Judicial Scrutiny of Valuation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Tribunals are not valuers and do not pretend to be. They will not substitute their own view of what a plant is worth.
What they will do is ask whether the number rests on anything — and that is a question a badly documented report cannot survive, however sound its arithmetic.
Commercial wisdom is largely non-justiciable, but it is protected only when informed. Challenges succeed on foundations, not merits: vague methodology, undisclosed assumptions, omitted encumbrances, an unmet statutory floor, or CoC members who voted without seeing the reports. The standard: if it cannot be explained in plain language with every number traceable, it does not hold.
What the courts have settled
A plan need not match liquidation value. In Maharashtra Seamless Ltd v. Padmanabhan Venkatesh, the Supreme Court held there is no statutory requirement for a resolution plan to offer more than the liquidation value. What matters is that the valuation underpinning the decision is methodologically sound.
Commercial wisdom is largely beyond review. Committee of Creditors of Essar Steel v. Satish Kumar Gupta is the leading statement: the CoC's commercial decision on the viability and feasibility of a plan is not for the Adjudicating Authority to re-take. But the protection presupposes a decision made on adequate material — which is why the valuation, and access to it, keeps returning as the pressure point. CoC commercial wisdom →
Statutory charges must be accounted for. In State Tax Officer v. Rainbow Papers Ltd, a statutory charge under a State tax law was held capable of constituting a security interest. A valuation that missed such a charge has not merely understated a liability — it has misdescribed who is entitled to the proceeds. Statutory liabilities →
The five grounds that actually work
1. Vague or unexplained methodology. Naming a method is not choosing one. A report that says "the income approach was adopted" without explaining why it fits this asset, or how the inputs were derived, gives a challenger an open door.
2. Undisclosed assumptions. The most damaging category, because it is unanswerable. Where a number depends on an assumption that is not on the page, nobody — not the CoC, not the Tribunal — can test it. A valuation resting on undisclosed assumptions is defective irrespective of whether the assumption was reasonable.
3. A material item omitted. An encumbrance, a statutory charge, a class of asset, a ring-fenced amount, a whole asset class not valued because "there was nothing there".
4. The statutory floor not met. Operational creditors must receive at least their Section 30(2)(b) liquidation entitlement. This is not commercial judgment and is fully reviewable.
5. CoC members who did not see the reports. A vote cast without access to the valuation is not informed commercial judgment, and the protection does not attach to it. Confidentiality and access →
The documentation standard
There is a workable formulation, and it is stricter than most reports meet:
If the valuation cannot be explained to an adjudicating authority in plain language, with every number traceable to a source, an assumption, or a stated professional judgment, it is not adequate.
Three tests inside that sentence:
Plain language. A report that requires the valuer present to interpret it will not travel well into a hearing.
Every number traceable. Not most. A figure that appears in a schedule with no derivation is a figure the challenger will start with.
Source, assumption, or judgment. Every input falls into one of three buckets, and the report should make clear which. "Professional judgment" is a legitimate category — provided it is labelled as such and reasoned, rather than presented as though it were data.
Divergence is not itself a problem
Tribunals have been reluctant to treat every difference between two valuers as a defect. Valuation involves judgment at every stage, so some divergence is inherent — a difference in the low single digits or even around ten per cent proves nothing.
What attracts scrutiny is an unexplained divergence. Two reports that differ by 25% and each explain their assumptions give the CoC something to reason about. Two that differ by 25% and neither explains anything give a challenger two targets. The 25% divergence rule →
Practical protection
- State the basis of value and the valuation date on the face of the report.
- Justify the methodology for each asset class, in a paragraph, not a phrase.
- List assumptions in one place, including those that seem obvious.
- Run sensitivity analysis and show it. Assumptions and sensitivity →
- Record limitations — assets not verified, data unavailable, access refused.
- Keep working papers capable of reconstructing every figure.
- For the RP: minute that reports were circulated and that members had the opportunity to review them.
Key takeaways
- Tribunals test the foundation, not the number.
- Commercial wisdom is protected only when informed.
- Undisclosed assumptions are the most damaging defect — they cannot be answered.
- A plan need not beat liquidation value, but the Section 30(2)(b) floor is reviewable.
- Missed statutory charges misdescribe entitlement, not just quantum.
- Unexplained divergence is the problem, not divergence.
- Label professional judgment as judgment.
Read next
- How the CoC Uses Valuation: Commercial Wisdom and Its Limits
- Assumptions and Sensitivity Analysis in a Valuation Report
- Statutory Liabilities in IBC Valuation: GST, TDS and PF
- Supreme Court Landmark Judgments on IBC
Disclaimer: Positions stated as on 5 September 2026. Case law under the Code develops continuously — verify the current position before relying on any proposition here.