Draft Valuers Bill, 2020

(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Companies (Registered Valuers and Valuation) Rules, 2017 made under Section 247 of the Companies Act, 2013 shall stand rescinded.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.