The Supreme Court on Tuesday cleared the way for the U.S. government-backed sale of Chrysler LLC to a group led by Italian carmaker Fiat SpA, a victory for the bankrupt automaker and the Obama administration.

The high court rejected a request from Indiana pension funds and other opponents of the transaction to delay the deal while they challenge Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments.

Chrysler is aiming to close its sale early in the morning on Wednesday, a person familiar with the plans said.

To close the sale, $2 billion in funds provided by the U.S. government must be transferred to Chrysler's creditors and the wire transfer deadline had already passed by the time the high court cleared the deal late on Tuesday, this person said.

The person, who declined to be named because the plans are not yet public, said Chrysler is aiming to execute the funds transfer and close the deal by 9 a.m. EDT on Wednesday.

The Chrysler case has been widely regarded as setting a precedent for General Motors Corp, which is using a similar quick-sale strategy in its bankruptcy in New York.

The Supreme Court in a brief two-page order said the challengers had not met their burden of showing that a delay was justified.

The court's action was not a decision on the merits of the underlying legal issues, the justices said. And they said their assessment was based on the record and proceedings in this case alone.

The Chrysler dispute marked the first time the Supreme Court had been confronted by legal issues involving the U.S. government's power to deal with the economic crisis.

The White House welcomed the high court's action.

We are delighted that the Chrysler-Fiat alliance can now go forward, allowing Chrysler to reemerge as a competitive and viable automaker, said an White House official, speaking on condition of anonymity.

We are gratified that not a single court that reviewed this matter, including the U.S. Supreme Court, found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government, the official said.

CAPPED THREE DAYS OF HIGH COURT ACTIVITY

The Supreme Court's refusal to block the deal capped three days of intense activity, with written briefs filed over the weekend and even earlier on Tuesday by both sides in the legal battle.

The court lifted a temporary stay of the sale granted by Supreme Court Justice Ruth Bader Ginsburg on late Monday in a move widely seen as giving the court more time to weigh whether to intervene.

The pension funds argued that the Chrysler sale unlawfully rewarded unsecured creditors ahead of secured lenders, that it amounted to an illegal reorganization plan, and that the U.S. Treasury Department overstepped its powers by using bailout funds for Chrysler when Congress intended the money for banks.

Chrysler and the Obama administration urged the Supreme Court to allow the sale to go forward and said a long delay could kill the deal, resulting in the automaker's liquidation and the loss of more than 38,000 jobs.

They cited Chrysler's worsening financial situation, with $100-million-a-day losses. The sale agreement sets a June 15 deadline to close.

It would have taken the votes of five of the nine Supreme Court members to put the deal on hold. The court acted with no recorded dissent from any of the justices.

Chrysler filed for bankruptcy protection on April 30 to complete the sale and alliance with Fiat within 60 days, in a case that analysts have seen as a test for the much bigger and more complex bankruptcy of GM.

The $2 billion sale of Chrysler's assets to a new company that will be 68 percent controlled by a healthcare trust aligned with the United Auto Workers union was approved by a U.S. bankruptcy judge on June 1.

Fiat will control 20 percent, the U.S. and Canadian governments will control the other 12 percent.

Both a federal bankruptcy judge and a U.S. appeals court in New York have approved the sale.

(Additional reporting Emily Chasan in New York and by Ross Colvin and Joanne Allen in Washington; Editing by Gary Hill)

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