Delay In Seeking Revised Valuation Of Asset Not Enough To Term It Sham: NCLT Mumbai
The National Company Law Tribunal (NCLT) at Mumbai has held that a revised valuation obtained after discovery of additional restrictions on a property cannot be dismissed as a sham merely because there was a delay in seeking such revision.
It said valuation is a technical exercise and must be assessed in light of the facts available to the valuer at the relevant time.
“Though, there is considerable delay in seeking revised valuation report consequent upon purported discovery of “red-zone” classification of property, in question, however, the said delay, in itself, can not lead to a conclusion that revised valuation is a sham exercise, more so when the Valuer, initially, had based his report on basis of classification of subject property as “Non-Agriculture Land” without any restriction as applicable to properties falling under “red-zone”, the tribunal observed.
A coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar dismissed an application filed by Subhash Ganpatrao Buty, an unsecured financial creditor. He had challenged the valuation and sale of a land parcel during the insolvency of Gigeo Construction Company Pvt Ltd.
The CIRP was initiated on June 4, 2024, on a petition filed by Omkara Asset Reconstruction Pvt Ltd. During the process, an eight-acre land parcel situated in Nagpur was classified as a non-core asset and proposed to be sold. Initially two registered valuers submitted valuation reports on the premise that the land was non-agricultural and free from zoning restrictions.
Buty had alleged that the resolution professional was aware of the land's “red-zone” classification at an earlier stage but delayed seeking revised valuation reports, resulting in substantial undervaluation. It was contended that the revised valuation, obtained much later, was intended to depress the asset value.
Rejecting the plea, the tribunal noted that the initial valuation was based on incomplete information, as the “red-zone” classification and the agricultural nature of the land were conclusively established only after verification of official records and issuance of a zonal certificate. It said once these additional facts came to light, the resolution professional rightly sought revised valuation reports from the same registered valuers.
Finding no statutory violation or fraud, the NCLT dismissed the application and directed the resolution professional to examine the applicable policy on compounding of unauthorized construction in respect of the Fortune Mall property.