WHAT COMES UNDER THE SCOPE OF WORK

&

WHAT DOES NOT COME UNDER THE SCOPE OF WORK

OF THE VALUER

Er. Sundeep Bansal, BE, LLB

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

---

Here is a detailed breakdown of what comes under and beyond the scope of a bank valuer:
I. Within the Scope of Bank Valuer (Duties & Responsibilities)

As established by various courts and the Insolvency and Bankruptcy Board of India (IBBI), a valuer’s primary duties include:
• Accurate Valuation Reporting: Conducting a “true and fair” valuation of Land & Building, Plant & Machinery, or Securities.
• Methodology Compliance: Adhering to recognized valuation standards (Market, Income, or Cost Approach) and justifying the method used.
• Due Diligence and Physical Inspection: Physically inspecting the property, verifying measurements, and comparing with title deeds (e.g., in G.Satyanand Rao vs The State, 2018, the court highlighted that failure to physically verify and relying on false facts constitutes criminal conspiracy).
• Reporting Specific Values: Providing Fair Market Value, Realizable Value, and Distress Sale Value.
• Documentation: Maintaining written, contemporaneous records for three years to support their valuation decisions.
• Disclosing Interests: Disclosing any direct or indirect interest in the assets being valued to avoid conflicts of interest.

II. Beyond the Scope of Bank Valuer (Limitations & Non-Liability)

Courts have held that valuers are experts, but they are not insurers of the loan. Their scope does not include:
• Guaranteeing Loan Repayment: A valuer is not responsible for losses if the borrower defaults, as valuation is an informed estimate, not a guarantee of future price.
• Legal Title Verification: A valuer is generally not responsible for verifying the legal title of the property, as this is the duty of the bank’s legal counsel. However, they must report any discrepancies found in the documents provided.
• Liability for Market Crashes: a valuer is not liable for losses caused by a general market crash, only for the difference between their negligent valuation and the true value at that time.
• Investigating Borrower’s Character: A valuer is not responsible for the creditworthiness of the borrower.
• Ignoring Statutory Rules: A valuer cannot bypass mandatory valuation rules (e.g., using a non-standardized method just to inflate value).
• “Convenience Valuation”: A valuer must not provide inflated valuations to help a borrower secure a higher loan.

III. Key Judicial Pronouncements

• Allahabad Bank vs Kanhaiya Lal Kapoor & Ors (1997): The court ruled that valuers are not liable for losses solely because their valuation was used in a loan approval process. Mis-judgment must be proven to stem from gross negligence or fraudulent intent.
• Miheer H. Mafatlal vs. Mafatlal Industries Ltd (Supreme Court): The Court will not interfere with a valuer’s report unless the approach is patently erroneous, violates accepted principles, or fails to consider relevant factors.
• G.Satyanand Rao vs The State (2018): A panel valuer who issues inflated valuation certificates in collusion with borrowers and bank employees to secure loans is liable under criminal conspiracy (IPC 120B).

IV. Consequences of Acting Beyond Scope (Liability)

If a valuer acts beyond their professional duties (i.e., commits negligence or fraud), they are liable for:
1. Refunding Fees: Refund of remuneration received.
2. Damages: Payment for losses arising from misleading statements.
3. Criminal Prosecution: Imprisonment under Sections 420, 120B IPC if fraud is proven.
4. Debarment: Removal from the bank’s panel and IBBI registration cancellation.

Published by: Council of Engineers and Valuers (CEV)