Holding on or letting go? addressing the continuation bias in the Insolvency and Bankruptcy Code 2016

This article examines the phenomenon of continuation bias within the Indian Insolvency and Bankruptcy Code 2016 (“IBC”). The IBC aims to reorganize financially distressed but economically viable companies, with the goal of value maximization. Continuation bias impacts the efficiency of the insolvency process and recovery by delaying liquidation. Due to a dearth of post-2016 Indian literature on this topic, this article relies on the continuation bias literature from the USA for conceptual foregrounding and explores whether the IBC exhibits continuation bias characteristics owing to the legislative framework and judicial decisions, while also providing a few policy recommendations. Compared to the previous legislation, the research does not find significant evidence of the bias within IBC but identifies gaps where such a bias could manifest.