TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 217
X X X X Extracts X X X X
X X X X Extracts X X X X
.... view of the facts and grounds stated herein above the petitioners herein prays that this Hon'ble Court may be pleased to: a. Issue appropriate writ, order or direction declaring Rule 3(2) of the Companies (Registered Valuers and Valuation) Rules, 2017 as unconstitutional for violating Article 14, Article 19(1)(g) and Article 301 of the Constitution of India. b. Pass any other order and / or direction, as this Hon'ble Court may deem fit proper under the facts and circumstances of the present case and in the interest of justice." 3. In substance, the challenge in these petitions is to declare Rule 3(2) of the Companies (Registered Valuers and Valuation) Rules, 2017 as unconstitutional for violating Article 14, Article 19(1)(g) and Article 301 of the Constitution of India. The Rule 3(2) is reproduced as under: X X X X X X (2) No partnership entity or company shall be eligible to be a registered valuer if- a. it has been set up for objects other than for rendering professional or financial services, including valuation services and that in the case of a company, it is a subsidiary, joint venture or associate or another company or body corpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question. Regrettably, according to him, the impugned Rule fails on both the counts. 8. It is his submission that the subsidiaries or joint ventures or associates of globally recognized entities which have a rich and varied experience in the field of valuation are better equipped as opposed to individual valuers to carry out valuation pertaining to large corporations and in such a case it becomes necessary to engage companies such as the petitioner to carry out valuation. These subsidiaries or joint ventures or associates of foreign and Indian companies will continue to impart more professionalism, quality, high standards and transparency in valuation industry. 9. In fact, it is his endeavor to submit that the impugned Rule shall perniciously affect investment / acquisition of assets in India as both Indian and foreign investors ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich valuation is required to be carried out. A perusal of the counter affidavit gives the following position: Companies Act, 2013 Insolvency & Bankruptcy Code, 2016 Section 62(1)(c)-Issue of new shares Section 59(3)(b)(ii)- In an application for voluntary liquidation of a corporate person, company should submit a report of the valuation of assets of the company, if any, prepared by a registered valuer. Section 192(2)- Non-cash transactions with directors IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016- Regulation 27- determination of fair value and liquidation value of corporate debtor. Section 230(2) and (3) and Section 232-Compromises, Arrangements and Amalgamations Section 236- Purchase of minority shareholding Section 281(1)(a) submission of report by Company Liquidator. 13. It is the stand of the respondents and also contended by Ms. Madhavi Divan that in the light of the myriad uses of valuation under the Act and the IBC, the integrity, impartiality and truthfulness of the valuation process is absolutely essential to the proper working of these laws and to incoming FDI in India which is based on such valuat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ofessions or business / enterprises so that the integrity of the profession be maintained and there is no conflict of interest. Hence, the Rules do not suffer from the vires of excessive delegation as contended by Mr. Singh. 18. In other words, she submits that the subsidiary company is controlled by the parent company; in joint venture parties have joint control and management; and associate company is one in which other company has significant influence. Hence, subsidiaries, joint ventures and associates cannot be said to be completely independent of the parent company. If a Registered Valuer company is a subsidiary, joint venture or associate of another company, the said entity may not be able to stand out as an independent professional body. Hence, if valuation is allowed to be undertaken as a business by such entities, independence and credibility cannot be ensured. Professionalism as a registered valuer can be achieved only if the body is professionally independent and is set up exclusively for professional valuation services. She submits that valuation is a professional service and unless adequate standards are prescribed, it cannot sustain as a competent profession that is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Bar and those not so oriented are kept out. The role of an advocate is essentially different from the role of any other profession. An advocate is said to belong to a noble profession. The Act itself envisages the State Bar Councils who are the elected peers of advocates themselves to lay down the standards for the professional conduct and etiquette. That would naturally bring in its wake the power to regulate entry to such a noble profession. It is said that law is a jealous mistress that calls for undivided loyalty and unflinching attention from her devotees. Dry drudgery of desks' dead wood is the essential requirement of an advocate aspiring to win laurels in the profession. X X X X X 20. It is no doubt true that under Article 19, subarticle (1)(g) all citizens have a right to practise any profession, or to carry on any occupation, trade or business and any profession may include even plurality of professions. However, this is not an absolute right. It is subject to sub-article (6) of Article 19 which lays down that nothing in sub-clause (g) of the said clause shall affect the operation of any ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Article 19(1)(g) as the impugned rule has to be treated as imposing a reasonable restriction on the said fundamental right it also, therefore, has to be held not to be arbitrary or unreasonable from any viewpoint. The rule carves out a well-defined class of professionals carrying on other professions and denies to members of this well-defined class entry to the legal profession so long as they insist on carrying on any other profession simultaneously with the legal profession. The said classification has a reasonable nexus to the object sought to be achieved, namely, the efficiency of advocates belonging to the legal profession and the better administration of justice for which the legal profession is a partner with the judiciary. The challenge mounted on the rule in the light of Article 14, therefore, has to fail." 22. The objective and intention behind laying down the impugned Rule is clearly to introduce higher standards of professionalism in valuation industry, specifically in relation to valuations undertaken for the purpose of Companies Act and IBC, 2016. The impugned Rule obviates the possibility of conflict of interest on account of diverging interests of constituent /....