CAG gets more power to audit even private firms

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The court added a caveat to the order, though: The CAG audit ought to be only on the telcos' receipts and no further. Reuters The court added a caveat to the order, though: The CAG audit ought to be only on the telcos' receipts and no further. Reuters
SummaryHC ruling in telecom case allows scrutiny of revenue, not expenditure.

In a ruling that legal experts say could fortify the Comptroller and Auditor General’s (CAG) constitutional prerogatives and open the accounts of private corporates to its supervisory audit, the Delhi High Court on Monday held that the CAG can audit such accounts as far as the question of the government’s “revenue” — that by definition flows into the Consolidated Fund of India — is involved. To quote from the verdict, “The Rule and the Section fits perfectly into the constitutional scheme of every rupee flowing into the Consolidated Fund of India, by way of revenue, to be audited by the Comptroller and Auditor General of India.”

Dismissing a clutch of writ petitions filed by telecom industry bodies Cellular Operators Association of India (COAI) and Association of Unified Telecom Providers of India (AUSPI) challenging the Telecom Regulatory Authority of India and the sectoral auditor general’s directives to all telecom operators to disclose their account books to the CAG, the court said these fiats were perfectly constitutional.

The ruling, with received mixed reactions from top lawyers and perturbed the industry, could give ammunition to Delhi chief minister Arvind Kejriwal, who has announced a CAG audit of the capital’s electricity distribution companies’ expenditure in the wake of charges that they are overstating expenses.

The court added a caveat to the order, though: The CAG audit ought to be only on the telcos’ receipts and no further.

The apex auditor, the court cautioned, “would not confuse himself with his wide all-embracing power under Section 14(2) of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971, which includes inquiries into aspects like faithfulness, wisdom and economy in expenditures”.

The court held that auditing the annual gross revenue (AGR) of telecom companies was within the CAG’s rights as estimating the quantum of AGR was integral to verifying whether the government’s income as licence fee and spectrum usage charges are protected.

Upholding the view that the “general (state) revenue” would include not only taxes and duties but all the public money which the state collects and receives “from whatever source and in whatever manner”, the court said neither relevant Trai rules nor the pertinent sections of the CAG Act are ultra vires Article 149 of the Constitution.

“The Rule, the Section and the constitutional provisions as interpreted by us perfectly fit the critical features of the new emerging regulatory State,” a two-member bench of justices Pradeep Nandrajog

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