Ministry of Corporate Affairs has placed on its website a Report of the Committee of Experts which examined the Need for an Institutional Framework for Regulation and Development of Valuation Professionals. Stakeholders may send their comments till 14th May 2020. Usually, Indian stakeholders took no interest in such draft as the law-making process is considered slow. However, stakeholders are equally responsible for plight create by half-hearted laws be it the Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016.
The Draft Valuers Bill does neither create new profession nor a new regulation for the profession. It just creates a new regulator – National Institute for Valuers. This is a proposed law to provide for the establishment of an Institute to promote the development of, and to regulate the profession of valuers and market for valuation services and to protect the interests of users of valuation services in India.
Proposed law tries to consolidate valuation services required in various laws. “Valuation services” under proposed law means the services relating to valuation of any asset or liability-
(a) which is required under the provisions of-
(i) the Banking Regulation Act, 1949 (10 of 1949),
(ii) the Securities Contacts (Regulation) Act, 1956 (42 of 1956),
(iii) the Wealth Tax Act, 1957 (27 of 1957),
(iv) the Income Tax Act, 1961 (43 of 1961),
(v) the Securities Exchange Board of India Act, 1992 (15 of 1992),
(vi) the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),
(vii) the Foreign Exchange Management Act, 1999 (42 of 1999),
(viii) the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (54 of 2002),
(ix) the Prevention of Money Laundering Act, 2002 (15 of 2003),
(x) the Limited Liability Partnership Act, 2008 (6 of 2009),
(xi) the Companies Act, 2013 (18 of 2013),
(xii) the Pension Funds Regulatory and Development Authority Act, 2013 (23 of 2013),
(xiii) the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015),
(xiv) the Insolvency and Bankruptcy Code, 2016 (31 of 2016), or
(xv) any other law, as may be prescribed.
(b) which arises from the needs of the market, as may be specified.
The “Valuer” means a valuer who is registered as such under section 50 and includes a ‘valuation entity’, ‘associate valuer, ‘fellow valuer’ and ‘honorary valuer. Section 48 classifies valuers in four classes of valuers, namely:
(a) valuation entities;
(b) associate valuers;
(c) fellow valuer; and
(d) honorary valuer.
The draft retains present 3 assets classes however has a flexible provision. Based on its assessment of the needs of the market for valuation services, the Institute, by notification specify an asset class; add or delete any asset class; and expand or limit the scope of an asset class, for the purpose of educational courses, examinations and registration of valuers.
REGISTRATION OF VALUERS
The registration of the valuers shall be asset class wise.
A valuer, who is registered under the Companies (Registered Valuers and Valuation) Rules, 2017 made under the Companies Act, 2013 (18 of 2013), as on the date of commencement of provisions of this Chapter, shall be deemed to be an associate valuer registered under this Act.
A person, who is eligible under the law and enrolled with a valuation professional organisation as a member, may make an application to the Institute for a certificate of registration as a valuer.
However, registration as valuer will not permit a person to start his practice as a valuer.
No person shall act as a valuer or hold out as a valuer except under, and in accordance with, a certificate of registration granted under this Act. A valuer shall not render valuation services except under, and in accordance with, the conditions of a certificate of practice granted under this Act.
CONDUCT OF VALUATION
A valuer shall, while conducting a valuation or rendering valuation services, comply with
the valuation standards as notified or modified by the Institute.
Until the valuation standards are notified or modified by the Institute, a valuer shall make valuations or render valuation services in accordance with –
(a) internationally accepted valuation standards and guidelines; or
(b) valuation standards and guidelines adopted by the valuation professional organisation of which he is a member.
A valuer shall conduct a valuation, render valuation services and prepare valuation reports in such form and manner as may be specified.
A valuer shall not outsource valuation services to another person, except to the extent and the manner, as may be specified. The expression “outsource” means the use of a third party to perform the services which have been sought by a client from the valuer. The services which are generally expected to be carried out by a valuer shall not be outsourced. The services which are generally not expected to be carried out by a valuer may be outsourced.
A valuer may seek the opinion or get valuation conducted by another valuer of an asset class, where the scope of valuation services includes a valuation of any asset or liability belonging to an asset class in respect of which he is not registered. He shall disclose the details of such opinion or valuation in his report and he and the other valuer, as the case may be, shall be jointly and severally responsible for such valuation.
Where a valuer considers it necessary to get an opinion in relation to the rendition of valuation services, he may engage one or more experts for assistance, subject to making disclosures. An “expert” includes an engineer, a chartered accountant, a company secretary, a cost accountant and any other person who is authorised to issue a certificate in pursuance of any law for the time being in force, except a valuer registered under the provisions of this Act.
The valuer shall be deemed to be responsible for the opinion or valuation so received. However, the valuer shall not be deemed to be responsible if he proves that he had exercised due diligence.
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 and the valuation report shall be admissible as expert evidence within the meaning of section 45 of the Evidence Act, 1872 (1 of 1872).
A valuer shall not conduct a valuation where he has any conflict of interest. Where a valuer comes to know of or discovers any conflict of interest while conducting a valuation, he shall immediately apprise the same to the stakeholders.
A valuer shall not charge a fee which is linked to the value of assets undervaluation or success of the relevant transaction.
STRUCTURE OF REGULATORY MECHANISM
NATIONAL INSTITUTE OF VALUERS, a bureaucratic organization having a duty of the Institute to promote the development of, and to regulate the profession of valuers and market for valuation services, and to protect the interests of users of valuation services, by such measures as it thinks fit.
COMMITTEE OF VALUERS, a committee of NIV, consists of 20 valuer members to advise on any issue relating to the profession of valuers and market for valuation services.
Valuation Standards Committee, a committee of NIV, shall recommend:
(a) valuation standards; and
(b) valuation guidelines,
to be used by valuers for valuation services.
VALUATION PROFESSIONAL ORGANISATION shall –
(a) promote the professional development of its members;
(b) promote professional and ethical conduct amongst its members;
(c) monitor the activities of its members to ensure compliance with this Act, rules and regulations made thereunder and its bye-laws;
(d) redress of grievances of users against its members;
(e) safeguard the rights, privileges and interests of its members; and
(f) any other function as may be specified by the Institute.
VALUER INSTITUTE shall-
(a) deliver educational courses in accordance with the syllabus and in the manner of delivery, as may be specified;
(b) levy such fee from students undergoing educational courses as may be commensurate with its cost of delivery in a competitive market environment; and
(c) endeavour to arrange financial support for deserving students who cannot afford the full cost of the educational course.
Aishwarya Mohan Gahrana
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