Under Regulation 35 of the CIRP Regulations, two registered valuers independently estimate the fair value and the liquidation value of the corporate debtor, and the average of each becomes the benchmark for the committee of creditors.

What is fair value?

The estimated realisable value of the assets if exchanged on the insolvency commencement date between a willing buyer and a willing seller, at arm’s length, after proper marketing, both acting knowledgeably and without compulsion. It assumes an orderly sale.

Liquidation value assumes a forced, time-bound sale — for specialised plant the gap from fair value can exceed 40 per cent.
Liquidation value assumes a forced, time-bound sale — for specialised plant the gap from fair value can exceed 40 per cent. Photo: Sidharthkochar · CC BY-SA 3.0 · Wikimedia Commons

What is liquidation value?

The estimated realisable value if the assets were sold on the insolvency commencement date in liquidation — a forced, time-bound sale. For a stressed steel plant or a half-built township, liquidation value can be 40–60 per cent below fair value because the buyer pool shrinks and dismantling, transport and holding costs rise.

Liquidation value as a share of fair value — indicative by asset type
  • Land85%
  • Buildings70%
  • General-purpose machinery60%
  • Specialised plant45%
  • Inventory and stores40%

Indicative ranges. The more specialised the asset and the shorter the sale window, the wider the gap.

How is confidentiality maintained?

The valuers report only to the resolution professional; the values are shared with CoC members only after receipt of resolution plans, under a confidentiality undertaking.

Inventory and stores are usually the first assets to lose value in a forced sale.
Inventory and stores are usually the first assets to lose value in a forced sale. Photo: Prabhat1729 · CC BY-SA 4.0 · Wikimedia Commons

Why does technical depth matter in IBC valuation?

A plant that is valued from the asset register alone will be wrong. Condition, remaining life, whether a line can be recommissioned, and what the replacement cost really is today determine both values. Kakode & Associates’ IBC valuations — including Jet Airways (₹5,376 crore) and Think & Learn / BYJU’S (₹28,514 crore) — are prepared by engineers who inspect every major asset. See IBC & NCLT Resolution Valuation.