JLL, CBRE, other global realty consultants take on valuer rules in Delhi HC

Post September 30, some 50-odd individual registered valuers will carry out all valuation exercises countrywide, across various asset classes, said industry sources

A clutch of international property consultants (IPCs), including JLL, CBRE, Cushman & Wakefield and Knight Frank, have challenged the constitutional validity of valuer rules under Companies Act that puts restrictions on certain companies from becoming a registered valuer.

According to a notification by Ministry of Corporate Affairs, from October 1 onwards a company that is a subsidiary, an associate company or a joint venture, will not be allowed to register as a valuator under the Companies Act or the Insolvency and Bankruptcy Code.

So in effect, after September 30, around 50-odd individual registered valuers will carry out all valuation exercises countrywide, across various asset classes, said industry sources. The crunch in the number of registered valuers in the market could delay the valuation exercise under insolvency and bankruptcy proceeding, some legal experts fear.

Till now both international and Indian valuers were involved in valuation exercises in respect of property, stocks, shares, debentures, securities or goodwill, or any other assets or net worth of a company or its liabilities, under the provision of the Companies Act. However, Section 247 of the Act –– that came into force in October 2017 –– mandated that such valuations have to be done by the registered valuer. But the notified rules under Companies (Registered Valuers and Valuation) Rules, 2017 imposed restrictions on companies that are eligible to be registered valuer.

According to Rule 3(2)(a) “no partnership entity or company shall be eligible to be a registered valuer if 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”.

This effectively made IPCs ineligible to be registered as valuers given the scope of their business activity that includes offering services such as broking, valuation, property management, consultancy, among others. The government’s move is seen as an effort to avoid conflict of interest situations.

Industry estimates are that the valuation business would account for 8-10% of India revenues for the four global property consultants. “Between them, they would have around 300-400 people managing the valuation business,” said an industry player.

The case is listed for hearing in Delhi high court on Wednesday, September 19. The four IPCs are represented by law firm Kochhar & Co.