The National Company Law Appellate Tribunal (NCLAT) at Chennai on Friday temporarily halted the recent acquisition of power generating company Coastal Energen by a consortium led by 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 said that such being the case, "consortium members should not be permitted to make any gains".
The Appellate Tribunal further said that the Interim Resolution Professional will continue to run Coastal Energen’s power plant in Thootukudi, Tamil Nadu, until September 18, the next date of hearing. Any money that is generated during this period will be kept in an escrow account.
The NCLAT was hearing a batch of appeals filed by Ahmed Buhari, a suspended director of Coastal Energen, and two of the company’s shareholders - Precious Energy Holdings and Mutiara Energy Holdings.
The appellants had challenged an order of the National Company Law Tribunal (NCLT) Chennai that had approved a resolution plan, thus permitting the takeover of Coastal Energen’s 1,200 MW coal fired thermal power plant by a consortium that has two members - private asset management company Dickey Alternative Investment Trust (DAIT) and Adani Power.
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.
The appellants also claimed that the resolution plan does not comprise any consortium agreement entered into between DAIT and Adani Power, and that DAIT is merely a front purportedly holding 51% in the consortium without even having the ability to contribute to its funding requirements.
The entire purpose of such consortium is to project that the acquisition process is a joint project by DAIT and Adani in which the latter is the minority, holding 49 per cent.
On the other hand, counsel for Adani Power argued that the company had already completed the acquisition process, taken over the power plant’s operations and paid the entire sum of 3,500 crore towards the resolution plan.
The NCLAT said that until it heard the matter on merits, it was only “appropriate that the resolution professional continued to run the company (Coastal Energen and its power plant).”
It directed all parties to file their pleadings by September 19 and said it will hear the matter on merits on the next date of hearing.
