IBBI Rule 35 Valuation: Complete Guide for Registered Valuers in 2026
Regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 — commonly searched as "IBBI Rule 35" — is the backbone of asset valuation in India's insolvency framework. This guide explains fair value, liquidation value, compliance requirements, and practical insights for registered valuers and stakeholders navigating the Corporate Insolvency Resolution Process.
Part of our Complete Indian Startup Valuation Guide — 19 methods compared with formulas, stages & costs.
What is Rule 35 Under the Insolvency and Bankruptcy Code?
Regulation 35, read with Regulation 27, requires the Resolution Professional in a Corporate Insolvency Resolution Process (CIRP) to appoint two sets of registered valuers — each set holding one valuer for every asset class, with one of them designated the coordinating valuer — to determine the fair value and liquidation value of the corporate debtor. Since the IBBI (CIRP) (Amendment) Regulations, 2026 of 25 February 2026, fair value is the realisable value of the corporate debtor as a whole, including the synergies between its assets, and since 20 May 2026 an MSME corporate debtor needs only one set unless the committee of creditors asks for two. These values are the baseline against which resolution plans are judged.
The importance of Rule 35 cannot be overstated — it ensures that the Committee of Creditors (CoC) has a reliable benchmark when deciding whether a resolution plan offers adequate value compared to what would be recovered in a liquidation scenario.
Key Regulatory References
- IBBI (CIRP) Regulations, 2016 — Regulations 2(1)(hb), 27 and 35, as amended by the IBBI (CIRP) (Amendment) Regulations, 2026 (F. No. IBBI/2025-26/GN/REG135, 25 February 2026): fair value redefined, coordinating valuer, averaging of the two closest estimates, third set where estimates differ by 25% or more, physical verification and the methodology meeting with the committee
- IBBI (CIRP) (Second Amendment) Regulations, 2026 (20 May 2026) — one set of valuers for an MSME corporate debtor unless the committee of creditors records reasons for two; the Liquidation Process (Third Amendment) Regulations, 2026 of the same date make the same change for MSME liquidations
- IBBI (Liquidation Process) (Second Amendment) Regulations, 2026 (25 February 2026) — Regulation 35(3) and new 35(8): standards and report format as notified by the Board by circular
- IBBI Circular No. IBBI/RV/103/2026 dated 15 June 2026 — Guidelines for Conducting Valuation under the Code: documentation, 23 mandatory report items, the VRIN in every page footer, receivables parameters, asset-class templates and the coordinating valuer's report
- Companies (Registered Valuers and Valuation) Rules, 2017
- IBBI Circular No. IBBI/RV/93/2026 dated 1 April 2026 — International Valuation Standards (IVS) notified as the standards for all valuations under the Code (Regulation 35(1), CIRP Regulations; Regulation 35(3), Liquidation Process Regulations)
- International Valuation Standards (IVS) as issued and updated by the IVSC — current edition effective 31 January 2025
Fair Value vs Liquidation Value: The Two Pillars
Understanding the distinction between these two valuation concepts is fundamental to every Rule 35 engagement.
📊 Fair Value
The estimated realisable value of the corporate debtor, or of its assets, in an arm's length exchange after proper marketing between a willing buyer and a willing seller acting knowledgeably, prudently and without compulsion, as at the insolvency commencement date — computed on the total realisable value of all assets, tangible and intangible, together with their underlying synergies (Regulation 2(1)(hb), substituted on 25 February 2026).
- Corporate debtor valued as a whole, synergies included
- Proper marketing, willing buyer and seller
- Arm's length, knowledgeable, no compulsion
- Computed by the coordinating valuer of each set
⚖️ Liquidation Value
The estimated realisable value of the assets of the corporate debtor if it were to be liquidated on the insolvency commencement date (Regulation 2(1)(k)) — an as-is, where-is sale with limited marketing exposure.
- Distressed sale assumption
- Limited marketing period
- As-is, where-is condition
- No fixed discount is prescribed; it follows the asset and the market
| Parameter | Fair Value | Liquidation Value |
|---|---|---|
| Premise | Going concern | Forced / orderly liquidation |
| Marketing Period | Reasonable (6–12 months) | Immediate to 3 months |
| Buyer Pool | Broad market participants | Limited, distressed buyers |
| Defined in | Regulation 2(1)(hb), as substituted on 25 February 2026 | Regulation 2(1)(k) |
| Use Case | Resolution plan evaluation | Minimum recovery benchmark |
Step-by-Step Rule 35 Valuation Process
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Appointment by Resolution Professional
The RP appoints two sets of registered valuers within 7 days of the RP's own appointment, and in any case by the 47th day from the insolvency commencement date (Regulation 27(1)). Each set has one registered valuer for every asset class the corporate debtor holds (Securities & Financial Assets, Land & Building, Plant & Machinery), and the RP, after consulting the committee of creditors, designates one valuer in each set as its coordinating valuer (Regulation 35(1)(a)). For an MSME corporate debtor one set is appointed, and a second only if the committee asks for it with reasons recorded in writing (Second Amendment Regulations, 20 May 2026).
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Information Memorandum Review
Valuers review the Information Memorandum prepared by the RP, financial statements, asset registers and legal documents. Before any estimate is computed, the RP convenes a meeting at which the valuers, including the coordinating valuers, explain their methodology to the members of the committee (Regulation 35(1)(b)); the minutes are annexed to the reports. Each valuer physically verifies the inventory and fixed assets before submitting a report (Regulation 35(1)(c)).
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Valuation Methodology Selection
Select appropriate approaches — Income approach (DCF), Market approach (comparable transactions), or Cost approach (replacement/reproduction cost) — based on asset type and data availability.
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Fair Value & Liquidation Value Determination
Each valuer determines the fair value and liquidation value of its asset class under the International Valuation Standards and reconciles the approaches used. The coordinating valuer of each set then computes the fair value of the corporate debtor from those asset-class values together with the synergies between them (Regulation 35(1)(d); the June 2026 guidelines express this as FVCD = ΣVRV + S). The fair value of the corporate debtor is the average of the two closest estimates submitted by the coordinating valuers, and the liquidation value the average of the two closest estimates in each asset class (Regulation 35(1)(f) and (g)). Where the two estimates differ by 25% or more, or where the committee asks for it with reasons, the RP may appoint a third set (Regulation 35(1)(e)).
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Report Submission (Per the Model Timeline)
Each valuer submits its report, and each coordinating valuer its coordinating valuation report with an executive summary, in the format notified by the Board (Regulation 35(1A); IBBI Circular IBBI/RV/103/2026 of 15 June 2026): 23 mandatory contents, from purpose and basis of value to the reasons for any asset given a nil value, with the Valuation Report Identification Number (VRIN) in the footer of every page. Submission follows the engagement letter and the model CIRP timeline in Regulation 40A. The RP provides the fair value and liquidation value to every CoC member in electronic form after receipt of resolution plans, against a confidentiality undertaking (Regulation 35(2)).
Valuation Approaches Used in Rule 35
1. Income Approach (DCF Analysis)
Projects future cash flows of the corporate debtor and discounts them to present value. Most relevant when the entity has ongoing operations with identifiable revenue streams. The discount rate reflects the risk profile of the distressed entity, typically 15–30% for CIRP cases.
Best suited for: Operating businesses, SaaS companies, service entities with contractual revenues.
2. Market Approach (Comparable Transactions)
Uses valuation multiples derived from comparable company transactions or publicly traded peers. EV/EBITDA, EV/Revenue, and P/E multiples are applied with appropriate discounts for distress, illiquidity, and size differentials.
Best suited for: Companies in sectors with active M&A activity and readily available market data.
3. Cost Approach (Net Asset Value)
Values individual assets at their replacement or reproduction cost, less accumulated depreciation and obsolescence. For liquidation value, additional forced-sale discounts are applied.
Best suited for: Asset-heavy businesses like manufacturing, real estate, and infrastructure companies.
Common Challenges in Rule 35 Valuations
Practitioners frequently encounter the following difficulties during CIRP valuations:
- Incomplete records: Corporate debtors in distress often have gaps in financial documentation, requiring forensic reconstruction of financial statements.
- Contested asset ownership: Land, IP, and receivables may be subject to litigation, requiring contingent valuation techniques.
- Rapid depreciation of going-concern value: As CIRP progresses, customer relationships, employee retention, and brand equity erode, making timing critical.
- Limited comparable data: Many Indian mid-market companies lack listed peers, requiring creative benchmarking against regional and sectoral proxies.
- Regulatory grey areas: Interpretation of "reasonable marketing period" and discount factors for illiquidity remain subjective across tribunals.
NCLT and NCLAT Precedents on Rule 35
Key Judicial Observations
Tribunals have consistently emphasised that the Rule 35 valuation serves as a benchmark but is not a rigid floor for resolution plans. The CoC retains commercial wisdom to accept plans below liquidation value in rare circumstances — however, the NCLAT has clarified that a resolution plan significantly below liquidation value requires extraordinary justification.
What earlier orders treated as good practice — a third valuer where the two estimates diverge, and the average of the two closest — is now written into Regulation 35 itself: a third set may be appointed where the estimates differ by 25% or more, and the average of the two closest estimates is the fair value (from the coordinating valuers) or the liquidation value (per asset class).
Checklist for Registered Valuers
Rule 35 Compliance Checklist
- Valid IBBI registration certificate for the relevant asset class
- Independence declaration — no conflict of interest with corporate debtor or CoC members
- Engagement letter with RP specifying scope, timeline, and fees
- Physical verification of inventory and fixed assets completed before the report (Regulation 35(1)(c))
- Methodology explained to the committee of creditors before computing estimates; minutes annexed (Regulation 35(1)(b))
- Multiple valuation approaches applied with documented rationale
- Fair value and liquidation value separately determined and reported
- Report compliant with the International Valuation Standards (mandatory for IBC valuations from 1 April 2026, IBBI Circular IBBI/RV/93/2026) and Rule 8 of the RV Rules, 2017
- Report in the Board's format (IBBI Circular IBBI/RV/103/2026): all 23 mandatory contents, VRIN in every page footer, receivables assessed on the seven stated parameters, working papers retained
- Coordinating valuer: engagement letter, inputs from the other valuers in the set, synergies identified, coordinating valuation report with executive summary
- Submitted within the engagement timeline agreed with the RP (Regulation 40A model timeline)
- Professional indemnity insurance in place
- Continuing Professional Education (CPE) hours current
Frequently Asked Questions
Rule 35 of the IBBI (CIRP) Regulations 2016 mandates that a registered valuer must determine both the fair value and liquidation value of the corporate debtor's assets during the Corporate Insolvency Resolution Process. This valuation is critical for resolution plan evaluation and sets the benchmark for minimum recovery expectations.
Only IBBI registered valuers holding a valid certificate of registration under the Companies (Registered Valuers and Valuation) Rules, 2017 for the relevant asset class. The Resolution Professional appoints two sets of valuers, each with one valuer per asset class and a coordinating valuer designated in consultation with the committee of creditors; an MSME corporate debtor needs one set unless the committee asks for two (Regulations 27 and 35, as amended in 2026). The valuers must be independent and free from conflicts of interest.
Fair value is the estimated realisable value of the corporate debtor, or its assets, between a willing buyer and a willing seller at arm's length after proper marketing, as at the insolvency commencement date, taking all assets and their underlying synergies together (Regulation 2(1)(hb), as substituted on 25 February 2026). Liquidation value is the estimated realisable value of the assets if the corporate debtor were liquidated on that date (Regulation 2(1)(k)). No fixed discount between the two is prescribed.
The valuers are appointed within 7 days of the RP's appointment and by the 47th day of the process (Regulation 27(1)). They meet the committee to explain their methodology before computing estimates, verify the inventory and fixed assets, and submit their reports in the Board's format within the engagement timeline, consistent with the model CIRP timeline in Regulation 40A. The RP then provides the fair value and liquidation value to every CoC member in electronic form after resolution plans are received, against a confidentiality undertaking (Regulation 35(2)).
Since 1 April 2026 every valuation under the Insolvency and Bankruptcy Code must follow the International Valuation Standards (IVS) as issued and updated by the IVSC — notified by IBBI Circular No. IBBI/RV/93/2026 dated 1 April 2026 under Regulation 35(1) of the CIRP Regulations, Regulation 35(3) of the Liquidation Process Regulations and the corresponding provisions of the voluntary liquidation, pre-packaged insolvency and personal-guarantor regulations. The valuer must also follow the Companies (Registered Valuers and Valuation) Rules, 2017 and maintain independence, objectivity and professional competence.
Four things. From 25 February 2026 (IBBI (CIRP) (Amendment) Regulations, 2026) fair value is defined for the corporate debtor as a whole with its synergies, each set of valuers has a coordinating valuer, estimates are averaged from the two closest, a third set may be appointed where they differ by 25% or more, and physical verification and a methodology meeting with the committee are mandatory. From 1 April 2026 the International Valuation Standards apply (Circular IBBI/RV/93/2026). From 20 May 2026 an MSME corporate debtor needs one set of valuers unless the committee asks for two. From 15 June 2026 reports follow the Board's format (Circular IBBI/RV/103/2026): 23 mandatory contents, the VRIN on every page and a coordinating valuation report.
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