Indemnity bond for Valuers in SBI

Page Category: Engineer Valuers

To, SBi, We request you to reconsider the move and to dispense with the policy of taking of Indemnity Bond from us, engineer Valuers,

Ref:	1.	Your Circular No. SARG/ARC/03/2020-21 dt. 29.05.2020
	2.	Your Circular No. CCO/CPPD-ADV/49/2019-20 dt. 03.07.2019
	3.	Order of Patna High Court in Case No.
	4.	Order of Rajasthan High Court in Case No.
	5.	Our representations to the State Bank of India dt

Sub:		Dispensing with of taking Indemnity Bond from Engineer Valuers with respect to their empanelment and also at the time of issuing the Valuation report of Properties

We request you to reconsider the move and to dispense with the policy of taking of Indemnity Bond from us, engineer Valuers, which would not only subject us to indirectly stand as guarantors for Bank’s loanees and also undermines our professional dignity. In addition the conditions put forth in the IB pushes the lives of our dependents in jeopardy and at risk for no fault of theirs and ours.

No other service provider including the Bank’s Officials who would be involved in the process of loan sanction are asked for giving this Kind of Indemnity Bond. But only Engineer Valuer is asked to do so. Why sir? Actually engineer valuer’s role is very minimal during the process of loan sanctions and after. Let us review what happens during the process of loan sanctioning by the Bank.

Generally the following sequence of events take place while a loan is sanctioned,

1. either a Person or a business entity approaches the Bank requesting for a loan or a Bank Official or Bank Manager goes to the prospective loanee offering Finances from the Bank.

2. then Bank would inquire about the financial and other credentials of the prospective loanee. Income Tax returns, GST returns etc. are verified. Business premises are visited by the Bank. Business turnover of the firm or person is verified by the Bank based on Accountants’ reports. And after Bank satisfies with him, then only bank starts the actual process of financing the business.

3. then bank asks the prospective loanee to provide security of Immovable properties against the loan.

4. then prospective loanee furnishes relevant documents of the property or properties to be pledged with the Bank against the loan. then the Title deed documents are sent to Advocate to verity genuinty of title of the property. After legal opinion is obtained Bank asks Bank’s empanelled Engineer Valuer to assess market value of the property offered as security. A Bank official, along with the owners of the property, accompanies the Valuer during inspection of the property. Field officer of the Bank separately or along with the BM or Engineer also visits the property and conducts inquiries about the property.

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5. then based on his professional knowledge the Engineer valuer issues a Valuation report. Then Bank Manager after comparing the Market Valuer given by the Valuer with the guideline rate of Sub Registrar’s market value. Then BM is free to accept the Market value of Panel Valuer. IN case he is not satisfied with the Valuation report of Valuer he would obtain second Valuation from another Empanelled Valuer. Valuer is paid the prescribed Valuation fee based on the Value of the property. For example, if the Market value assessed is Rs. 25.00 Lakh the fee @ Rs. 125/- per lakh that is, Rs. 3125/- is to be paid to the Valuer.

6. then Bank sanctions the loan. Quantum of loan is determined by the Bank based on Bank guidelines. And it may be remembered that property value is not the sole determining factor for the quantum of loan. The loan may be 60% of the value of property or 200% depending on the type of loan to be sanctioned. So, Value of the property is not main criterion for sanction of a loan.

From the above narration it is obvious that Engineer valuer has no authority to grant any loan to any person. Bank official the Branch Manager accords sanction to the customer of the Bank. In addition to the Engineer valuer, The Branch Manager takes the services of Private Accountants, Chartered accountants, Advocate, and verifies Income Tax and GST tax returns reports etc also in the process. And the loan is sanctioned by the Branch Manager after he personally satisfies with the prospective or running customer that the customer is a genuine person and has good financial potential and capacity to repay the loan. And accordingly the Branch Manager and Field officer record their opinions about the customer before sanctioning of the loan. Because as per Bank norms Branch Manager is solely responsible for the sanctioning the loan and for maintenance of the good health of the account of the loanee.

Reserve bank or Bank’s guidelines clearly directs the BM to verify the reports given by all -Accountant, advocate, engineer valuer before sanction of the loan.

Quantum of loan is determined by the accounts of business turnover mainly. So Value of the property is not main criterion for sanction of a loan.

And moreover, the loanee is a stranger for engineer valuer until the Bank introduces him to get value of his property assessed. But the proposed indemnity bond indirectly gives an impression to a third person that Engineer introduced the Bank’s customer to the Bank. Which is not the case. And signing of Indemnity Bond by the Engineer Valuer conveys a message that Engineer is either related to the loanee or has vested interest in the availing of loan by the Bank’s customer, the loanee.

We think there is a conspiracy to harm entire Engineer Valuer community by implementing this policy of taking Indemnity bond from the valuers, if removal of DECLARATION clause from the Valuation format is any indication. Declaration clause in the existing format reads like this,

Declaration:
i.	The property was inspected by the undersigned on
ii.	The undersigned does not have any direct / indirect interest in the above property.
iii.	The information furnished herein is true and correct to the best of our knowledge.
iv.	I have submitted Valuation report to the Bank directly.

Pl read the second clause in the above declaration. It clearly states that the Valuer does not have any direct or indirect interest in the property to be mortgaged by the Bank. Now this clause is removed in the new format to make way for Indemnity Bond.

In the absence of this DECLARATION and inclusion of the Indemnity bond in lieu, the Valuer is made indirectly as a Guarantor for the Loan availed by the Bank’s customer. So that Engineer valuer is made a scapegoat for no fault of his. And as the responsibility of Bank officials is relaxed and Engineer is made solely responsible for the good health of the loan account Bank officials would become lax while sanctioning the loans and also while collecting loan installments and eventually percentage of loans that become NPAs would increase. Thereby Engineers are prone to become Scapegoats again and again. But it should be noted that Engineer is paid a sum of Rs 2000/- to Rs. 3000/- in most of the cases for giving Market Valution reports. And loans santioned would be in the range of Rs. 10,00,000/- to Rs. 40,00,000/- mostly. How can an engineer who is paid Rs. 3000/- be made responsible for say Rs. 25,00,000/- taken as loan by somebody else from the Bank?

Let us read the proposed Bond sir,

Annexure-XV

LETTER OF INDEMNITY BY ENGINEER VALUERS

To,

State Bank of India,

_________________.

Dear Sir(s),

In consideration of State Bank of India (herein after called the “Bank” which expression shall include its successors and assignees) empanelling me / us on their panel of approved Engineers and Valuers for the purpose of assessing the market value of the properties proposed to be taken as securities for the credit limits granted or to be granted by the Bank to its various borrowers, I/ We jointly and severally, extend this letter if indemnity.

Whereas by the letter of empanelment dated __________, the bank has empanelled me / us on their panel of approved Engineers & Valuers for the purpose of assessing the market value of the properties proposed to be taken as securities for the credit limits granted / to be granted by the Bank,

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I/ We jointly and severally agree as follows:-

I / We shall duly and faithfully perform and discharge all the duties in the works entrusted by the Bank and in relation to the purposes of empanelment, fairly without any favour and discrimination and I / we hereby undertake and agree to indemnify you, your successors and assigns at all times and from time to time from and against all loss, damage and all actions, suits, proceedings, expenses, costs, charges and demands arising out of any act, lapses, defaults, negligence, errors, mistakes committed by me/ us in performance of my / our professional obligations and I / we also hereby undertake and agree to pay to you on demand sums of money, costs, charges and expenses incurred in respect thereof and also to pay you interest on all such moneys at your ruling rate.

I / We further specifically agree that this indemnity shall continue to remain in force and I /We shall continue to be liable there under for all losses, damages, costs, charges and expenses arising out of any act, lapses, defaults, negligence, errors, mistakes committed by me/ us in performance of my / our professional obligations and shall be binding on me / us and our legal and personal representatives, successors and assigns.

Place: Yours Faithfully,

Date: Signature

(Name and Official Seal of the

Approved Valuer)

According to this Indemnity Bond the engineer Valuer is engaged by the Bank to assess market value of the property to be mortgaged to the Bank. While preparing the report engineer visits the site and takes measurements of the property. And issues valuation report. And prior to this the property documents would be verified by Bank’s legal advisor to ascertain the fact that the property referred in the Legal report and the Valuation report are one and same. The Valuation report does not create any additional Title of the Property to the title holder.

And Bank rules through its circulars clearly state, “Branch Managers should verify the correctness of Valuation made by Valuers by making independent enquiries with respect to Valuation and certify to the extent in the Valuation report itself as per Certificate given in the formats”. Accordingly Branch Manager Certifies the Valuation report like this,

And as per Bank’s guidelines a DECLARATION from the Valuer that he has no direct or indirect interest in the property should be obtained. Surprisingly, this DECLARATION from is missing in the present New Format of Valuation Report. As per new format the declaration that Engineer Valuer has no direct or indirect relation to the loanee is absent and hence Engineer valuer is subjected to the suspicion of having some Interest in the loan process and it gives authenticity and strength to the Indemnity Bond signed by the Engineer valuer. But it is evident from the IB that Engineer Valuer has a fiduciary relationship with the Bank. He signs the Bond saying “Yours Faithfully”. So indemnity bond given by a person who is in fiduciary relation is not valid under Indian Contract Act. Let is be.

So there is a conspiracy to make Engineer Valuer as a scapegoat to save bank Officials for their mistakes, if not maldeeds.

Eventhough the new format avoids endorsement statement of the BM at the end of Valuation report, actually Branch Manager sings in their prescribed format stating that the Engineer Valuer given so and so value and guideline rate is so and so and based my (BM’s) inquiries the Market value would be this much. Whatever may be the case once the loan is sanctioned it is deemed that BM has accepted the Market value assessment of the Engineer Valuer. And Engineer’s responsibility ends there. As per the rules of Valuation standards if the Bank is not satisfied with the Engineer Valuer’s Report Bank has to ask for explanation within 45 days. So if the Bank accepts the Valuation report without any query finding fault with the VR at later stage would become absurd and malignant only.

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Removal of BM’s endorsement at the end of the VR helps misleading the investigating authorities in case of the loan account becoming a bad loan and pass the buck on to the Engineer Valuer in the presence of Indemnity Bond signed by the Engineer Valuer in the records of the file. But evidently once Branch Manager Signs the Valuation Report at the bottom, BM himself becomes responsible for the Market value adopted by the bank and by the way Engineer’s role ends there. The Bank and Branch Manager become solely responsible for the good health of the loan account. Then why engineer is asked to sign indemnity Bond?

Actually we have given our representations in time to you sir, expressing our grievance and objections to the policy of Indemnity Bond. And we went to High courts seeking justice. However, the present Circular of empanelment of Valuers continues to press for Indemnity Bond by engineer valuers.

But we hope it will not stand the legal scrutiny. Let us look back at the Indemnity form. At the end of the description where the Valuer is supposed to sign Bank has typed like this, “ Yours Faithfully, Signature (name and official seal of Approved Valuer)”. Faithful word conveys clear message that this bond is obtained from a subordinate by a superior person or organization. As per Clause 16 of Indian Contracts act any indemnity issued by a person who stands in a fiduciary relation to a dominant person is invalid.

Further Clause No. 124 of Indian Contracts act defines Indemnity and guarantee like this, “A contract by which one party promises to save the other from loss caused to him by the conduct of the promissor himself, or by the conduct of any other person, is called a Contract of Indemnity”.

Whereas in the Indemnity bond prescribed by the Bank there is no promissor (Loanee) in the picture. Only engineer by himself offers indemnity as if he is a promissor in the absence of the loanee promissor. Bank cannot ask indemnity from engineer valuer for the loss caused by a loanee. So obviously this Indemnity bond is created to make loss to the valuer and victimize him for no fault of his.

And we engineers work for the Banks and provide service as Valuers of immovable properties for a reasonable fee of about 0.125 % (as prescribed by Income Tax dept and CBDT) on the market value of the property to make a living. And the income on an average would be about 30,000 per month after expenses. How can we compensate the Bank for Tens of lakhs of rupees for the faults of others? Most of us are below middle class. We have no such wherewithal to stand guarantee for such huge amounts. Indian Contract act defines a contract invalid if it is impossible to be performed. And also this proposed Bond intends to make our family members also as guarantors. We have no right to harm our dependents like this by signing this Bond.

Hence, we request the Bank to dispense with the policy of taking INDEMNITY BOND from us, Engineer Valuers, which would make us scapegoats for the mistakes of others.

The undersigned has inspected the property detailed in the Valuation Report dated _____________ on _____________. We are satisfied that the fair and reasonable market value of the property is Rs. _________ (Rupees ________________ only).

Signature
(Name of the Branch Manager with Official seal)

Page Category: Engineer Valuers