Supreme Court allows DAIT-Adani Power consortium to operate Coastal Energen plant for now

The Supreme Court has allowed a consortium led by Dickey Alternative Investment Trust (DAIT) and Adani Power to operate a power plant of the bankrupt Coastal Energen until the National Company Law Appellate Tribunal (NCLAT) passes a final order in the matter [Dickey Alternative Investment Trust and anr v. Ahmed Buhari and ors]..A Bench of Chief Justice of India DY Chandrachud and Justices JB Pardiwala and Manoj Misra modified the NCLAT Chennai's interim order passed last week directing that a resolution professional run the plant..In its order, the appellate tribunal had temporarily halted the recent acquisition of Coastal Energen by a consortium led by DAIT and Adani Power. A coram of judicial member Justice Sharad Kumar Sharma and technical member Jatindranath Swain issued a status quo order after noting that prima facie, due process had not been followed.The NCLAT thus put an interim stop to the ₹3,335 crore resolution plan put in place by the consortium, pending the challenge to the takeover..On Thursday, the Bench led by CJI Chandrachud noted that the NCLAT order suffered from "internal inconsistency". The NCLAT order stated,"For a period of one week or till the next date, the Resolution Professional will continue to operate the plant as before and the “status quo” as on date, qua the Resolution Professional would be maintained, particularly for all the financial transactions."The top court thus ordered,"Prima facie, we are of the view that September 6 order suffers from internal inconsistency. The first part indicates status quo ante has to be restored and the second part shows status quo has to be maintained. Since proceedings are before the NCLAT on September 18, until appeal is heard and disposed off, the impugned direction would mean that status quo ante shall not be restored and status quo as on operation shall continue and this is subject to SRA will not dismantle the plant, or create third party rights.".During the course of the hearing, the CJI had also observed,"What was the great hurry for NCLAT to disturb the status quo? The Committee of Creditors has approved them by 97 percent and if they have done it in their commercial wisdom then what is the issue?".Senior Advocate Mukul Rohatgi and Kapil Sibal appeared for consortium.Senior Advocates Aryama Sundaram and Dama Seshadri Naidu appeared for the respondents..The consortium had offered a ₹3,335.52 crore resolution plan for bankrupt Coastal Energen that was approved by NCLT on August 30 this year. This resolution plan was offered after the NCLT triggered insolvency proceedings against Coastal Energen and appointed an interim resolution professional following an insolvency plea filed by the State of Tamil Nadu against the power company.Coastal Energen's suspended directors, however, challenged the takeover by filing an appeal before the NCLAT. They claimed that the acquiring consortium was a sham and that DAIT was a mere front for Adani Power.The suspended directors claimed that Adani Power had initially applied to act as a resolution applicant in its “individual capacity” and take over the plant. However, after it failed in such effort, “it entered ex-facto, as a consortium, along with DAIT.”They further argued that DAIT was not eligible to submit a bid at all, since it had been founded in 2019 and did not have the mandatory minimum track record of financial performance..[Read order].[Read live thread here]