Coastal Energen Insolvency : Supreme Court Allows Dickey Trust-Adani Power Resolution Plan To Operate Till NCLAT Final Decision

In relation to the Corporate Insolvency Resolution Process (CIRP) of Coastal Energen Private Limited, the Supreme Court on Thursday (September 12) directed that the status quo which existed when the National Company Law Appellate Tribunal (NCLAT) passed the order on September 6 will continue to operate till the NCLAT finally decided the appeal.

A bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Manoj Misra passed this direction while disposing of the appeal filed by the Succesful Resolution Applicant(SRA) - a consortium of Dickey Alternative Investment Trust and Adani Power Ltd - challenging the NCLAT's order dated September 6, which effectively put on hold the Rs 3,335 crore resolution plan put forth by them for the revival of Coastal Energen Private Limited.

The Supreme Court clarified that its order will be subject to the condition that the SRA will not dismantle the plant, create any third-party rights, alienate the plant or create any financial obligations except in the ordinary course of business.

The Court further directed the parties not to seek any adjournment of the NCLAT hearing scheduled on September 18. The Court also clarified that the order should not be construed as any observation on the merits of the appeal pending before the NCLAT.

The Court observed that the NCLAT's order, prima facie, suffered from an "internal inconsistency", as on the hand the NCLAT directed that for a period of one week, the Resolution Professional would continue to operate the plant as before and on the other hand, it directed that the status quo as on the date will be maintained. "The first part of the above direction seems to indicate that the status quo ante would have to be restored, while the second part of the above direction seems to indicate that the status quo as on day (namely September 6) will be maintained," the Court observed.

"Until the appeal is heard and disposed of by the NCLAT, the impugned direction of the NCLAT, is clarified, that it shall not require that the status quo ante would be restored and that status quo as was operating when the order was passed on September 6, 2024, shall continue to remain in operation," the Court directed.

Senior Advocate Mukul Rohatgi for the SRA submitted that the Committee of Creditors had approved their resolution plan with 97% vote in November 2023 and it was approved by the National Company Law Tribunal on August 30, 2024. He added that on August 31, an amount of Rs 3335 crores was paid to 16 debtors and possession of the plant was taken. The appeal before the NCLAT was filed by Ahmed Buhari, a former director of Coastal Energen on September 3.

After the order was pronounced, Rohatgi requested that the appeal be transferred to the NCLAT Principal Bench to be heard by Justice Ashok Bhushan. However, the Court refused this plea, saying that it would send a wrong signal.

Senior Advocates Mukul Rohatgi and Dr AM Singhvi appeared for the appellants. Senior Advocates Kapil Sibal, CA Sundaram and Dama Seshadri Naidu appeared for the contesting respondents. Solicitor General of India Tushar Mehta appeared for the COC.

During the hearing, Sibal argued that there were procedural errors in accepting the resolution plan. He argued that Adani Power, in its indpendent capacity, had sent an email for Expression of Interest, but it was rejected by the CoC. However, Adani came back as part of the consortium and such "backdoor entry" cannot be allowed, Sibal argued.

In response, CJI verbally said :

"They paid Rs 3300 crores to the Committee of Creditors. The Committee of Creditors have approved the plan with 97%. Their commercial wisdom ought to prevail," CJI Chandrachud observed during the hearing.

CJI also questioned the "great hurry" by the NCLAT in disturbing the status quo.

In February 2022, Coastal Energen was admitted to CIRP by the NCLT based on an application filed by the State Bank of India.

Case Title : DICKEY ALTERNATIVE INVESTMENT TRUST AND ANR. Versus AHMED BUHARI AND ORS.| Diary No. 41691-2024