COURT JUDGMENTS RELATED TO PANEL VALUERS OF BANKS - B. KANAGA SABAPATHY Tiruchirappalli

Transcription

1 1/12 COURT JUDGMENTS RELATED TO PANEL VALUERS OF BANKS - B. KANAGA SABAPATHY Tiruchirappalli The following judgments will be highly helpful for the practising panel valuers in order to defend when their reports are challenged in the court of law. I. Liability against a professional arises only when he is an active participant in a plan to defraud the bank. CBI Vs. K. Narayana Rao - Supreme court - (2012) 9 SCC II. Valuer is not an expert to test the genuineness of the documents. L.N. Rajagopalan Vs State - CRL.R.C.No of Madras High court III. A valuer is not competent to certify the genuineness of the title. Vijay kumar singh Vs State of bihar of 2011 Patna High court IV. A valuer is not responsible to detect the forged document. Aparna das Vs Banks - W.P.No (W) of Kolkata High court V. Valuer has no role to certify or verify the title of the documents. Hemraj phonsa Vs CBI Court of special judge, Anti corruption, Jammu & Kashmir. Note : The practising valuers may go through the judgments in detail and get their knowledge enriched.

2 2/12 I. LIABILITY AGAINST A PROFESSIONAL ARISES ONLY WHEN HE IS AN ACTIVE PARTICIPANT IN A PLAN TO DEFRAUD THE BANK CBI Vs. K. Narayana Rao - Supreme court - (2012) 9 SCC CBI registered FIR against certain bank officials, builder and other persons for defrauding the bank to the tune of 1.27 crores. 2. CBI filed charge sheet against K. Narayana Rao, Panel advocate. The allegation is that he gave false legal opinion in respect of housing loans. It is specifically alleged than K.N. Rao and the valuer have failed to point out the actual ownership of the properties and to bring out the ownership details and name of the apartments. They should be punished under section 120 B with 419, 420, 467, 468, 471, 109, Section 420 IPC Objecting this, Mr. Rao filed a criminal petition in the high court which quashed the proceedings of CBI as far Mr. Rao is concerned. 4. CBI appealed to Supreme court. 5. Counsel for CBI argued : Mr. Rao did not verify the originals pertaining to house loans before giving legal opinion and intentionally changed the proforma and violated the banks circulars. 6. Counsel for Mr. Rao argued : i) Mr. Rao had not committed any offence for punishment under the said sections... ii) Based on the documents placed, he gave legal opinion after perusing and on satisfying himself for which he cannot be implicated as a conspirator for the offence punishable under the said sections Supreme court said : The allegations made by CBI are :

3 3/12 i) The panel advocate and panel valuer have failed to point out the actual ownership and failed to bring out ownership details and name of apartments in their reports. ii) They have failed to point out the falsehood in the construction permission (Municipal permission were fake). iii) The impersonated site owners executed false sale deeds. The panel advocate submitted false legal opinions and panel valuer submitted false valuation reports. iv) They have colluded with others, entered into conspiracy and cheated the bank. They are liable for offences punishable under the said sections The counsel for CBI quoted many court judgements and insisted that punishment is to be given. Supreme court answered suitably for the judgements quoted by CBI. 9. After hearing both sides, the S.C. said : i) The only allegation against the panel advocate is that he submitted false legal opinion. ii) He was not named in FIR. He was charge sheeted. iii) None of the witnesses have spoken about the advocate s involvement in the said conspiracy. iv) A lawyer does not tell his client that he shall win the case in all circumstances. Likewise a physician would not assure the patient of full recovery in every case. A surgeon cannot and does not guarantee that the result of surgery would invariably be beneficial, much less to the extent of 100% for the per son operated on. The only assurance which such a professional can give or can be given by implication is that he is possessed of the requisite skill in that branch of profession which he is practising and while undertaking the performance of the task entrusted to him, he would be exercising his skill with reasonable competence. This is what the person approaching the professional can expect. Judged by this standard, a professional may be held liable for negligence on one of the two findings, viz., either he was not

4 4/12 possessed of the requisite skill which he professed to have possessed, or, he did not exercise, with reasonable competence in the given case, the skill which he did possess. v) It is not necessary for every professional to posess the highest level of expertise in that branch which he practices. vi) There is a lot of difference between the giving of improper legal advice and the giving of wrong legal advice. Mere negligence on the part of a legal practitioner in the exercise of his profession does not amount to professional misconduct. vii) The liability against an opining advocate arises only when the lawyer was an active participant in a plan to defraud the bank. In this case there is no evidence to prove that Mr. Rao was abetting or aiding the original conspirators. viii) Merely because his opinion may not be acceptable, he cannot be mulcted with the criminal prosecution, particularly in the absence of tangible evidence that he associated with other conspirators. ix) It is beyond doubt that a lawyer owes an unremitting loyalty to the interests of the client and it is the lawyers responsibility to act in a manner that would best advance the interest of the client. Merely because his opinion may not be acceptable, he cannot be mulcted with the criminal prosecution, particularly, in the absence of tangible evidence that he associated with other conspirators. At the most, he may be liable for gross negligence or professional misconduct if it is established by acceptable evidence and cannot be charged for the offence under Sections 420 and 109 of IPC along with other conspirators without proper and acceptable link between them. It is further made clear that if there is a link or evidence to connect him with the other conspirators for causing loss to the institution, undoubtedly, the prosecuting authorities are entitled to proceed under criminal prosecution. Such tangible materials are lacking in the case of the respondent herein. x) This Supreme court agrees with conclusion of High court in quashing the criminal proceedings and reject the stand by the CBI. * * *

5 5/12 II. VALUER IS NOT AN EXPERT TO TEST THE GENUINENESS OF THE DOCUMENTS L.N. RAJAGOPALAN VS STATE CRL.R.C.NO OF MADRAS HIGH COURT 1.0. Prosecution : Branch Manager of the bank sanctioned limits to 10 companies based on forged auditor s certificates and collateral security documents. All the accused conspired together to commit the offences Charge against the valuer : Being an approved valuer, he valued six properties. But those properties were not existing as described in the title deeds. Valuer did not identify the ownership of the property. He violated the guidelines of the bank and submitted valuation report of the properties which do not exist Prosecution counsel says : i) Valuer failed to verify the documents and the person in actual possession of the property. ii) Valuer has not followed the guidelines Valuer says : i) No guidelines were given to him by bank. ii) He is supposed to estimate the marketability of the property referred for valuation by the bank based on the documents provided. Of course the valuer is bound to physically inspect the property.

6 6/12 iii) The valuer cannot simply go to a location of the property on his own. For the purpose of identification, he takes Branch manager or some authorized agent Court said : 5.1. An approved valuer fixes the value taking into account various factors It is definitely not the duty of the valuer to look into the authenticity of the documents. He is not an expert to test the genuineness of the documents. He is not equipped with knowledge to identify a document as a fabricated or concocted one. For assessing the value of the property which is the prime job of the valuer, he is not supposed to identify and meet the owner of the property The poor approved valuer, well qualified in assessing the value of the property, has been wrongly implicated having found that no properties were in existence as thought he committed cheating punishable under section 420 of the Indian Penal Code. Likewise, the other charges under sections 419, 467, 468, 471 read with section 120-B of the Indian Penal Code have also no basis. It is in the figment of imagination of the investigating agency that the valuer was involved in the conspiracy hatched by the other accused. The valuers are supposed to contact the Branch Manager and not the borrowers. None of the witnesses has spoken to the fraudulent or dishonest role played by the valuer in the fabrication of documents The allegation made against the valuer are found to be baseless. Absolutely no materials are available for charging him for the offences alleged against him Trial court misdirected itself and come to a wrong decision that there are materials to charge this valuer Therefore, the valuer is discharged from the criminal proceedings. * * *

7 7/12 III. A VALUER IS NOT COMPETENT TO CERTIFY THE GENUINENESS OF THE TITLE VIJAY KUMAR SINGH Vs STATE OF BIHAR of 2011 PATNA HIGH COURT 1.0. Vijay kumar singh is the valuer. As the panel valuer, he visited the land along with the Chartered accountant, Manager Canara bank, Panel advocate and valued the land shown by the banker The lawyer issued non-encumbrance certificate. Loan was availed by the party. After availing the loan, the party never operated the bank account and the ac count was declared NPA The bank after verification, found the said title deed was forged and fabricated It was concluded that the act of fraud was a result of conspiracy and the loan amount was misappropriated after submitting fake document. The police investigated the case and charge sheeted the valuer, advocate and chartered accountant. In the FIR, it is specifically mentioned that valuer has issued the valuation report The advocate for valuer argued : The valuer has mentioned in the report : i) If this property is offered as collateral security, the concerned financial institution is requested to verify the extent of land shown in this valuation report with regard to the latest legal opinion. ii) The valuation work is undertaken by this valuer based on the request of Manager, Canara bank.

8 8/12 iii) The scrutiny report and non-encumbrance certificate was submitted thereafter. The valuer has not made any offence. He quoted K. Narayana Rao case The bank advocate argued that bank was defrauded by the valuer hatching conspiracy with loanee or guarantor The Court said : The bank was frauded by the loanee who gave a fraudulent deed. The valuer was not supposed to certify the genuineness and otherwise of the title. The valuation is not in dispute. Hence the valuer cannot be liable for dishonesty. Forgery has not been done by the valuer. There is nothing in record that the valuer has indulged in conspiracy with the loanee. There is neither any direct nor circumstantial evidence to suggest that the valuer is part of any conspiracy. Narayana Rao Vs CBI case was quoted Court is of the view that no offence, as charged is made out against the valuer. To continue the case will be an abuse of the court. * * *

9 9/12 IV. A VALUER IS NOT RESPONSIBLE TO DETECT THE FORGED DOCUMENT APARNA DAS Vs BANKS W.P.No (W) of Kolkatta High Court 1. Aparna Das is a panel valuer in Kolkata. 2. For SBI, she did a valuation in In 2012, the bank said valuation was done based on manufactured document. Explanation was sought. 4. Aparna Das replied that being an Engineer / Valuer, she has no legal right to verify any document. 5. In 5/2014, she was informed by the bank that she was depanelled. 6. IBA issued a circular informing the depanelment. 7. Subsequently, Federal bank also blacklisted her. 8. During the proceeding, the respondent bank said, It was a duty cast on the valuer to ascertain the document on the basis of which valuation was to be undertaken. 9. The court observed : i) In the valuation report, the valuer has clearly mentioned that legal matters were not verified. If this be true, then to depanel the petitioner on the ground that she had not inspected the documents on the basis of which the valuation report had been prepared would not be correct.

10 10/12 ii) The job of a valuer is to value the property. A valuer is not expected to read the title deeds. A valuer and a legally trained person cannot be equated. Valuer is blamed here to cover the lapse on the part of the Chief manager of the bank. The reason for which the petitioner has been depanelled is the job of a Law officer. It is for the bank manager to consider the legal points and certainly it is not the job of a valuer. The decision of the bank is to have far reaching effect. The consequence is the IBA conveys the matter to all the banks and all the banks start depanelling the valuer automatically. The bank ought to have taken a considered opinion before taking drastic step of depanelling which will affect her right to life and livelihood guaranteed under Article 21 of the constitution of India. Accordingly as there exists no nexus between the decision taken by the bank and the task entrusted to the valuer, the depanelment of the valuer cannot be sustained in the eye of law. Valuer has to be empanelled again. 10. The letters issued by State Bank India & Federal Bank depanelling the valuer are set aside by the court. * * *

11 11/12 V. VALUER HAS NO ROLE TO CERTIFY OR VERIFY THE TITLE OF THE DOCUMENTS HEMRAJ PHONSA VS. CBI COURT OF SPECIAL JUDGE, ANTI CORRUPTION, JAMMU & KASHMIR The valuer was asked telephonically to conduct the survey regarding the valuation of the property in question, for the loan to be sanctioned in favour of accused. There is no written communication from the bank. He proceeded on spot and the property was identified by owner of the property and he conducted the valuation of the property identified by him. Neither any bank official was deputed nor the bank has identified the property for the purpose of conducting the valuation. The documents i.e. Gift Deed whereby it was shown that the property has been gifted to the applicant, turned to be fake, as is alleged in the charge sheet. So far as the job of valuer is concerned, his job is to assess the market value of the property. Whether the documents are genuine or forged was the job of the bank official. It was for them, to have enquired about the genuineness of the documents, which later on turned to be fake. The valuer has estimated the value of the properties referred to him by the bank which was identified by the owner who had been sent by the bank with the valuer. Once the property was shown to him and was identified by the owner, he had no reason to disbelieve him regarding the identification of the property which was shown to him. He has given the report of the property identified. A valuer is not expected to read title deed as a legally trained person. To expect the valuer to detect forged documents of manufactured documents would be to expect the valuer to be a legally trained person. A valuer and legally trained person cannot be equated. It was the job of the bank and not that of the valuer to ensure and verify the genuineness of the documents, which has not been done by the bank. The investigating agency has not placed on record the role of duties regarding the valuer. In absence of the same it cannot be presumed that valuer has any role to certify or verify the title of the documents, or any other role which can be attributed to

12 12/12 valuer except the valuation of the property. There is nothing on record in black and white to show that the valuer was at fault to rely upon the identification of the property by beneficiary / mortgagor who claimed to be owner on the strength of the documents, reflected in the opinion / report of the valuer. Further there is nothing on record in form of any bank circular or instruction that the valuer was duty bound to take the assistance of revenue officials or bank officials and not that of alleged beneficiary for purpose of identification of the property regarding which the valuation was given. In absence of the charter of duties specifying the role of the valuer that he is not to take the help of alleged beneficiary / mortgagor for identification of the property, the court is unable to accept the submissions and is accordingly rejected. On the strength of material placed on record including statements of the witnesses, allied documents and in view of discussion made herein above, it is held that the investigating agency has failed to make out a case of conspiracy against the valuer, as such he is discharged. * * *