In this paper, a new competent control approach is implemented to investigate the performance of a Distribution STATic COMpensator (DSTATCOM) in a three phase balanced nonlinear load supplied by a three-phase AC mains. The modern control approach, ADALINE based LMS algorithm is used to produce the switching pulses for the voltage source inverter (VSI) of DSTATCOM followed by the generation of reference source current. The performance of the DSTATCOM is analysed under single phase fault condition. System stabilization, harmonic mitigation of source current and alleviation of unbalanced supply current are achieved successfully using the control approach under single phase fault condition. The simulations of the proposed system are performed in a MATLAB/Simulink software.