IBBI Valuation – Scope, Timelines & Legal Provisions under IBC

Table of Contents

Valuation under the Insolvency and Bankruptcy Code, 2016 (IBC) is a critical step to ensure fairness, transparency, and confidence among stakeholders during insolvency, resolution, or liquidation processes. IBBI valuation under the Insolvency and Bankruptcy Code plays a key role in determining asset values for informed decision-making. The Insolvency and Bankruptcy Board of India (IBBI) has laid down a structured framework that mandates valuations be carried out by a Registered Valuer under IBBI.

For CEOs, CFOs, Chartered Accountants, Insolvency Professionals, and legal advisors, a clear understanding of valuation under IBC, including its scope, timelines, and governing provisions, is essential for regulatory compliance and strategic decision-making.

What is IBBI Valuation?

IBBI valuation refers to the process of determining the fair value and liquidation value of assets as required under the valuation provisions of the Insolvency and Bankruptcy Code, 2016 and the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations. These valuations enable the Committee of Creditors (CoC), Insolvency Professionals, and adjudicating authorities to take informed and defensible decisions during insolvency proceedings.

Valuation under IBC can only be conducted by a Registered Valuer under IBBI, certified for specific asset classes such as land and building, plant and machinery, or securities and financial assets.

Scope of Valuation under IBC

Valuation requirements under the IBC apply across multiple insolvency and liquidation scenarios where IBBI valuation is mandatory:

Corporate Insolvency Resolution Process (CIRP)

Valuation is required to determine the fair value and liquidation value of the corporate debtor’s assets during CIRP. These values assist the CoC in evaluating and comparing resolution plans submitted by prospective resolution applicants.

Fast-Track Insolvency Resolution

Fast-track insolvency follows valuation principles similar to CIRP, albeit with shorter statutory timelines, as prescribed under IBC valuation regulations.

Liquidation Process

In liquidation proceedings, valuation of assets is undertaken to assess their realizable value, forming the basis for asset sale strategy and distribution of proceeds among stakeholders.

Voluntary Liquidation

Valuation is required prior to initiating voluntary liquidation and must be supported by valuation reports issued by Registered Valuers under IBBI.

Key Legal Provisions and Rules Governing IBBI Valuation

Valuation under the Insolvency and Bankruptcy Code is governed by multiple provisions and regulations, including:

CIRP Regulations, 2016

Regulation 27: Appointment of two Registered Valuers within seven days of commencement of CIRP.
Regulation 35: Determination of fair value and liquidation value; appointment of a third valuer where valuation variance exceeds prescribed thresholds.

Fast-Track CIRP Regulations

Regulations 26 and 34: Appointment of Registered Valuer(s) for valuation of assets.

Liquidation Process Regulations, 2016

Regulations 34 and 35: Liquidator to appoint two Registered Valuers within seven days of liquidation commencement.

Voluntary Liquidation under IBC

Section 59(3)(b)(ii): Valuation report(s) by Registered Valuer required prior to filing declaration of solvency.

These provisions ensure that valuation under insolvency and bankruptcy law is conducted in a transparent, consistent, and standardised manner.

Timelines for Valuation under IBC

Time-bound compliance is a cornerstone of the IBC framework, and valuation timelines are strictly prescribed:

CIRP: Two Registered Valuers must be appointed within seven days of insolvency commencement (but not later than the 47th day). Valuation reports are generally submitted within 40 to 50 days.
Fast-Track CIRP: Appointment of a Registered Valuer immediately after commencement.
Liquidation: Two Registered Valuers must be appointed within seven days of liquidation commencement.
Voluntary Liquidation: Valuation reports are required before filing the declaration of solvency.

Non-adherence to these timelines can expose insolvency professionals and stakeholders to procedural risks and regulatory scrutiny.

Fair Value vs. Liquidation Value under IBC

Both fair value and liquidation value serve distinct but equally important purposes in insolvency proceedings:

Fair Value refers to the estimated realizable value of assets in an arm’s-length transaction, assuming adequate exposure to the market and normal negotiation conditions.
Liquidation Value represents the estimated realizable value of assets if they were sold on the insolvency commencement date under distressed or time-bound conditions.

While fair value aids the CoC in evaluating resolution plans, liquidation value sets the baseline for recoveries in liquidation and acts as a reference point for approving resolution plans.

Role of Registered Valuers under IBBI

Registered Valuers under IBBI play a central role in valuation under IBC and are responsible for:

Conducting independent and unbiased valuation of assets.
Adhering to prescribed valuation standards, methodologies, and professional ethics.
Providing reliable valuation reports to Insolvency Professionals, the CoC, and adjudicating authorities such as the NCLT.
Supporting defensible decision-making during insolvency and liquidation processes.

Why IBBI Valuation Matters

IBBI valuation under the Insolvency and Bankruptcy Code is not merely a statutory requirement but a critical governance and risk-management tool. It ensures:

Regulatory compliance and reduced litigation exposure.
Transparency and fairness in insolvency and liquidation proceedings.
Confidence among creditors, investors, and other stakeholders.
Informed financial, commercial, and legal decision-making.

Conclusion

Valuation under IBC is a well-defined and time-bound process governed by IBBI, ensuring accuracy, fairness, and transparency in insolvency and liquidation proceedings. Adhering to prescribed rules, timelines, and appointing a Registered Valuer under IBBI for valuation under IBC is not only mandatory but essential to safeguarding stakeholder interests and achieving effective insolvency outcomes.

For professional support on IBBI valuation, CIRP valuation, liquidation valuation, or advisory under the Insolvency and Bankruptcy Code, engaging experienced valuation experts ensures compliance and credibility at every stage.

Post Views: 523