RULE 3(2) OF COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017 HAS BEEN UPHELD
The Hon’ble Delhi High Court in CUSHMAN AND WAKEFIELD INDIA PRIVATE LIMITED vs. UNION OF INDIA, on 11th February, 2019, upheld that the Rule 3(2) of the Companies (Registered Valuers and Valuation) Rules, 2017 (herein after referred as “the Rules”) has been made to uphold professional integrity.
Rule 3(2) of the said Rules talks about the eligibility of the Registered Valuers, reads as follows:
“No partnership entity or company shall be eligible to be a Registered Valuer if‑
(a) it has been set up for objects other than for rendering professional or financial services, including valuation services and that in the case of a company, it is not a subsidiary, joint venture or associate of another company or body corporate…”
In the present case, the restriction demarcated under the Rules were challenged by Cushman and Wakefield India Pvt Ltd (hereinafter referred as “the Company”), on the ground of arbitrariness, unreasonableness, and violative of Article 19(1) (g) of The Constitution of India, 1949 i.e. Right to carry business, trade or profession. It was submitted that this was an unreasonable classification.
The Company contended they are not only discriminated against individuals and partnership entities but also such companies which are not subsidiaries, joint ventures or associates of other companies / body corporates.
However, the opposite counsel submitted that restricted entities under Rule 3(2) of the Rules, if allowed as Registered Valuer will not be able to operate with independence and thus credibility cannot be ensured.
This restriction will be beneficial for the Valuers, by aiding them to take individual assessment and thereby eliminating the conflict of interest.
On perusal of the averments by the parties the Hon’ble Delhi High Court held that “The objective and intention behind laying down the impugned Rule is clearly to introduce higher standards of professionalism in valuation industry, specifically in relation to valuations undertaken for the purpose of Companies Act and IBC, 2016. The impugned Rule obviates the possibility of conflict of interest on account of diverging interests of constituent / associate entities which resultantly shall undermine the very process of valuation, being one of the most essential elements of the proceedings before NCLT”
Satyam Singh Pal
The Indian Lawyer
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