Introduction

On 14^th November 2025, IBBI (Insolvency and Bankruptcy Board of India) released a discussion paper which examines the present inconsistencies in the valuation process under the IBC, 2016, and proposes changes with the purpose of addressing those issues increasing the credibility and achieve overall procedural efficiency. The paper adapts enterprise-level valuation (including intangibles such as brand goodwill, IP, customer relationships, synergies) proposing a shift from the presently practiced asset-specific valuation. This means that the value of the business must be measured along with the value of its assets. IBBI also replaces reference to “internationally accepted standards” in context of valuation with “valuation standards as specified by the Board”, furthering standardization. Moreover, a third set of valuers must now be appointed when the estimated asset values by two sets of valuers differ by more than 25%. The “Two closest estimates” rule is also adopted in the proposed regulation 35(1) of the CIRP Regulations, 2016, where fair value is the average of two closest AFVs (Aggregate Fair Values), and liquidation value is the average of two closest values per asset class. This greatly reduces the scope of manipulation in valuation and brings consistency in the valuation process. These changes align with the value-maximization objective of the IBBI and impacts how the liquidation plan is evaluated by the CoCs (Committee of Creditors) and how the courts decide valuation disputes. In the paper, IBBI is proposed to be empowered to issue formats and circulars with addition of Regulation 35(4) to the CIRP Regulations. RVs (Registered Valuers) are now mandated to maintain uniform supporting documentation and follow Board-prescribed formats for valuation reports.

Other changes include proposals such as introducing asset-class (Land & building, Finance, securities, P&M) based valuer “sets”, and “Coordinator valuer” to integrate these different asset class valuations into a single AFV.  The coordinator valuer/s will give their comprehensive enterprise-level AFV.

This piece explains the related judicial and legal landscape, analyzes legal issues involved, and examines the likely effects of the proposed changes.

Judicial landscape

In Swiss Ribbons, the Supreme Court recognized maximization of corporate debtor’s asset value while the company keeps running as an important objective. A running business is more valuable than one shut down and bolsters entrepreneurship by preserving jobs, contracts, and economic value. As liquidation diminishes the total value of the business (tangible as well as intangible), according to the Supreme Court, revival should be preferred unless liquidation becomes a necessity. Asset-specific valuation follows liquidation logic while enterprise-level valuation reflects a rescue-and-resolve approach the Court followed. In Essar Steel, while the Supreme Court reiterated commercial wisdom of CoCs, it held that the Court could review if procedures were effectively complied with and whether principles of legality and fairness were followed.  It was emphasized by the Court that commercial wisdom must be exercised by the CoCs based on the material placed before it. A defective valuation, thus, indicates material irregularity, making the process vulnerable. The proposed changes such as enterprise valuation, board-specified standards, and third valuer strengthen procedural regularity and fairness by more transparent valuation processes and reports. It also enhances judicial reviewability of the valuation process.

Valuation disputes such as one in the Maharashtra Seamless, where there were stark differences between three figures of liquidation valuation by three different valuers indicated towards non uniformity and the consequent distorted CIRP outcomes. Though the Supreme Court affirmed that valuation estimates play only assistive role and need not be mandatorily followed, the case highlighted the systemic inconsistency in methodology and assumptions valuers adopt. Similar dispute was resurfaced in the Binani Industries. The proposed reforms redefine the entire valuation system to reduce such disputes in future.

Legal issues

However, the proposed changes raise several legal issues. Delegating IBBI the duty to prescribe valuation challenges can be said to be excessive as the Board is only empowered to frame regulations and guidelines “as may be required by the Code” under Section 240 of the IBC. It is for the Central Government to provide valuation standards under Rule 18 of the Companies (Registered Valuers and Valuation) Rules, 2017. Earlier, until such standards were notified or modified, “internationally accepted valuation norms” had to be followed. Now with the replacement of the same with “valuation standards as specified by the Board”. Thus, this standard-setting power might conflict with the statutorily mandated standards under Valuation Rules. This expansion of IBBI’s power beyond the traditional role of overseeing the valuation process, increasing the Board’s influence on the valuation practice, increasing the risk of inconsistency and dilution of MCA’s (Ministry of Corporate Affairs) Power. However, with standardized process and detailed formats, valuation reports are expected to gain more evidentiary value before adjudicating bodies. Richer valuation reports would make it more convenient for the NCLAT (National Company Law Appellate Tribunal), under Section 61 of the IBC, to test allegations of arbitrariness and procedural irregularity.

Institutional Consequences

For the CoCs, economic accuracy of decisions is improved because of the increased emphasis on enterprise-level valuation and standardized formats, reducing the scope of inconsistency. Quality data achieved by following these mandates would enhance assessment of resolution applicants, and it would be easier for the CoCs to check if proposed revival strategies are workable. These changes shrink CoCs’ unchecked discretion (“commercial wisdom”) in choosing one resolution applicant over another.

For the RPs (Resolution Professionals), the proposed changes increase operational complexity as they must coordinate with asset-class based valuer sets and must ensure compliance to formats as is prescribed by the Board.

The valuers must now comply with uniform formats and are required to disclose assumptions, data sources, discounting models, etc., increasing the legitimacy and defensibility of the reports. The paper proposes a single RV instead of two sets of valuers for small debtors (proposal 4) to reduce transaction cost and avoid unnecessary compliance burden. However, since there would be no “second opinion” as a self-corrective mechanism, there might be increased risk of cognitive bias and methodological error.

The proposed amendments would most likely benefit players in tech, pharma, and services sectors where there are substantial intangibles involved in the business in the form of software IPs, patents, data assets, customer contracts, and brand trust. On the other hand, for asset heavy businesses such as steel, cement, and heavy manufacturing, enterprise-level valuation represents only marginal gains as their intangibles are limited.

Overall, price discovery of stressed assets is improved, resulting in more accurate recoveries for financial creditors and increased investor confidence in the CIRP process and the viability of IBC law itself.

Practical Risks

While the 25% threshold for third valuer aims to address unrealistic divergence between two different estimates, it incentivizes behaviors to avoid this fixed mathematical trigger. Such convergence gaming can reduce the scope of independent judgment in some scenarios.

Finding and coordinating with asset-specific valuers can slow down the entire CIRPs. Besides, the subjectivity of enterprise-level valuation would make it significantly difficult to find trained valuers. Mid-sized insolvency cases can be disproportionately impacted with increased transaction cost.

Moreover, insufficient and low-quality data have consistently been flagged as a major hurdle in the valuation process. Weak documentations, unverifiable receivables, off-book liabilities, and other constraints significantly affect valuation. While the report acknowledges these issues, it does little to comprehensively and effectively address them.

Way Ahead

While the proposed changes establish a uniform framework and statutorily establish the value maximization and rescue and resolve mandates of the courts, success largely depends on efficient implementation. Clear legal foundations should ideally lead to clarity in practice. The Board should also focus on proper capacity-building of Coordinator Valuers, class specialists, and amendment-focused training of RVs. Besides, the Board should check that enterprise level valuation does not result in unnecessary and impractical inflation of estimated valuation. These reforms, if implemented well, would mark a shift in Indian insolvency landscape from asset liquidator system to a going concern rescue framework, IBBI’s original promise.