Liquidation 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.
A liquidation asks a different question from a CIRP. Instead of fair value and liquidation value, the enquiry is the realisable value of the assets or businesses — and the liquidator may inherit the CIRP figures rather than start again.
Reuse or refresh — Regulation 35(1) and (2)
| Situation | What the liquidator does |
|---|---|
| Valuation was conducted under the CIRP regulations | Consider the average of the estimates arrived at under those provisions — Regulation 35(1) |
| Not covered by 35(1), or the liquidator is of the opinion that a fresh valuation is required | Within 7 days of the liquidation commencement date, appoint two registered valuers — Regulation 35(2) |
The fresh liquidation valuation requires the prior approval of the committee of creditors by simple majority, and covers the realisable value of the assets or businesses under clauses (a) to (f) of Regulation 32.
A CIRP valuation is not stale merely because the process failed. It was done by two registered valuers, on physical verification, to internationally accepted standards, in the IBBI's format — and it was the basis on which the committee assessed every plan it rejected.
Commissioning a second liquidation valuation costs the estate money it does not have and delays a process that is already the fallback. Regulation 35(2) preserves the liquidator's judgment to order one where circumstances warrant it — a long gap since the CIRP estimates, a material change in the assets, or a valuation that never covered the businesses as going concerns — but it is a decision to be justified, not a default.
How a fresh liquidation valuation is done — Regulation 35(3) and (4)
- The registered valuers independently submit to the liquidator their estimates of realisable value of the assets or businesses.
- The estimates are computed in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017, after physical verification of the assets of the corporate debtor.
- The average of the two estimates is taken as the value of the assets or businesses.
Note two differences from the CIRP. The computation standard cited is the 2017 Rules rather than internationally accepted valuation standards, and there is no third-valuer mechanism and no 25% divergence test — the average of the two stands, however far apart they are.
Valuing against the modes of sale — Regulation 32
The liquidator may sell:
- an asset on a standalone basis;
- the assets in a slump sale;
- a set of assets collectively;
- the assets in parcels;
- the corporate debtor as a going concern; or
- the business or businesses of the corporate debtor as a going concern.
This is why Regulation 35(2) refers to the realisable value of the assets or businesses. A liquidation valuation that produces only an asset-by-asset figure leaves the liquidator unable to price the two going-concern options — which are usually the ones that recover the most.
The other processes compared
| Process | Valuers | Appointment deadline | How the value is fixed |
|---|---|---|---|
| CIRP (Reg 27, 35) | Two | 7 days of appointment; not later than the 47th day from commencement | Average of the two closest, with a third valuer if estimates differ by 25% |
| PPIRP (Reg 38, 39) | Two | 3 days of appointment | Average of the two |
| Fast track CIRP (Reg 26, 34) | One | 7 days of appointment | The single estimate |
| Liquidation (Reg 35) | Two, if fresh | 7 days of the liquidation commencement date | Average of the two |
| Voluntary liquidation (s.59(3)(b)(ii)) | Registered valuer | — | A report of the valuation of the assets, if any |
| Individual bankruptcy (Reg 30) | One, plus an optional additional valuer | — | Where two are appointed, the average |
Confidentiality carries across
In a PPIRP and a fast track CIRP the resolution professional provides fair value and liquidation value to committee members in electronic form, on an undertaking that the member will maintain confidentiality and will not use the values to cause undue gain or undue loss to itself or any other person. The resolution professional and the registered valuers must maintain the same confidentiality.
The reason is obvious once stated: a prospective resolution applicant who knows the liquidation value knows the floor, and can price to it.
Common mistakes
- Commissioning a fresh liquidation valuation without recording why the CIRP estimates were inadequate.
- Proceeding under Regulation 35(2) without the committee's prior simple-majority approval.
- Applying the CIRP 25% divergence test and third-valuer mechanism in a liquidation.
- Valuing only the assets and leaving the going-concern modes of sale unpriced.