PROFESSIONAL LIABILITY OF VALUERS AND OTHER EXPERTS ENGAGED BY BANKS IS LIMITED TO THE SCOPE OF THEIR ASSIGNED DUTIES

VIJAY KUMAR SINGH Vs. STATE OF BIHAR

LANDMARK JUDGEMENT & CASE LAW RELATED TO VALUATION

Er. Sundeep Bansal, BE, LLB

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

VIJAY KUMAR SINGH Vs. STATE OF BIHAR

Patna High Court – Criminal Miscellaneous No. 27162 of 2011
Decision Date: 10 December 2013
Coram: Hon’ble Mr. Justice Dinesh Kumar Singh

Background of the Case

The present application was filed under Section 482 of the Code of Criminal Procedure seeking quashing of the order dated 05.01.2011 passed by the learned Chief Judicial Magistrate, Patna, whereby cognizance was taken and process issued against the petitioner for offences punishable under Sections 406, 420, 467, 468, 471, 109 and 120B of the Indian Penal Code in Patna Kotwali P.S. Case No. 393 of 2008.

Facts of the Case

A cash credit loan of Rs. 7.75 lakhs was sanctioned on 13.02.2006 by the bank in favour of Manoj Kumar, proprietor of M/s Om Trading Company, a medicine distribution firm.

For securing the loan:

Stock lying in the godown of the firm was pledged with the bank.
A title deed dated 11.06.1992 relating to land measuring 2.5 kathas situated at Mauza Ranipur, By-Pass Road, Patna was submitted as collateral security.

The roles of various persons were as follows:

Arunjay Kumar, Advocate of the bank, issued the non-encumbrance certificate and legal opinion.
Vijay Kumar Singh (petitioner), an empanelled valuer of the bank, assessed the valuation of the land after visiting the site and issued a valuation certificate.
Shankar Prasad Sah, Chartered Accountant, submitted the viability report.
Based on these reports, the loan was sanctioned.

Subsequently:

The borrower did not operate the loan account nor deposit sale proceeds.
The account was declared NPA.
On verification, the title deed was found to be forged and fabricated.
The pledged stock was also removed from the godown without the bank’s permission.
The recoverable amount was Rs. 8,16,428.

An FIR was lodged alleging conspiracy and misappropriation, and after investigation, charge-sheet was submitted against the petitioner and others, excluding the loanee and guarantor.

Issues for Consideration

Whether the petitioner, being a bank valuer, could be held criminally liable for offences under Sections 406, 420, 467, 468, 471, 109 and 120B IPC.
Whether there was any material to show abetment or criminal conspiracy on the part of the petitioner.
Whether continuance of criminal proceedings against the petitioner would amount to abuse of the process of court.

Submissions

Petitioner’s contention: The valuation report itself clarified that verification of title and legal aspects was the responsibility of the bank and its legal advisor. The petitioner only assessed the valuation of the land and was not required to verify title or genuineness of documents. Reliance was placed on CBI, Hyderabad v. K. Narayana Rao.
State’s contention: The petitioner, along with others, defrauded the bank by hatching a conspiracy with the loanee and guarantor.

Court’s Analysis and Findings

The Court observed:

The bank was primarily defrauded by the loanee, who submitted a forged title deed.
The petitioner, as a valuer, was not entrusted with verification of title and was not responsible for certifying genuineness of ownership.
There was no entrustment, hence no offence under Section 406 IPC.
There was no dishonest inducement by the petitioner; the valuation amount was not disputed, hence Section 420 IPC was not attracted.
Forgery-related offences under Sections 467, 468 and 471 IPC were attributable, if at all, to the loanee.
There was no material, direct or circumstantial, showing:
- Instigation,
- Intentional aid, or
- Agreement to commit an illegal act
  so as to constitute abetment under Section 107 IPC or criminal conspiracy under Section 120A IPC.

The Court relied upon the principles laid down by the Supreme Court in CBI, Hyderabad v. K. Narayana Rao (2012) 9 SCC 512, holding that a professional can be criminally prosecuted only if there is tangible evidence of active participation in a conspiracy to defraud.

Final Judgment

The High Court held that no offence, as alleged, was made out against the petitioner. Allowing the prosecution to continue would amount to abuse of the process of the court.

Accordingly:

The order dated 05.01.2011 issuing process,
The cognizance taken,
And the entire criminal prosecution against the petitioner was quashed.

Key Takeaway

This judgment reaffirms that the professional liability of valuers and other experts engaged by banks is limited to the scope of their assigned duties. In the absence of clear evidence of conspiracy, abetment, or dishonest intent, criminal prosecution against such professionals is unsustainable and liable to be quashed to secure the ends of justice.