The family of modular multilevel converter is characterized for using several cells to properly face Medium and High voltage range. This high number of semiconductors reduces its reliability. In this paper, a sliding mode observer (SMO) is implemented to continually estimate the current of clusters and voltage of each cell capacitor and directly detect a faulty cell by an open circuit of the semiconductor. A Triple Star Bridge Cell Modular Multilevel Converter (TSBC-MMC) with three cell per cluster for direct conversion of AC to AC voltage have been implemented in PLECs software. Simulation results show the feasibility and an excellent performance of the proposed SMO, which effectively can discriminate the faulty cell among the 27 different cells of the converter without using additional measuring devices.