Theoretical Framework of Behavioural Law – IBC: A Study

Abstract

The Insolvency and Bankruptcy Code, 2016 (IBC) is a behavioural law that is based on a comprehensive theoretical framework in formulating its objectives. The Maximisation of Assets Value, Going Concern Concept, eliminating the non-insolvency creditors from protection, promoting entrepreneurship development, and ultimately balancing the interests of stakeholders. The theoretical framework has origins in each of the objectives as mentioned earlier and the same are addressed in this paper. The paper also focuses on an inclusive approach to addressing corporate insolvency resolution in the interest of all the stakeholders. It addresses how the theory has the dynamics of the market as the determinant factor in the entire process of resolution. The role of the judiciary is comprehensively addressed in the insolvency legal framework with differing theoretical frameworks. Furthermore, they substantiated the impact of certain issues, viz., Information asymmetry, holding problems, conflict of interest in value estimation and investment incentives and debt overhang, the transformation of India’s credit culture and deeming provisions in the Indian insolvency law and how they are utilised prudently. Therefore, IBC and its ecosystem are built with a substantial theoretical framework to address the critical issues of insolvency resolution and bankruptcy.