Fair Value vs. Liquidation Value: Two Numbers, Not One

Confirmed directly against Regulation 2(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Fair value: "the estimated realizable value of the corporate debtor or the assets of the corporate debtor, as the case may be, if they were to be exchanged on the insolvency commencement date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, and where the parties had acted knowledgeably, prudently, and without compulsion." The Explanation adds that this estimate is "computed after taking into account the total estimated realizable value of all the assets of the corporate debtor including but not limited to tangible and intangible assets, along-with their underlying synergies."

Liquidation value, by contrast: "the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date." No willing buyer, no marketing period, no synergies. One definition describes an orderly, arm's-length sale of a functioning business. The other describes what the pieces would fetch if it stopped functioning tomorrow.

Since the Regulation 35 mechanism was substituted (with the current synergy language added by amendment effective 25 February 2026), fair value is not one valuer's number. Registered valuers are appointed in a set, one per asset class, and one of them is designated the coordinating valuer for that set. Each valuer values their own asset class; the coordinating valuer then combines those figures, "along with their underlying synergies," into a single fair value for the corporate debtor as a whole. Where two coordinating valuers' fair-value estimates, or the underlying liquidation-value estimates, come out significantly different, defined in the Regulation itself as a gap of 25% or more, a third set of valuers can be appointed, and the average of the two closest estimates becomes the final number.

The amended Regulation's own Explanation operationalises exactly this role and states the computation directly:

"𝐹𝑉𝐶𝐷 = ∑(𝑉𝑅𝑉) + 𝑆", where FVCD is the Fair Value of the Corporate Debtor, VRV is the value of each individual asset class as determined by its Registered Valuer, and S is "a synergistic value adjustment reflecting the additional value arising from the integrated operation and interaction of the tangible and intangible assets and business activities of the Corporate Debtor, including operational efficiencies, business synergies, market positioning, and expected future earning potential."

The same Explanation is explicit that this synergy step is not available to liquidation value at all: "The Registered Valuers appointed for different asset classes shall determine the fair value and liquidation value within their respective asset classes." There is no coordinating valuer for liquidation value and no synergy adjustment layered on top. Each asset class's liquidation value stands on its own, and the Regulation's own averaging rule treats fair value and liquidation value differently for exactly this reason: the average of the two closest coordinating valuers' estimates is taken as the fair value of the corporate debtor as a whole, while the average of the two closest estimates within each asset class is taken as that asset class's liquidation value. One number is assembled bottom-up with an uplift for integration. The other is never assembled at all; it just sits as a set of per-asset-class figures. The distinction tracks the same logic covered in Valuation Approach vs. Valuation Method: What the Words Actually Mean: fair value is closer to an income-approach, going-concern number with a deliberate adjustment on top, not unlike how a control premium adjusts a base value for the benefit of holding things together, covered in Control Premium: Explicit Duty Under IBC, Implicit Duty Everywhere Else. Liquidation value stays a disaggregated, asset-by-asset number consistent with what a forced, piecemeal sale would actually produce.

A separate Regulation 35, this one in the IBBI (Liquidation Process) Regulations, 2016, governs valuation once a company has actually moved from resolution into liquidation, and it does not start from a blank page.

• Sub-regulation (1): if fair value and liquidation value were already determined during CIRP, the liquidator simply "considers the average of the estimates of the values arrived under those provisions." No fresh valuation exercise by default.
• Sub-regulation (2): where no prior valuation exists, or the liquidator, in consultation with the consultation committee, decides fresh valuation is needed, two registered valuers are appointed within seven days of the liquidation commencement date. A relative of the liquidator, a related party of the corporate debtor, an auditor of the corporate debtor within the preceding five years, and a partner or director of the liquidator's own insolvency professional entity are all barred from the appointment.
• Sub-regulation (4): the average of the two independent estimates is taken as the value of the assets.
• Sub-regulation (7): if the fresh liquidation-stage valuation of an asset class deviates by 25% or more from the value already fixed during CIRP, the liquidator has to convene a meeting and have the valuers explain the difference to the committee, the same 25% threshold that triggers a third valuer during CIRP itself.

The default is continuity, not duplication. A number produced once, properly, during resolution is meant to survive into liquidation without being redone from scratch.

Neither Regulation 35 names a specific valuation standard by itself. Both simply require the valuers to work "in accordance with such valuation standards as notified by the Board through circular," a clause substituted into the Liquidation Process Regulations effective 25 February 2026 to replace an earlier cross-reference to the Companies (Registered Valuers and Valuation) Rules, 2017. The Board has not yet notified a standard under that clause; until it does, the practical answer traces back to Rule 18's own fallback, internationally accepted valuation standards or a valuer's RVO-adopted standard, covered in full in What Valuation Standard Actually Governs an SFA Registered Valuer?. The fair value and liquidation value split is not a separate standard. It is two different bases of value computed under whichever standard actually governs the engagement.

Fair value and liquidation value are not two estimates converging on the same truth from different angles. They answer two different questions: what would a willing buyer pay for this business, running, with everything it holds together working in its favour, and what would the pieces fetch if it stopped running tomorrow. One gets a coordinating valuer and a synergy adjustment on top of the sum of its parts. The other does not, deliberately. Getting that distinction right is not a technicality. It is the difference the Code cares about between a company worth saving and one worth breaking up.

This machinery is also, in a roundabout way, the reason IBBI ended up regulating registered valuers at all rather than some other body: the Code's own regulations already assumed this profession would exist to produce exactly these two numbers, a history covered in Why India Carved Out a Separate Profession Just for Valuation.