In today’s fast-paced business world, financial stability and solvency are essential for smooth operations. However, there are times when companies face financial hardships and are unable to meet their obligations. This situation, known as Corporate Insolvency, can arise due to unpaid operational dues, outstanding financial liabilities, or defaults in debt repayments. In such cases, Indian law provides a structured and time-bound resolution mechanism under the Insolvency and Bankruptcy Code, 2016 (IBC).

This article explains what corporate insolvency means, how creditors can initiate the process, and the crucial role of IBBI Registered Valuer under Section 247 of the Companies Act, 2013, especially during the insolvency resolution process.

Understanding Corporate Insolvency
Corporate Insolvency refers to a financial condition where a company (corporate debtor) is unable to meet its outstanding obligations—whether to operational creditors (like vendors and suppliers), financial creditors (such as banks and NBFCs), or any other entities.

In such a case, an application for initiating a Corporate Insolvency Resolution Process (CIRP) can be filed before the National Company Law Tribunal (NCLT) by:

Financial Creditors (Section 7 of IBC)
Operational Creditors (Section 9 of IBC)
Corporate Debtors themselves (Section 10 of IBC)
Initiating Insolvency Proceedings
A corporate insolvency proceeding begins when the default amount crosses the threshold of ₹1 crore, as per the latest notification under the IBC. The process is time-bound and ideally must be completed within 180 days, extendable by another 90 days with NCLT’s approval.

Interestingly, if the debtor has a counterclaim, they can also pursue legal remedies to recover dues through civil suits or other applicable laws. But if recovery is not possible through traditional means, NCLT provides an efficient, transparent, and organized process.

Who Can File an Insolvency Petition?
Any individual or legal entity to whom a debt is owed—whether financial, operational, or statutory—can approach NCLT for initiating CIRP. After admission of the petition, a Resolution Professional (RP) is appointed, who takes over the management of the company and invites potential investors to revive the company under a resolution plan.

This is where valuation becomes a crucial part of the process.

IBBI Registered Valuers – A Critical Role in Insolvency
Valuation of the corporate debtor’s assets and liabilities is a fundamental step in the CIRP. This is performed by Registered Valuers governed under Section 247 of the Companies Act, 2013.

Earlier, valuation practices in India were scattered and lacked uniformity. With the introduction of Section 247 and subsequent rules, the valuation process is now regulated, standardized, and supervised by a dedicated body—Insolvency and Bankruptcy Board of India (IBBI).

Section 247 of Companies Act, 2013 – Explained
– Valuation by Registered Valuers:
Section 247 lays down the legal foundation for valuation in India. It mandates that wherever a valuation is required under the Act—whether for shares, securities, property, net worth, or liabilities—it must be conducted by a Registered Valuer only.

– Key Provisions under Section 247:
Appointment of Valuer:
Valuation must be carried out by a person who is qualified, experienced, and registered as a valuer with the IBBI, and appointed by the Board of Directors or Audit Committee.
Duties of the Valuer:

Conduct impartial and fair valuation.
Exercise due diligence and professional judgment.
Adhere to the prescribed valuation standards and rules.
Avoid conflict of interest – they must not perform valuation for assets in which they hold direct or indirect interests.
Penalties for Contravention:

Fine of ₹25,000 to ₹1,00,000 for general non-compliance.
If fraud is involved, imprisonment up to 1 year and fine up to ₹5,00,000.
Convicted valuers must refund their remuneration and compensate the company or affected parties for losses caused by incorrect or misleading valuations.
The Companies (Registered Valuers and Valuation) Rules, 2017
To implement Section 247, the MCA notified the Valuation Rules on 18th October 2017. These rules specify:

Eligibility criteria for becoming a valuer
Registration process with IBBI
Valuation disciplines (Land & Building, Securities or Financial Assets, Plant & Machinery)
Code of conduct for registered valuers
The rules became effective from 1st February 2019, making it mandatory to appoint a registered valuer for all valuations under the Companies Act and also during insolvency.

Valuation in Corporate Insolvency Process
When a company undergoes insolvency proceedings:

The Resolution Professional (RP) must appoint two IBBI Registered Valuers within 7 days of the commencement of CIRP.
The valuers independently assess:

Fair Value: Estimated realizable value of assets in a normal transaction.
Liquidation Value: Estimated realizable value if the company is liquidated today.
These values form the basis of:

Evaluation of Resolution Plans
Negotiation with potential investors
Determination of the company’s viability
The RP submits the average of both valuers’ reports to the Committee of Creditors (CoC).
Why Registered Valuers Are Important?
Ensure transparency and credibility in valuation
Maintain consistency in valuation practices
Help creditors make informed decisions during CIRP
Minimize manipulation or overvaluation of company assets
Act as independent experts without bias
Benefits of a Time-Bound Insolvency Process
Ensures fast-track revival or closure of insolvent companies
Maximizes asset value recovery for creditors
Prevents misuse of company resources during default
Encourages entrepreneurship by offering an exit strategy
FAQs on Corporate Insolvency & Registered Valuers
– Who can become a Registered Valuer in India?
Any individual with the required educational qualification, work experience, and membership of a Registered Valuer Organisation (RVO) can apply for registration with the IBBI under the relevant asset class.

– Is it mandatory to appoint Registered Valuers during insolvency?
Yes. As per IBBI regulations, appointment of two registered valuers is mandatory during the CIRP to determine fair and liquidation value.

– Can a director of the company act as a valuer?
No. Valuers must be independent and cannot have any direct or indirect interest in the company or its assets, as per Section 247(2)(d).

– What is the punishment for giving a false valuation report?
As per Section 247(3), the valuer is liable to fine, imprisonment, and compensation if found guilty of false or misleading valuation with fraudulent intent.

– How long does the insolvency process take?
Ideally, the CIRP must be completed within 180 days, which may be extended by another 90 days, with total duration not exceeding 330 days, including litigation.

Final Thoughts
Corporate Insolvency is a legal tool designed to balance the interests of creditors and debtors. With the framework of the IBC and oversight from NCLT, it ensures that companies either recover or are liquidated in a systematic manner.

At the heart of this process lies the critical role of Registered Valuers, appointed under Section 247 of the Companies Act, 2013. Their valuation reports form the financial bedrock upon which the fate of the corporate debtor is decided—whether it’s restructuring, resolution, or liquidation.

As India moves toward a more transparent and accountable financial system, the roles of insolvency professionals, registered valuers, and legal frameworks like IBC will only grow stronger and more vital.

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Corporate Insolvency and the Role of IBBI Registered Valuers Under Section 247 of Companies Act, 2013

Corporate Insolvency and the Role of IBBI Registered Valuers Under Section 247 of Companies Act, 2013

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