IMPORTANT COURT JUDGMENTS IN FAVOUR OF VALUERS & AGAINST VALUERS OR DEFINING LIABILITIES

Er. Sundeep Bansal, BE, LLB

For the Council of Engineers and Valuers
(For Professional Circulation among Valuers, Chartered Engineers, and Financial Experts)

In Indian law, the liability of bank-empanelled valuers is governed by principles of professional negligence, contract law, and criminal conspiracy. Courts generally protect valuers from criminal liability for simple errors in judgement, provided there is no evidence of active fraud or collusion. However, valuers may face civil consequences, such as removal from panels or blacklisting, if they fail to follow prescribed guidelines or professional standards.

Judgments in Favour of Valuers

These cases emphasize that valuers are experts whose opinions should not be lightly discarded and that mere negligence does not constitute a criminal offence.

CBI vs K. Narayana Rao (2012) 9 SCC 512: The Supreme Court held that professional liability arises only when a valuer is an active participant in a plan to defraud a bank. Mere negligence without tangible evidence of a conspiracy is insufficient for criminal charges.
Central Bank of India vs Bijendra Kumar Jha (2025): The NCLAT New Delhi ruled that valuations by registered valuers should not be lightly interfered with by adjudicating authorities. Courts cannot substitute their own opinion for that of a valuer when the report is based on relevant material.
Rakesh Kumar Sharma vs CBI (2015): The Delhi High Court held that a professional cannot be held liable for a criminal offence based on mere negligence in the absence of tangible evidence of fraudulent intent.
Vijay Kumar Singh vs State of Bihar (2013): The Patna High Court clarified that a valuer is not competent to certify the genuineness of property titles.
Aparna Das vs Banks (2014): The Kolkata High Court ruled that a valuer is not responsible for detecting forged documents provided by the borrower.
Hemraj Phonsa vs CBI (2015): A J&K court affirmed that a valuer has no role in verifying the legal title of documents.
Allahabad Bank vs Kanhaiya Lal Kapoor (1997): The court ruled that valuers are not liable for bank losses solely because their valuation was used for loan approval. Misjudgement must be proven to stem from gross negligence or fraud.
Mohanty & Associates vs Orissa High Court (2014): The court held that blacklisting a valuer cannot be done arbitrarily and must follow the principles of natural justice, including a proper hearing.
NR Raghuram & Co vs IBA (2020): The court found that placing a valuer’s name on a caution list without following mandatory procedures is arbitrary and unconstitutional as it deprives them of their right to carry on business.
G.L. Sultania vs SEBI (2007): The Supreme Court held that unless a valuation is patently erroneous or departs from well-accepted principles without reason, courts should not interfere with an expert’s valuation.

Judgments Against Valuers or Defining Liabilities

These rulings outline when valuers can be held liable, the validity of indemnity clauses, and the standards they must uphold.

Aparna and Associates vs Punjab National Bank (2022): The court upheld the validity of mandatory indemnity clauses for empanelled valuers, stating they are not “unconscionable” and merely fix liability for failing to perform duties.
Practicing Valuers Association (India) vs State Bank of India: The Bombay High Court refused to interfere with bank requirements for indemnity letters, ruling they do not violate Article 14 of the Constitution.
M/S. ABS Wheels Pvt. Ltd vs Union Bank of India: A valuation report was deemed defective because it used a “Hypothetical Development Plan Method” with an illegal 35% deduction, which was contrary to the property’s actual industrial status.
L.N. Rajagopalan vs State (2009): The Madras High Court noted that valuers are supposed to identify the property based on the schedule and contact the Branch Manager, not the borrowers, to avoid conspiracy risks.
Companies Act 2013, Section 247: Under this statute, if a valuer contravenes provisions with the intent to defraud, they face imprisonment (up to one year) and a fine ranging from ₹1 lakh to ₹5 lakh.
Sri P. Venkateshwar Rao vs Canara Bank (2022): Reaffirmed that while indemnity clauses are enforceable if duty failure results in loss, the actual liability must be decided by a court of law.
IBA Handbook Guidelines: Procedures for removal include a show-cause notice and a hearing for “extreme cases” such as professional misconduct or violating code of ethics.
Dr. Syed Sabahat Azim vs Sahaj-E-Village Ltd: The NCLT observed that a valuation report can be challenged on grounds of patent illegality, fraud, collusion, or partiality.
Rule 17 of Companies (Registered Valuers) Rules: Provides for the cancellation or suspension of registration for violations of the Act or professional standards.
Indian Penal Code (IPC) Sections 120B, 420, 467: Valuers can face prosecution under these sections if they are found to have conspired with borrowers to induce banks into delivering funds through fraudulent valuations.

Key Legal Principles for Valuers

Principle	Description
Negligence vs Fraud	Civil negligence (errors) is distinguished from criminal liability (collusion/fraud).
Title Verification	Valuers are generally not responsible for verifying the legal authenticity of titles.
Indemnity	Banks are legally permitted to require indemnity letters as a condition for empanelment.
Expert Status	Valuation is considered a technical, complex field; courts typically defer to expert opinion unless it is “patently erroneous”.