ORDERLY LIQUIDATION VALUE AND REALISABLE VALUE

- N. Ravindran
Tiruchirappalli(T.N.)

1.0. INTRODUCTION

My letter addressed to Mr. R.K. Gandhi with regards to a clarification sought on the
‘orderly liquidation value and the realisable value’ and the reply given by him are
reproduced here for the sake of other fellow valuers. My sincere thanks to
Mr. R.K. Gandhi who has not taken much time in spite of his busy schedule to
answer a question from a simple person like me.

2.0. COPY OF MY LETTER

Dear sir,

1. Kindly explain whether orderly liquidation value and realisable value are one
and same.

2. As per valuation standards board ICAI - An orderly liquidation refers to the

realisable value of an asset in the event of liquidation after allowing appropriate
marketing efforts and a reasonable period of time to market the asset on an
as-is, where - is basis.

3. Whether realisable value is less than the forced sale value or more than the
forced sale value?

(N. RAVINDRAN)
Tiruchirappalli

3.0. COPY OF REPLY BY MR. R.K. GANDHI

Dear Shri. Ravindran

Every authority has its own definition and that is the reason for the confusion. ICAI
definition of orderly liquidation is clear as it mentions ‘Sale on ‘as is where is’ basis,
hence word realisable value will not create confusion. Bankers do not understand
correct meaning of realisable value in valuation. Under ordinary normal sale, seller
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has to bear all arrears of property tax, light and water bills, land revenue, etc. upto the
date of sale. But on ‘as is where is’ basis, all arrears of tax, etc. will have to be borne
by the purchaser. Realisable value for the bankers in reality is the amount left (Net
realised) with the Bank after payment of auction cost, adverisement cost, pending
taxes and water light bills, etc.

Hence orderly liquidation value and realisable value under ‘as is where is’ basis concept
will have same meaning.

However under normal sale conditions, both will carry different meaning as explained
above.

Forced sale value is more than realisable value due to liabilities attached with property.
If there are no tax arrears, etc. even then, realisable value will be less because
advertisement cost and auction cost are to be borne by the banks and to that extent,
value will be less than money received (Forced sale value) from the highest bidder in
the auction.

R.K.Gandhi
12.04.2019

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