Is this a defective condition

Service entrance conductors attach directly to the main disconnect instead of the lugs. As long as it energizes the bus bar and safely disconnects it, any problem?

Backfeeding is usually OK provided the breaker is secured by screws or rivets. You should consult with the local inspection department to see what they allow.

Agree, Breaker should be secure.

In my area, it would be okay.

Your area doesn’t follow the NEC?

What does the NEC say?

(D) Back-Fed Devices. Plug-in-type overcurrent protection devices or plug-in type main lug assemblies that are backfed and used to terminate field-installed ungrounded supply conductors shall be secured in place by an additional fastener that requires other than a pull to release the device from the mounting means on the panel.