The Hon’ble High Court at Delhi in Cushman and Wakefield India Private Limited v. Union of India and Anr. (Writ Petition No. 9883 of 2018) has upheld the constitutionality of Rule 3(2) of the Companies (Registered Valuers and Valuation) Rules, 2017 (‘RV Rules’) under which a partnership and/or a company is ineligible from being a registered valuer if “...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 of another company or body corporate.”

Facts of the case:

Cushman and Wakefield India Private Limited (‘Petitioner’) was engaged in the business of real estate consultancy services including provision of real estate valuation services.

The Petitioner was agrieved by the notification of Rule 3(2)(a) of the RV Rules. It was alleged that the said notification impaired the right of the Petitioner by making the Petitioner ineligible from being a Registered Valuer on the mere ground that the Petitioner was a subsidiary of a body corporate. The Petitioner thus preferred the present writ petition alleging violation of Article 14, Article 19(1)(g) and Article 301 of the Constitution of India by Rule 3(2)(a) of the RV Rules.

High Court's observations and findings:

The High Court considered “whether exclusion of a subsidiary company, joint venture or associate of other company, for purpose of eligibility for registration as valuer is reasonable” and answered in the affirmative.

The High Court held that the test of permissible classification is fully satisfied by the RV Rules and that the separate class carved out through the classification contemplated in Rule 3(2)(a) of the RV Rules is founded on intelligible differentia.

While disposing of the instant writ petition, the High Court at Delhi observed that “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 / associate entities which resultantly shall undermine the very process of valuation, being one of the most essential elements of the proceedings before NCLT.”