Coastal Energen insolvency: SC allows Dickey-Adani to operate plant for now

The Supreme Court on Thursday allowed Dicky Trust-Adani Power consortium to operate a power plant of the bankrupt Coastal Energen Pvt until the National Company Law Appellate Tribunal (NCLAT) passes a final order on the matter, overruling the tribunal’s September 6 interim order directing that a resolution professional run the plant.

The NCLAT, in its September 6 order, had halted the Rs 3,335 crore resolution plan put forth by the consortium, which is the successful bidder for the bankrupt firm, for the revival of Coastal Energen Private Limited.

The appellate tribunal had in its order said that a resolution professional would continue to run Coastal Energen's power plant in Thootukudi, Tamil Nadu, until September 18, the next date of hearing. Any money generated during this period would be kept in an escrow account, it had said.

Terming the NCLAT’s interim order as “inconsistent”, the apex court said on one 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 said.

Chief Justice of India (CJI) D Y Chandrachud said, “Since proceedings are listed before the NCLAT on September 18... and both sides state that no adjournments will be sought and if NCLAT prepones it will not object.”

So parties shall cooperate with NCLAT when the next hearing is held, the Court said.

Senior Advocate Mukul Rohatgi, appearing for the consortium, said the Committee of Creditors (CoC) had approved their resolution plan with 97 per cent vote in November 2023 and it was approved by the National Company Law Tribunal (NCLT) on August 30.

He told the court that on August 31 that Rs 3,335 crore were paid to 16 borrowers 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 had requested that the appeal be transferred to the NCLAT Principal Bench to be heard by Justice Ashok Bhushan. However, the Court refused the plea, saying that it would send a wrong signal.

Meanwhile, Senior Advocate Kapil Sibal, appearing for the respondents, said 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, he said.

In response, the CJI said, "They paid Rs 3,300 crore to the Committee of Creditors. The Committee of Creditors have approved the plan with 97%. Their commercial wisdom ought to prevail.”

Coastal Energen was admitted to the insolvency process by the NCLT based on an application filed by the State Bank of India in February 2022.