Agricultural Land Under Valuation Rules, 2017: Who Is Qualified To Value What Law Forgot?

The Companies (Registered Valuers and Valuation) Rules, 2017 (“the Rules”) notified by the Ministry of Corporate Affairs vide order dated 23^rd October, 2017, represent a significant legislative step towards institutionalizing asset valuation under the Companies Act, 2013, delegating powers under section 247 of the Act, which is principally governed by the Insolvency and Bankruptcy Board of India (IBBI) acting as an “authority” to recognize Registered Valuers Organizations (RVO) and individual registered valuers. Valuation examinations prescribed under such rules and the Companies Act, 2013 are, mandated as a prerequisite to be a registered valuer.

As per Section 2(c) and in accordance with Schedule IV of The Rules, the valuation is conducted for three asset classes, namely Plant and Machinery, Land and Building, and Securities or Financial Assets.

Within the ambit and scope of such a capital asset, Land and Building, there is no clear distinction as to how the term agricultural land shall be construed. This article examines whether agricultural land falls within the asset class of Land and Building under section 8 of the Rules and whether the current framework is equipped to govern its valuation.

AGRICULTURAL LAND: OUTSIDE THE AMBIT OF 'LAND AND BUILDING'

Section 8 of the Companies (Registered Valuers and Valuation) Rules, 2017 pertains to the conduct of valuation and sets out the obligations of valuers. Under Section 8(1) of The Rules, the registered valuer shall comply with all the necessary requirements under the Rules with special reference to compliance standards mentioned under Rule 18 of the Rules. Additionally, under Section 8(1)(a) and 8(1)(b), the registered valuer must undertake the valuation as per internationally accepted valuations and valuation standards adopted by registered valuer organizations (RVO's) respectively. However, with respect to agricultural land, there is no explicit mention in any of the asset classes. If agricultural land is not recognized within any prescribed asset class, the registered valuer is left without applicable standards, without RVO guidance, or basis to conduct the valuation.

As per section 8(2), the registered valuer may take assistance of any other expert or expert body for conducting such a valuation and even get a separate valuation for an asset class conducted by another registered valuer. However, the liability against such conduct of valuation would remain against the first-mentioned registered valuer. Section 8(2) of the Rules, presupposes that the registered valuer can identify the asset class of the property being valued because without identification, the valuer cannot determine whether to seek external assistance at all. If agricultural land finds no recognition in the prescribed asset classes, this presupposition collapses entirely, leaving the valuer without a legitimate basis to even invoke the assistance mechanism that Section 8(2) provides.

Furthermore, Section 2(c) defines asset class only as a genus, and read with schedule IV, which pertains to the generic qualifications and eligibility of Land and Building valuers requiring experience of not less than five years in civil engineering architecture or town planning, additionally, post graduate in these courses and even valuation in full time Real Estate Valuation leaving an entire category of land without any prescribed qualification, creating a structural vacuum within the Rules.

Section 2(14) of the Income Tax Act, 1961, defines a capital asset as a property of any kind held by an assesse, whether or not connected with his business or profession, but expressly excludes agricultural land from its scope. It has also been explicitly mentioned under section 194LA, explanation (i) that defines 'agricultural land', further explanation (ii) defining 'immovable property'- “means any land (other than agricultural land) or any building or a part of a building”. Agricultural land is thus expressly excluded from the definition of 'capital asset' under the Income Tax Act, 1961, and is construed as a category distinct from Land and Building, placing it outside the scope of 'capital asset' altogether.

This can be further supported by the judgment of CIT v. Green Gold Tree Farmers (P.) Ltd. [2008] 299 ITR 262, the Hon'ble High Court of Uttarakhand held that whether land qualifies as agricultural land must be determined with reference to Section 2(14), which defines 'capital asset' and expressly excludes agricultural land from its scope.

This position finds further judicial support in decisions that emphasize actual use as the determinative criterion. In Chand Prabha Jain v. CIT [2012] SCC OnLine ITAT 15141, wherein the tribunal held that actual use and circumstances surrounding the land's sale were of paramount nature in determining its classification as agricultural land.

Similarly, in The Hon'ble Delhi Court in Shiv Shankar Lal v. CIT [1974] 94 ITR 433, reiterated that the characterization of land hinges on its actual use rather than just following the definitions as prescribed under the relevant statutes. This principle of actual use as the determinative criterion further reinforces that agricultural land cannot be mechanically subsumed within a generic land category without a careful examination of its specific nature and use.

It may be contended that from a fair reading of the term 'Land and Building' in The Rules, 2017, there is no explicit exclusion of the term agricultural land; this would therefore include all such categories of land within its scope. Furthermore, the exclusion of land under section 2(14) of the Income Tax Act, 1961, operates entirely within a different statutory context and cannot, by itself, restrict the scope of an independent delegated legislation.

However, such a contention, while textually possible, ignores a deliberate and consistent legislative pattern. Parliament has not treated agricultural land as a mere species of ordinary land in one isolated statute; it has done so repeatedly, across multiple legislations, at both the central and state levels. To interpret the silence of the 2017 Rules as an implicit inclusion of agricultural land would be to disregard this consistent legislative intent and to assign a delegated legislation a scope that Parliament has never, in any statute, extended to it.

At the central level, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereinafter referred to as the LARR Act)- Parliament's most recent frameworks that treat agriculture as a category that requires entirely separate treatment, prescribing distinct methods and even different qualifications required for valuers. This alone demonstrates that the conscious separation of agricultural land from other categories of land is not a tradition floating from fiscal legislation but a present legislative choice.

At the state level, the Delhi Land Reforms Act, 1954, applies exclusively to land held or occupied for purposes connected with agriculture, horticulture, or animal husbandry. The Hon'ble Supreme Court of India in Harpal Singh v. Ashok Kumar [2018] 11 SCC 113 explicitly held that the Delhi Land Reforms Act, 1954, has ceased to apply to land that has lost its agricultural character, confirming that agricultural land and non- agricultural land operate as separate legal connotations. The agricultural character of land is therefore not merely a factual description, but a legally determinative classification that triggers a distinct body of law.

LEGISLATIVE AND JUDICIAL RECOGNITION OF A DISTINCT CATEGORY

The distinct treatment of agricultural land under the Indian law finds its most explicit statutory expression in the LARR Act, 2013.Section 29 of the LARR Act specifically mandates that for determining the value of trees, plants, and standing crops attached to agricultural land, the Collector must engage experienced persons in the field of agriculture, forestry, horticulture or, sericulture, different from engineers or technical specialists engaged for valuing Land and Buildings under section 29(1) of the LARR Act. This is further reinforced in the First Schedule, directing that the value of things attached to agricultural land be determined in accordance with section 29 of the LARR Act, 2013 creating, a root for the agriculture-specific methodology into the Act's core compensation framework.

This was judicially affirmed in The Special Tehsildar (LA) v. Malla Atchinaidu [2008 Supreme (Mad) 1124], wherein, the court drew a clear distinction made between the terms land and agricultural land, stating that the acquired land in question is agricultural land and the same cannot be regarded as developed land which would inherently lead in a difference in the valuation standard of such agricultural land.

The foregoing discussion leads to two clear inferences. Firstly, agricultural land requires valuation to be done by specialists with agricultural expertise and not generic property valuers. Secondly, Courts have consistently interpreted agricultural land as a category distinct from land in the generic sense, attracting separate treatment in both valuation methodology and legal character. That the most comprehensive land legislation in India mandates agricultural expertise for valuing agricultural land- while the 2017 Rules remain entirely silent. This exposes a gap that extends beyond legal theory into everyday valuation process.

THE SBI FRAMEWORK: A PRACTICAL INDICTMENT OF THE LEGISLATIVE GAP

The inadequacy of the 2017 rules in addressing agricultural land is not merely theoretical- it has found direct practical expression in the independent frameworks developed by lending institutions operating under the SARFAESI Act, 2002.

The State Bank of India, vide empanelment notice dated 15.05.2023, has prescribed distinct qualifications for agricultural land valuers, subsequently separating the valuers of Land and Building prescribed under the Schedule IV of The Rules, 2017.

Under the SBI framework, the registered valuer for agricultural land must either hold a degree in agricultural science with not less than five years of experience as a farm valuer, or must have served in a governmental capacity as a Collector, Deputy Collector, Settlement Officer, or Land Valuation Officer for a minimum of five years. Such valuers are additionally required to possess the knowledge of the income, market, and cost approaches to valuation as applied specifically to agricultural land, including annuities, capitalization rates, and the laws governing agricultural land.

Most importantly, the SBI circular explicitly excludes agricultural land from the qualifications prescribed for Land and Building, thereby recognizing it as a distinct immovable category that demands specialized expertise. This circular stands in contrast to the 2017 Rules, which presume all lands under a single asset class of “Land and Building” without any corresponding distinction or qualification requirement.

A registered valuer certified under Schedule IV of the 2017 Rules may possess none of the expertise that India's largest public sector bank considers essential for agricultural land valuation. That SBI has had to independently fill this gap is perhaps the most compelling evidence of the legislative void this article seeks to address.

The legislative gap on agricultural land under the Companies (Registered Valuers and Valuation) Rules, 2017 might look narrow and technical; at a first glance. It is not. India holds one of the largest reserves of agricultural land in the world, and with the accelerating pace of land use conversions from agricultural to commercial purposes, the role of registered valuers in accurately valuing such land has never been more consequential. An erroneous valuation of agricultural land does not merely affect a balance sheet, but also affects land rights, compensation claims, and institutional accountability.

This article concludes with two specific recommendations. First, the Ministry of Corporate Affairs, in consultation with IBBI, should amend the Rules to recognize agricultural land as a distinct class, separate from the existing Land and Building category, with its own prescribed methodology. Second, the qualifications and experience requirements for undertaking such valuations must be explicitly prescribed in consultation with IBBI, lending institutions, agricultural experts, and relevant government bodies. The gap exists. The consequences are real. The correction is overdue.

Author is a Law student at Symbiosis Law School, Noida. Views expressed are personal.