IBBI has found four errors by PVAI-VPO, over a period of June 2018 to June 2020, i.e., two years. It was stated that in the last two years, PVAI-VPO had processed 2000 applications, trained more than 1200 students, out of which at least 700 went for examination and at least 350 successfully passed exam, which is very good performance compared to many other RVOs in terms of percentage, number and that too in all three classifications. It was further submitted that the margin of error is less than 1%, which he requested to be considered as a human error. He submitted that PVAI-VPO is learning hands-on as there was no formal training and experience to run a regulatory body extension Organisation of this nature. He stated that PVAI-VPO being a welfare Organisation, takes time to change governance and functioning to become a regulatory body. 4.2 It is submitted that in case of Mr. Nikhil Chandak, he was ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther scrutiny from the IBBI. It was stated in the reply that PVAI-VPO never suspected him as well because, the employer of Mr. Kapadia confirmed the period of his employment during mobile call/personal visit. It was submitted that in small towns, new employees are paid in cash and that makes it difficult to prove at a later stage, the period of employment of the concerned candidate. 4.6 It was further submitted that Mr. Kapadia gave Valuers examination on 27th January, 2019, after completing 5 years of experience after graduation and less than 3 years after post-graduation. Initially, PVAI-VPO refused to entertain his application based on period of experience after post-graduation. Therefore, he submitted his application based on his experience after Graduation. It was submitted that eventually due to concealment of facts and variation in statements by Mr. Kapadia during scrutiny, PVAI-VPO decided to stop supporting him and insisted that Mr. Kapadia may directly approach the IBBI for representing himself for further relief. 4.7 On behalf of PVAI-VPO, it has been stated that during the initial days of the new regulations, this procedural irregularity committed by it was bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate debtor to facilitate comparison of choices and for taking informed decisions. 5.3 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. The Hon'ble Delhi High Court in the matter of Cushman Wakefield India (P.) Ltd. v. Union of India [2019] 152 SCL 526, had observed: The endeavor of the Rules is to introduce a class of professionals where the focus is on the professionals skills of the individuals rather than a business venture. Professionalism is introduced into the profession of valuation, which involves sophisticated skills and a high degree of integrity, impartiality and ethics for the purposes of the Companies Act and IBC, through Valuation Rules which can regulate this area and make valuers more accountable and professionally trained. 5.4 The IBBI Circular No. RVO/12/2018 dated 30th May 2018 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duals 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. 5.6 With respect to the case of Mr. Dhaval Chheda, 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. 5.7 In the case of Mr. Vikram Jai Kapadia, the 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. PVAI-VPO has not provided any justification for removal of the earlier experience certificate dated 23rd March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adia Jai Vikram to IBBI for registration as a valuer without verifying the content of contradictory experience documents submitted by him. 5.10. In the aforesaid matters, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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