Inspection Policy

CEV INTEGRAL APPRAISERS FOUNDATION INSPECTION POLICY

  1. 1. INTRODUCTION

1.1     Following extracts from the Monitoring Policy, as approved by the Governing Board of CEV- IAF, are relevant to understand the requirement to draw an Inspection Policy of the company.

1.1.1 In pursuance of its monitoring objectives and in fulfillment of its obligations as set out in this Monitoring Policy, the CEV-IAF shall draw a scheme to undertake monitoring   visits   to   its   Registered   Valuer   Members   for   inspection   of   their information and records and to review of compliance of obligations under the Act & Rules.

1.1.2 To remove subjectivity of the evaluation process, the Monitoring Committee may design and implement an appropriate check list and evaluation format to calculate 'overall compliance point index (OCPI)' which shall determine degree of compliance with respect to provisions of the act, rules, regulations, and guidelines issued thereunder and the bye-laws, the code of conduct and the directions given by the Governing Board.

1.1.3 On completion of a monitoring visit to the registered valuer member, the Monitoring Team shall submit its report setting out the scope of the monitoring visit, the extent to which the registered valuer member comply with the terms of reference of Team and relevant law and practice and other legislation, the extent to which professional competence has been tested and achieved and any other information which the Monitoring Team would like to add in the report.

1.1.4 The Monitoring Committee, among others, has been assigned the functions to undertake or cause to undertake inspections of the information and records submitted by the registered valuer members.

1.2    In  compliance  of  the  aforesaid,  the  Governing  Board  of  the  CEV  IAF, under due intimation and/or approval of the Insolvency and Bankruptcy Board of India, has adopted this Inspection Policy.

1.3       This Inspection Policy is a sub-set of the Monitoring Policy.

  1. 2. OBJECTIVES

 

2.1     The objective of monitoring is to gather necessary information, records and documents to enable  the  Monitoring Committee, Governing  Board of  CEV-IAF and Authority  [IBBI]  to monitor the performance and keep them informed with unbiased decisions about the performance of Valuer Member Professionals registered with the authority.

2.2       The objective of Inspection Policy is to ensure that in carrying out the valuation services, the registered valuer members of CEV-IAF comply with the Valuation Standards, Code of Conduct, and relevant provisions of the Act & Rules made there under. In addition, they have proper systems and procedures, including documentation systems, so as to maintain highest standards of quality in the work they perform. The inspections shall also help the CEV-IAF to guide the member to remove its shortcomings, if any.

  1. 3. DEFINITIONS

3.1        In this Policy, unless the context otherwise requires -

(1).  "Act" means the Companies Act, 2013 (18 of 2013); (2)   "Annexure" means an annexure to this policy;

(3)  "Asset Class" means distinct group of assets that have been classified as class of    assets by the Insolvency and Bankruptcy Board of India and requires separate set of valuers for valuation under the Companies (Registered Valuers and Valuation) Rules, 2017;

Provided that the Insolvency and Bankruptcy Board of India has so far made only three asset classes viz. Land & Building; Plant & Machinery; and Securities or Financial Assets.

(4) "Authority" means the Insolvency and Bankruptcy Board of India [IBBI] who has been specified by the Central Government under section 458 of the Companies Act, 2013 (18 of 2013) to perform the functions under the Companies (Registered Valuers and Valuation) Rules, 2017;

(5) "Bye-Laws" means the Bye-Laws of the CEV INTEGRAL APPRAISERS FOUNDATION as amended from time to time;

(6)  "Certificate of Practice" means the certificate of practice granted to a registered valuer member who has completed the requisite training of the CEV INTEGRAL APPRAISERS FOUNDATION in respect of valuation of an asset class or classes;

(7) "Code of Conduct" means the code of conduct for the registered valuers as given in Annexure-I to the Bye-Laws of CEV INTEGRAL APPRAISERS FOUNDATION;

(8)   "Company" means a company registered under the Companies Act, 2013 (18 of 2013) or under the Companies Act, 1956 (1 of 1956).

(9)  "Governing  Board"  means  the  Board  of  Directors  of  the  CEV  IAF constituted under the applicable provisions of the Companies Act, 2013 (18 of 2013);

(10) "CEV-IAF" means the CEV INTEGRAL APPRAISERS FOUNDATION duly incorporated as section 8 company under the Companies Act, 2013 with its registered office at CEV Headquarters, 210-Dayal Nagar, Near Ashok Nagar, Jalandhar, Punjab-144001, INDIA and recognized  as registered valuers organization by the Insolvency and Bankruptcy Board of India under Rule 13 of the Companies (Registered Valuers and Valuation) Rules, 2017;

 

(11) "Monitoring Committee" means the committee constituted by the Governing Board of CEV INTEGRAL APPRAISERS FOUNDATION in accordance with Article 13.2(1)(b) of its Articles of Association, Bye-law 8(1)(b) of its Bye-Laws, and applicable provisions of the Companies (Registered Valuers and Valuation) Rules, 2017;

(12) "Monitoring Officer" means an Officer of CEV-IAF either appointed or designated so, who  shall  perform  the  functions  assigned  to  the  Monitoring  Officer  under  the Monitoring Policy and Inspection Policy;

(13) "Partnership entity" means a partnership firm registered under the Indian Partnership Act, 1932 (9 of 1932) or a limited liability partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009);

(14) "Registered Valuer" means a person who has been granted certificate of registration by the authority under Rule 6 of the Companies (Registered Valuers and Valuation) Rules, 2017 and has been granted certificate of practice by the CEV INTEGRAL APPRAISERS FOUNDATION in respect of valuation of an asset class or classes and the term "valuer" shall be construed accordingly;

(14) "Registered Valuers Organisation (RVO)" means a legal entity recognized as registered valuers organization by the Insolvency and Bankruptcy Board of India under Rule 13 of the Companies (Registered Valuers and Valuation) Rules, 2017;

(16)   "Rules"  means  the  Companies  (Registered  Valuers  and  Valuation)  Rules,  2017  as amended from time to time;

(17)  "Valuation Standards" means the standards of valuation as notified or modified by the Central  Government  under  Rule  18  of  the  Companies  (Registered  Valuers  and Valuation) Rules, 2017; Provided that until the valuation standards are notified or modified by the  Central Government, the valuation standards would mean the standards of valuation adopted by the CEV INTEGRAL APPRAISERS FOUNDATION;

(18) "Valuer  Member"  means  a  person  who  possess  the  required  qualification  and experience as per Rule 4 of the Companies (Registered Valuers and Valuation) Rules 2017 and has completed the mandatory educational course as a student member of the CEV INTEGRAL APPRAISERS FOUNDATION in respect of valuation of an asset class or classes;

3.2      Unless the context otherwise requires, words and expressions used but not defined in this policy shall have the meanings respectively assigned to them in the Companies Act, 2013 (18 of 2013) and Rules made there under.

  1. 4. COMPLIANT STATUS

 

4.1    In the Monitoring Policy, it is said that based on the records submitted by the registered valuer members, the Monitoring Committee will evaluate the performance of the members and categorize them into three categories:-

(1)   Category A – Compliant: Members submitting the information regularly and fully complying with the provisions of the Act, rules, regulations, and guidelines issued thereunder, and the bye-laws, the Code of Conduct, and directions given by the Governing Board.

(2)   Category  B  –  Semi-Compliant:  Members  submitting  information  with  delay  or  are irregular in complying with policy or partly comply with the provisions of the Act, rules, regulations, and guidelines issued thereunder, and the bye-laws, the Code of Conduct, and directions given by the Governing Board.

(3)  Category C – Non-Compliant: Members who are not filing any information with the Monitoring Committee at all are considered as Non-Compliant.

  1. 5. COVERAGE & EFFECTIVE DATE

5.1   The Inspection Policy shall be implemented from the first day of April, 2020. Inspections would be introduced in stages with different types of valuer professionals included at each stage.

5.2    At first stage, registered valuer members who have been categorized as "Non-Compliant" shall be selected for inspection on a random sample basis. Second stage will cover members that fall under the "Semi-Compliant" category; and third & final stage will include members that are fully "Compliant" as per the Monitoring Committee.

5.3     It is proposed to cover following number of registered valuer members under the stated inspections over a period of five years:

(1)   Non-Compliant cases           - 100 percent

(2)   Semi-Compliant cases          - 50 percent

(3)   Fully Compliant cases           - 25 percent

5.4   The Monitoring Committee shall decide the names of practicing registered valuer members belonging to each asset class to be included in the final selection list of each year. Efforts

would be made to ensure that each registered valuer member who is presently 'non- compliant' is subjected to inspection at least once in five years and is brought to the fully compliant category. Further, the Committee shall ensure that all other members having substantial  scale  of  practice  and  handling  important  valuation  assignments,  as  may  be decided  by  the  Committee, are  covered for  inspection at least  once  in five  years.  The frequency of such inspections may vary owing to the following:

(a)    Review of the information / documents received from the registered valuer members;

(b)    Any information received from other stakeholders and regulators;

(c)    Any information received from the third party sources; and

(d)    On the direction of the Governing Board of CEV-IAF and/or from the IBBI.

5.5    If the registered valuer member is practicing as partner of a firm or as director of a company engaged in rendering valuation services, then the records of firm or company, as the case may be, shall be subject to inspection.

  1. 6. PERIOD OF INSPECTION

6.1         The period of inspection shall be

(a)   In case of a member with registration more than three years old, period of inspection shall be from the end-date covered under the last inspection till end of preceding completed financial year; or preceding three years, whichever is less.

(b)   In case of a member with registration less than three years old, period of inspection shall be from the date of registration till end of preceding completed financial year.

Provided that no part of the reports, records and documents relating to the valuation assignments completed on or before the date of registration shall be subject to inspection and review.

Note: No registered valuer member shall be selected for inspection if he/she is in practice for less than one year.

  1. 7. SCOPE OF INSPECTION

7.1    The stated Inspection process shall apply to all the Valuation Services provided by a member as  registered  valuer  under  the  provisions  of  Companies  Act,  2013  and  Rules  made there under.

7.2    Once  a  registered  valuer  member  is  selected  for  inspection,  its  valuation  engagement records and compliance records pertaining to the period of inspection shall be subjected to inspection.

7.3        The inspection shall cover:

(1)  Compliance with the provisions of the Act, rules, regulations, and guidelines issued there under;

(2)  Compliance  with  the  Bye-Laws,  the  Code  of  Conduct,  and  directions  given  by    the Governing Board of CEV-IAF;

(3) Compliance with Valuation Standards;

(4) Systems and procedures for conducting valuation engagements

(5)  Quality of reporting; and

(6) Training programmes for staff concerned with valuation functions, including availability of appropriate infrastructure.

  1. 8. COMPOSITION OF INSPECTION TEAM

8.1       Monitoring Policy provides that the Monitoring Committee may direct the inspection   to be carried out by any

(i) Member of the Committee, or

(ii) Officer of CEV-IAF, or

(iii) Member of the Governing Board of CEV-IAF, or

(iv) Other professional valuer member(s),either individually or jointly with other members  or officers in any manner as determined by the Monitoring Committee.

8.2     It is hereby set out that the officer of CEV-IAF who may be assigned the job to carry out inspection of any registered valuer member shall not be of the rank below level-IV.

8.3        It is further set out here that the other professional valuer member(s) must

(i)  Be the registered valuer member of CEV-IAF;

(ii)  Possess  at  least  ten  years  of  experience  of  valuation  [including  the  period  before registration with IBBI];

(iii) Be currently in the active practice of valuation in respect of asset class(es) for which he is undertaking inspection assignments;

8.4        For undertaking inspections, a valuer member should not have

(i)  Been declared to be of unsound mind;

(ii)  Been an undischarged bankrupt or applied to be adjudged as a bankrupt;

(iii) Been a non-resident person in India;

               (iv)  Any disciplinary or criminal action/proceedings pending against him;

  • Been found guilty by the Disciplinary Committee or Governing Board of CEV-IAF or by the IBBI;

(ii)  Been convicted by any competent court for an offence punishable with imprisonment for a term exceeding six months or for an offence involving moral turpitude;

(iii)   Been levied a penalty under section 271J of Income Tax Act, 1961;

(iv) Been imposed any warning or penalty or strictures against him by the competent authority; or

(v) Been categorized as semi-compliant or non-compliant by the Monitoring Committee of CEV-IAF.

8.5        Any valuer member empanelled for undertaking inspection on behalf of CEV-IAF shall

(i)    Undergo requisite training as prescribed by the Monitoring Committee of CEV-IAF;

(ii)    Furnish the prescribed declaration at the time of accepting any inspection assignment; and

(iii)   sign the prescribed Deed of Confidentiality.

8.6     The Monitoring Committee shall maintain a panel of eligible and willing registered valuer member(s) who offer themselves to be considered for part of the inspection team of CEV- IAF. The panel shall be valid for a period of two years and made public on the company's website.

8.7      A registered valuer member shall not accept any professional assignment from another  registered valuer member whose records have been inspected by him for a period two years from the date of appointment.

  1. 9. REPORTING

9.1        On completion of a inspection visit to the registered valuer member, the Team shall submit its report to the Monitoring Officer setting out the scope of the inspection, the extent to which the registered valuer member complied with the terms of reference of team and relevant law and practice and other legislation, the extent to which professional competence has been tested and achieved and any other information which the Inspection Team would like to add in the report.

9.2        As part of the record, the Inspection Report shall contain the following information:

(1)   Details of entity and registration of its proprietor/partner(s)/ director(s) with the IBBI;

(2)   Details of staff kept by the Member during the period of inspection;

(3)  Details of office systems and procedures with regard to compliance with the provisions of the Act, rules, regulations, and guidelines issued thereunder; or compliance with the Bye-Laws, the Code of Conduct, and directions given by the Governing Board of CEV- IAF;

(4)   Details of training program for the staff with valuation functions;

(5)   Whether the Member fully cooperated with the Inspection Team; and

(6)  Whether he allowed complete and free access to CEV-IAF inspection team to undertake inspection of his information and records;

9.3   The Inspection Team shall examine and answer each of the following points with supportive reasons. If the answer to any issue is negative, the report shall contain the nature of shortcomings and also suggest steps to remove them within a reasonable period.

(1)  Whether the Member has regularly filed necessary reports and returns with the CEV- IAF;

(2)   Whether the Member has conducted valuations only in respect of those assets or asset class(es) for which he is registered with the IBBI;

(3)  Whether the Member has, while undertaking valuation assignments, fully adhered with the applicable provisions of Companies Act, 2013;

(4)   Whether the Member has fully adhered with the conditions of registration set-out in

Rule 7 of the Companies (Registered Valuers and Valuation) Rules, 2017;

(5) Whether  the  Member has, while  undertaking valuation assignments, fully  complied with the Valuation Standards as required under Rule 8(1) of the Companies (Registered Valuers and Valuation) Rules, 2017;

(6)  Whether  the  Member has, while  undertaking valuation assignments, fully  complied with the provisions of Rule 8(2) & (3) of the Companies (Registered Valuers and Valuation) Rules, 2017;

(7)  Whether the Member has maintained all the reports, records and documents relating to valuation assignments for the prescribed period of three years from the completion of each such assignment as required under Rule 7(f) of the Companies (Registered Valuers and Valuation) Rules, 2017;

(8)   Whether the Member as fully complied with the Code of Conduct of CEV-IAF; if not, state the clauses thereof violated;

Note: The Inspection Team is required to give its observations/ comments on adherence by the Member separately with each clause of the Code of Conduct.

(9)    Whether, during the period of inspection, the Member has temporarily surrendered / restored his membership with the CEV-IAF in compliance with the provisions of Rule 9 of the Companies (Registered Valuers and Valuation) Rules, 2017;

(10)    Whether, during the period of inspection,

  1. Any complaints were received against the member with respect to the:

(i)     Valuation engagements;

(ii)    Non-compliance with the regulatory provisions under any law; or

(iii)   General conduct of the member with his clients & other stakeholders.

  1. b.  Any Valuations were challenged in any Court;
  2. c. Any warnings or penalties or strictures were imposed by the competent authority;
  1. d. Any Disciplinary proceedings were initiated against the member;

 

  1. Any legal action was initiated against the member;
  1. He was conviction for an offence;
  1. g. Any criminal proceedings are pending against the member;
  1. h. He has applied or declared as un-discharged bankrupt.
  1. b) Whether the Member has satisfactory mechanism in place for redressal of all grievances received; also provide the following details:

(i)     Number of grievances received and disposed off;

(ii)    Nature/type of grievances received;

(iii)   Average period of disposal of grievances; and

(iv)   Percentage   of   cases   where   any   grievance   was   re-addressed   by   the complainant

  1. c) In case  a  partnership  entity  or  company is  the  registered  valuer, whether  only  the partner or director who is a registered valuer for the asset class(es) that were valued was allowed to sign and act on behalf of it;
  1. d) In case a partnership entity or company is the registered valuer, whether it disclosed to the  company  concerned,  the  extent  of  capital  employed  or  contributed  in  the partnership entity or the company by the partner or director, as the case may be, who signed and acted in respect of relevant valuation assignment for the company;
  1. e) In case a partnership entity or company is the registered valuer, whether it immediately informed the authority on the removal of a partner or director, as the case may be, who was a registered valuer along with detailed reasons for such removal; and
  1. f) Any other issue considered important by the inspection team.
  1. 10. OBLIGATIONS OF THE REGISTERED VALUER MEMBERS

10.1      Any registered valuer member selected for inspection shall

(i)  Produce to the inspection team or allow access to, any record, document or prescribed register maintained by the member or any other record or document which is of a class

or description so specified, and which is in the possession or under the control of the member;

(ii)  Provide to the inspection team such explanation or further particulars in respect of anything produced in compliance with a requirement under sub clause (i) above, as the inspection team shall specify; and

(iii)  Provide the inspection team all assistance in connection with inspection;

10.2   Where  any  information  or  matter  relevant  to  a  registered  valuer  member  is  recorded otherwise than in a legible form, the member shall provide and present to the inspection team a reproduction of any such information or matter, or of the relevant part of it in a legible form, with a translation in English or Hindi if the matter is in any other language, and if such translation is requested for by the inspection team.

10.3   The registered valuer member shall, within 30 days of receipt of the bills from the inspection team, pay to the inspection team the cost of inspection including the out of pocket expenses as decided by the Monitoring Committee.

  1. 11. OBLIGATIONS OF THE INSPECTION TEAM

11.1   The inspection team shall, while undertaking inspection of a registered valuer member, shall strictly comply with the terms of reference assigned to it as part of its appointment.

11.2    The inspection team shall not take any extracts of the registered valuer member ‘Clients’ file or records examined by the team while conducting inspection, as a part of his working papers.

11.3      The inspection team shall complete the inspection within the prescribed time frame.

11.4    The inspection team shall raise bills to the registered valuer member covering the cost of inspection and out of pocket expenses as decided by the Monitoring Committee.

  1. 12. COST OF INSPECTION

12.1   The cost of inspection including the limit of out of pocket expenses payable to the inspection team shall be decided by the Monitoring Committee from time to time and shall be paid by the registered valuer member. The amount shall be paid by the registered valuer member within 30 days of receipt of the bills from the inspection team.

  1. 13. FUNCTIONS OF THE MONITORING COMMITTEE

13.1    The Inspection Reports shall be received and analyzed by the Monitoring Officer. He shall prepare [or cause to prepare] summary of all the inspect reports received during a quarter for onward submission to  the  Monitoring  Committee.  The Monitoring Committee shall review the summary reports and give such directions as deemed necessary.

13.2      As set out in the Monitoring Policy, the Monitoring Committee will take reasonable steps in seeking to confirm compliance on the part of Registered Valuer Members with all relevant aspects  of  the  Act,  Rules, Regulations, and Guidelines  issued under  the  Act,  and other legislations that may impact an individual while acting as Valuation Professional. The above includes the requirements of Code of Conduct prescribed under the Companies (Registered Valuers and Valuation) Rules, 2017 which have been adopted by the CEV-IAF.

13.3  The  Monitoring  Committee,  wherever  necessary,  refer  the  matter  to  the  Disciplinary Committee for appropriate action in case of such members who are found to be perennial defaulters.

  1. 14. REPORTS TO THE AUTHORITY

14.1   The Monitoring Committee shall submit a report to the authority in the manner specified by the authority with information collected during inspections.

  1. 15. REVIEW OF THE INSPECTION POLICY

15.1    The  implementation  of  the  Inspection  Policy  will  be  monitored  and  reviewed  by  the Monitoring Committee at half-yearly interval and annually by the Governing Board of CEV- IAF.

15.2    The Inspection Policy may be amended from time to time by the Governing Board and will remain in force till further instructions of the Governing Board or by the IBBI.