Fair Value vs. Liquidation Value Under the IBC

IBC, Fair Value vs Liquidation Value Under the IBC — THE IBC FILES: AN ENTREPRENEUR’S PERSPECTIVE

Article 4 of 10 | How valuation decides the fate of a company and its founder

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Fair Value vs Liquidation Value Under the IBC — What I Saw Happen to Su-Kam

By Kunwer Sachdev · Founder of Su-Kam · Part of my ongoing IBC series · A close look at the two numbers that are supposed to keep this process honest
The IBC was sold to us as a transparent process anchored by two valuations — Fair Value and Liquidation Value. In theory, these numbers are the pillars that keep creditors honest and give the resolution applicants something real to bid against. In practice, I watched my own company — valued at around ₹300 crore — get hollowed out under the CoC’s watch and sold for a pittance. This is what the two valuations are supposed to do, and what actually happens.
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⚖The Two Valuations the IBC Promises

At the start of every CIRP, the code mandates two valuations of the corporate debtor. They are not paperwork. They are meant to be the spine of the entire process.

Fair Value

The honest market appraisal of the company as a going concern. For creditors, it is the benchmark to judge whether a resolution plan is worth accepting. For resolution applicants, it is the number that lets them build a real bid.

Liquidation Value

The price the assets would fetch if the company were broken up and sold piece by piece. It is the floor below which no resolution plan should ever be accepted.

Used together, these two numbers are supposed to stop two specific abuses: undervaluation (assets stolen at distressed prices) and overvaluation (bids that look good on paper but never close). They are meant to keep the entire room accountable.

That is the theory. The reality, as anyone who has been through a CIRP knows — and I described it in detail in Inside the CIRP: 180 Days of Helplessness — is that these valuations get done, signed, filed, then quietly ignored by the very people they are designed to discipline.

🚫The Catch: I Was Never Asked

Here is the design flaw that breaks the whole system: the valuation is done without the promoter’s input. The person who built the company, who knows what every asset is actually worth, who can tell you which contract is live and which customer is loyal — that person is treated as if he were not in the room. And then, under Section 29A, he is barred from even bidding on his own company.

So the chain becomes: lose the company, lose the right to buy it back, lose the personal assets to the personal guarantee, and lose the public’s understanding of what really happened. The very person responsible for creating the value being sold gets no say in how that value is calculated, defended, or realised. I broke down the full debt-trap mechanics in IBC: A Debt Trap for Entrepreneurs — My Personal Ordeal.

“Was it the legislature’s intent that a life’s work could be ruined and the promoter’s integrity questioned — with the promoter denied a voice?”

📊What ₹300 Crore Became: The Su-Kam Timeline

I am going to tell you exactly what happened to Su-Kam, in numbers, because the numbers tell the story better than I can.

FY Revenue
₹500 Cr
Fair Value at CIRP
~₹300 Cr
My Offer (with bank)
₹250 Cr
Banks Recovered
₹8 Cr
  1. April 2018: Su-Kam, a ₹500 crore-revenue brand with a market presence and a functioning workforce, was taken into CIRP under the IBC.
  2. Fair valuation assessed at around ₹300 crore. That number, by the code’s own design, was the benchmark every subsequent decision was supposed to honour.
  3. Under the RP and the CoC, the company was allowed to decay. More debt was accumulated. Operational value was systematically stripped. (See The Day Su-Kam Died for the day the music stopped.)
  4. I was ready to bring ₹250 crore to the table with the help of a bank — only to be barred from bidding for my own company.
  5. The company was sold during COVID at a fraction of its worth. The banks — the same banks the code was supposed to protect — received just ₹8 crore. The rest? Recovered by invoking my personal guarantee.

💔The Human Bill Nobody Adds Up

The financial numbers are damning enough. The human bill is heavier. Thousands of Su-Kam employees lost their jobs. Suppliers who had built their businesses around us went bankrupt. Customers who had trusted the brand for years were left without service support. The brand, the properties, the intellectual property — the entire legacy — was acquired by someone else for a pittance.

And the founder? I was labelled a wilful defaulter in public, called by angry customers and dealers who had no way of knowing what had actually happened inside that boardroom, and dragged through personal insolvency proceedings. The criminalisation angle — how business failure quietly gets treated like a crime — I broke down in The Entrepreneur as Criminal: When Business Failure Becomes a Death Sentence in India.

The personal guarantee trap: First you lose the company. Then you are barred from buying it back. Then they come for your personal assets. Then they call you a defaulter. That is not a bankruptcy process — that is a sequence of punishments.

🔨What an Honest Valuation Regime Would Look Like

If the IBC is going to be salvaged, the two valuations must stop being decoration and start being the spine of the process. Here is what has to change:

  • Make Fair Value binding. No resolution plan should be approved below Fair Value without a hard, recorded justification — and certainly not without notice to the promoter.
  • Make Liquidation Value the floor — absolutely. If a deal closes below it, every party that voted for that deal answers for it.
  • Give the promoter a structured right to be heard on valuation. Not a veto, a voice. The person who built the company has data the valuer needs.
  • Stop the interest clock when CIRP begins. Compounding interest while the company is being deliberately starved is mathematically dishonest. I argued this further in IBC Amendments: Who Do They Really Serve?
  • Re-open Section 29A. Honest promoters who can bring a competitive bid should be allowed to compete, with safeguards against fraud — not blanket-banned.
  • Hold the CoC to a code of conduct. Without enforceable conduct rules, every valuation in this code is just a number waiting to be ignored.

💭What I Want the Next Generation of Entrepreneurs to Know

The current IBC framework, in the way it actually operates, is telling every founder in India: build a business, take risks, employ thousands — and if anything goes wrong, you will lose the company, your personal wealth, your reputation, and your voice, in that order. That is not a bankruptcy code. That is a deterrent against entrepreneurship.

Su-Kam’s story is not just my story. It is a warning. If we want the next generation to keep building, we have to fix the system that destroyed the last one — and the two valuations are exactly where that fix has to start.

What you can do: read the judgments. Read the actual resolution orders. Ask publicly why a ₹300 crore Fair Value ended in an ₹8 crore bank recovery. The reform of the IBC will be won in daylight, or not at all.

🔗This Series on the IBC — My Full Account

This article is part of an ongoing series I am writing on what the IBC actually does to entrepreneurs in India. Each post takes a different angle on the same problem — read them in any order, they reinforce each other.

Kunwer Sachdev, the Inverter Man and Solar Man of India
Kunwer Sachdev

Founder of Su-Kam and Kunwwer.ai, and mentor at Su-vastika and several other companies — the “Inverter Man of India” and the “Solar Man of India.” Read his story →

Frequently Asked Questions

What is fair value vs liquidation value under the IBC?

Fair value estimates a going-concern or market-based worth; liquidation value estimates forced-sale proceeds. Under IBC, these numbers heavily shape bids, recoveries, and promoter outcomes.

Why do valuation gaps matter to founders?

If assets are valued low for process purposes but personal liabilities remain high, the entrepreneur can be forced into distressed sales and residual personal claims.

Who controls valuation in CIRP/liquidation?

Valuers are appointed within the IBC process; Kunwer Sachdev argues founders have little real say, while timelines and incentives can favor mechanical or lender-aligned outcomes.

How can valuation reform help entrepreneurs?

Transparent methods, contestability, and alignment between what is demanded personally and what the process actually realizes from assets.

Kunwer Sachdev, the Inverter Man and Solar Man of India

Kunwer Sachdev

Founder of Su-Kam and Kunwwer.ai, and mentor at Su-vastika and several other companies — the “Inverter Man of India” and the “Solar Man of India.” Read his story →

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Related · The Manufacturing Mirage

This essay is the valuation fork inside IBC. Part 3: the IBC liquidation machine puts delay, an unimplemented plan, and a hung 47.66% vote on Videocon, Educomp, and Hero Electric Vehicles — not one funeral, and not a jobs census. The four changes are Part 4.

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