CAG cannot conduct audit of power distribution companies

Delhi High Court: The Court quashed the order of Delhi Government to get the accounts of three private power distribution companies audited by the Comptroller and Auditor General (CAG). While holding that the CAG had the constitutional authority to audit the power distribution companies, or DISCOMs, the court said the government did not take the decision on the advice of the council of ministers as required under section 20 of the CAG Act. The Court also said that the state government had no power to order a CAG audit and that only the Delhi Electricity Regulatory Commission had the right to do so.

The division bench of G. Rohini C.J. and R.S. Endlaw J. said that, “There can be no other audit at the instance of state government” as there is already a watchdog, the Delhi Electricity Regulatory Commission (DERC), with powers to audit the accounts of DISCOMs. It also dismissed a plea from NGO United RWAs Joint Action, or URJA, seeking a CAG audit by saying that “The direction for audit of DISCOMs by CAG, when the report of CAG cannot impact the tariff, would not also serve any public interest. All the power of state government relating to electricity now stands vested in DERC.” It also observed decision of the Delhi Government to audit the DISCOMs as a “misguided exercise”.

The Court order upheld the plea of the three DISCOMs – Tata Power Delhi Distribution, BSES Rajdhani Power and BSES Yamuna Power, contesting the Delhi government’s January 7, 2014 order to get their accounts scrutinised by the Comptroller and Auditor General of India. The Court observed that there was no “proposal of audit’ within the meaning of Section 20, till the time opportunity to represent against was given. ‘Proposal of audit ‘within the meaning of Section 20 cannot merely be the desire or intention to audit but has also to contain the terms and conditions of audit agreed upon by the CAG in the consultation to be held for such purpose as well as the reasons for which satisfaction is reached that the proposed audit is in public interest. The Court also rejected the contention of DISCOMs that CAG does not have jurisdiction over private bodies, and held that the words “body or authority” in Article 149 of Constitution of India and in the CAG Act are of wide amplitude and not confined to “body or authority” which satisfy the test of ‘State‘within the meaning of Article 12 and they extend to private body or authority also and would cover the DISCOMs. The Court also added that the direction of the Administrator of Delhi for audit of DISCOMs in exercise of power under Section 20 of the CAG Act has to be on the aid and advice of the Council of Ministers, and not eo nomine. It also said that the Audit under Section 20(1), for the reasons stated i.e. for determination of tariff is not expedient in public interest as the determination of tariff is on the sole domain of DERC which is well empowered to itself conduct the same or have the same conducted and the report of CAG of audit of DISCOMs has no place in the Regulatory Regime brought about by the Electricity Act and the Reforms Act. [United Rwas Joint Action v. Union of India, 2015 SCC OnLine Del 13089, decided on 30-10-2015]

One comment

Join the discussion

Your email address will not be published. Required fields are marked *

5 × one =