File photo of finance minister Arun Jaitley

MUMBAI: Finance minister Arun Jaitley said on Saturday defaulters would now have to either pay up or make way for new entrepreneurs as the new bankruptcy law had reversed the debtor-creditor relationship.

The finance minister also sought to assuage fears that businesses would come to a standstill during the insolvency proceedings. "The message in the legislation is now loud and clear; debtors will have to make sure their debts are serviced. The alternative mechanism is where you exit by taking a partner, or new entrepreneurs come in and protect the assets," he said at the National Conference on Insolvency and Bankruptcy.

Pointing out that it has been over a year since the new law was in place, Jaitley said the government would wait and watch out for judicial pronouncements under the Insolvency and Bankruptcy Code before seeing whether it needed improvement. "Legislation is the skeletal structure, the flesh and blood is provided by judicial interpretation. We will have to wait to see how much of the law is made effective by pronouncements of the tribunal and then look at improvement."

He added that now that the law is in place and the National Company Law Tribunal has been constituted, one way of ensuring that the process is effective is by adhering to the timelines provided in the law. He said that often timelines, which are seen as mandatory for the executive, are regarded by the judiciary as directional. "I hope that these remain as 'mandatory' as speed is of the essence for successful implementation of the law."

