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The Supreme Court of India intervened in the ongoing insolvency proceedings of Coastal Energen Private Limited (CEPL), a Tamil Nadu-based company, by ordering a status quo on September 12, 2023. This order effectively maintained the situation as it existed on September 6 before the National Company Law Appellate Tribunal (NCLAT) passed an order in the case. The NCLAT, in its September 6 ruling, had effectively put on hold the Rs 3,335 crore resolution plan submitted by a consortium of companies, Dickey Alternative Investment Trust and Adani Power Ltd, for the revival of CEPL.
The NCLAT's decision to halt the resolution plan stemmed from an appeal filed against an earlier order by the National Company Law Tribunal (NCLT). The NCLT had previously approved the consortium's Rs 3,335 crore plan for CEPL's revival. CEPL, which owned an imported coal-based thermal power plant in Tuticorin, Tamil Nadu, had been facing insolvency proceedings. The Supreme Court's intervention came as a result of an appeal filed by the consortium of firms, the successful resolution applicant (SRA), challenging the NCLAT's September 6 order.
The Supreme Court bench, composed of Chief Justice D Y Chandrachud and Justices J B Pardiwala and Manoj Misra, disposed of the plea by maintaining the status quo that prevailed before the NCLAT order. This decision granted relief to the consortium, which included an Adani firm, but imposed certain conditions. The SRA was prohibited from dismantling the CEPL plant, creating any third-party rights, alienating the plant, or incurring any financial obligations beyond the ordinary course of business. Additionally, the Supreme Court directed all parties to refrain from seeking any adjournments before the NCLAT, which was scheduled to hear the case against the NCLT order on September 18. It was clarified that the Supreme Court's order should not be interpreted as a reflection on the merits of the case.
The appeal before the NCLAT had been filed by Ahmed Buhari, a former director of CEPL. Solicitor General Tushar Mehta represented the Committee of Creditors (CoC). The approved resolution plan envisioned secured lenders of CEPL receiving approximately Rs 3,330 crore, representing 28.52% of the admitted claims totaling Rs 11,677 crore. The NCLT had initiated the corporate insolvency resolution process for CEPL in February 2022, following a case filed by the State Bank of India. Radhakrishnan Dharmarajan was appointed as the resolution professional.
The Supreme Court's intervention highlights the complexities and ongoing legal challenges involved in resolving corporate insolvency cases in India. The case underscores the importance of various stakeholders, including creditors, resolution applicants, and legal bodies, working collaboratively towards a successful outcome. The resolution of the CEPL case will have implications not only for the company's future but also for the broader Indian business landscape, particularly within the power sector.
Source: SC orders status quo in case related to insolvency proceedings of Coastal Energen