Companies Act Section 247 — Valuation by registered valuers

CHAPTER XVII REGISTERED VALUERS

Commercial / Corporate

Summary

Sub-section (1) states that whenever this Act requires a valuation of any property, stocks, shares, debentures, securities, goodwill, other assets, or the net worth or liabilities of a company, the valuation must be done by a person who has the prescribed qualifications and experience, is registered as a valuer, and is a member of a recognised organisation. This valuer must be appointed by the audit committee, or if there is no audit committee, by the Board of Directors of the company.

Sub-section (2) lists the duties of the appointed valuer. Under clause (a), the valuer must make an impartial, true, and fair valuation of any assets that need to be valued. Under clause (b), the valuer must exercise due diligence while performing their functions. Under clause (c), the valuation must be done in accordance with the rules that are prescribed. Under clause (d), the valuer must not undertake the valuation of any assets in which they have a direct or indirect interest, or become so interested at any time during a period of three years before their appointment as valuer or three years after the valuation of assets was conducted by them.

Sub-section (3) sets out the consequences for a valuer who contravenes this section or the rules made under it. The valuer is liable to a penalty of fifty thousand rupees. However, if the contravention was done with the intention to defraud the company or its members, the valuer is punishable with imprisonment for a term that may extend to one year, and with a fine that shall not be less than one lakh rupees but may extend to five lakh rupees.

Sub-section (4) states that if a valuer has been convicted under sub-section (3), they are also liable to do two things. Under clause (i), they must refund the remuneration they received to the company. Under clause (ii), they must pay damages to the company or to any other person for any loss arising out of incorrect or misleading statements of particulars made in their report.

Official Text

(1) Where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by 1[a person having such qualifications and experience, registered as a valuer and being a member of an organisation recognised, in such manner, on such terms and conditions as may be prescribed] and appointed by the audit committee or in its absence by the Board of Directors of that company.

(2) The valuer appointed under sub-section (1) shall,—

(a) make an impartial, true and fair valuation of any assets which may be required to be valued;

(b) exercise due diligence while performing the functions as valuer;

(c) make the valuation in accordance with such rules as may be prescribed; and

(d) not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time 2[during a period of three years prior to his appointments as valuer or three years after the valuation of assets was conducted by him].

(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall be 3[liable to a penalty of fifty thousand rupees]:

Provided that if the valuer has contravened such provisions with the intention to defraud the company or its members, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

(4) Where a valuer has been convicted under sub-section (3), he shall be liable to—

(i) refund the remuneration received by him to the company; and

(ii) pay for damages to the company or to any other person for loss arising out of incorrect or misleading statements of particulars made in his report.