Site Inspection Protocols 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.
Regulation 35 requires fair value and liquidation value to be computed after physical verification of the inventory and fixed assets. What that verification is worth afterwards depends entirely on how it was recorded at the time.
The objective
Site inspection is often a critical source of valuation evidence, particularly for tangible assets. Its purpose is to:
- verify the existence of assets;
- assess their condition; and
- identify factors that may affect value.
What the record should contain
| Element | Why it matters |
|---|---|
| Date and location of inspection | Anchors observations to the inspection date, distinct from the valuation date |
| Persons present | Establishes who accompanied and what access was given |
| Assets inspected | Defines the coverage actually achieved |
| Observations on condition, utilisation, damage or obsolescence | The substance of the valuation judgement on tangible assets |
| Photographic evidence | Contemporaneous corroboration that cannot be reconstructed later |
| Significant discrepancies between physical observations and available records | The exceptions that most often matter |
Site inspection protocols require two kinds of discrepancy to be specifically documented and evaluated:
assets recorded in the fixed asset register that are not physically located; and assets identified that are not reflected in available records.
Both matter in an insolvency, and for different reasons. Missing assets may indicate disposals in the look-back period — the starting point of a preferential or undervalued transaction enquiry. Unrecorded assets are the U S Realty pattern, where three shops omitted from the balance sheet came to light more than a year into the CIRP.
A valuer who reconciles only in one direction — register to floor — will find the first and miss the second.
Restricted access
Where access to assets or locations is restricted, the limitation and any alternative procedures performed should be recorded.
This is the raw material for the limitation disclosure that will appear in the report. The stronger illustrative disclosure in Chapter 4 is exactly this situation written up properly — inspection not possible due to restricted access, condition assessed from fixed asset records, maintenance reports and photographic evidence, with the resulting valuation subject to a higher degree of uncertainty.
Contemporaneous, and in the work file
Inspection records should be prepared contemporaneously and retained as part of the valuation work file. Both halves matter:
- Contemporaneous — a note written weeks later records recollection, not observation, and will be treated as such under challenge.
- In the work file — Section 2 of a defensible work file holds the information request, tracking matrix, documents received, inspection records and management representation letters.
Why this is the primary evidence
From a defensibility perspective, inspection documentation often becomes the primary evidence supporting the valuer's assessment of asset existence and condition.
Nothing else can perform that function. A fixed asset register records what the company believes it owns; a valuation model records what the valuer concluded it is worth. Only the inspection record establishes that the asset was there and in what state — which is why physical verification is written into Regulation 35 rather than left to professional preference.
Site inspection protocols and the fresh valuation risk
Two of the three grounds on which the NCLT will direct a fresh valuation are answered by the inspection record:
- material irregularity in the valuation process — evidenced against by a documented physical verification meeting the Regulation 35 requirement; and
- omission of significant assets — answered by a reconciliation showing the asset universe was tested in both directions.
Common mistakes
- Treating site inspection protocols as satisfied by the fact that an inspection occurred, without recording what was observed.
- Reconciling the register to the floor but not the floor to the register.
- Writing up inspection notes after returning to the office.
- Omitting photographs, and relying on narrative description of condition.