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2015 (11) TMI 383 - HC - Indian LawsAudit of the accounts of the Distribution Companies (DISCOMs), entrusted with the work of distribution and retail of electricity in Delhi - Whether under Section 20(1) of the Comptroller and Auditor Generals (Duties, Powers and Conditions of Service) Act, 1971 (CAG Act) the Comptroller and Auditor General of India (CAG) can be requested to undertake the audit of the accounts of the DISCOMs - Whether the audit so directed can be since the date of inception of DISCOMs i.e. 1st July, 2002 and if not, for what period - DISCOMs contended that once there had been privatisation of the electricity companies, CAG had no jurisdiction qua them - 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. They extend to private body or authority also and would cover the DISCOMs. 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, GNCTD and not eo nomine. Though the opportunity to represent against the proposal for audit, under Section 20(3) of the CAG Act, given to the DISCOMs, cannot be faulted on the ground of insufficiency of time but was not reasonable, having been given without disclosing the public interest in which audit of accounts of DISCOMs was deemed expedient and having been given before consultation with CAG and before the terms and conditions of audit were agreed between the GNCTD and the CAG. Such consultation and agreement are essential components of the proposal for audit, opportunity to represent whereagainst is required by Section 20(3) to be given. 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. Thus, the impugned direction for audit of DISCOMs under Section 20(1) of the CAG Act is quashed / set aside. We therefore allow the petitions of the DISCOMs by quashing the impugned directives of the GNCTD and dismiss the PIL. Needless to state, all actions undertaken in pursuance to impugned directive are also rendered inoperative and to no effect.
Issues Involved:
1. Whether the Comptroller and Auditor General of India (CAG) can audit the accounts of Distribution Companies (DISCOMs) under Section 20(1) of the CAG Act. 2. Whether the decision to request such an audit should be made by the Administrator independently or with the aid and advice of the Council of Ministers of GNCTD. 3. Whether the direction for audit in the present case followed the procedure prescribed under Section 20 of the CAG Act. 4. Whether the audit can be conducted from the inception of DISCOMs and for what period. 5. Whether a mandate should be issued to GNCTD or CAG to conduct the audit if the direction is found procedurally flawed. Issue-wise Detailed Analysis: 1. CAG's Authority to Audit DISCOMs under Section 20(1) of the CAG Act: The court examined whether DISCOMs, which are public-private partnerships with 51% shares held by private entities and 49% by GNCTD, fall under the purview of "body or authority" within the meaning of Section 20 of the CAG Act. It was held that the words "body or authority" in Article 149 of the Constitution and the CAG Act are of wide amplitude and not confined to entities that satisfy the test of 'State' under Article 12. They extend to private bodies or authorities, thereby covering DISCOMs. The court emphasized that the CAG's role is crucial for ensuring accountability and transparency in public finance, and its audit powers should not be unduly restricted. 2. Decision-Making Authority for Requesting CAG Audit: The court clarified that the Administrator of Delhi, in exercising powers under Section 20 of the CAG Act, must act on the aid and advice of the Council of Ministers of GNCTD and not independently. The decision to direct an audit of DISCOMs falls within the domain of GNCTD, given that DISCOMs operate under its jurisdiction. The court highlighted that the Administrator's role is not to act eo nomine but to follow the advice of the Council of Ministers, ensuring the decision aligns with the democratic principles of governance. 3. Compliance with Procedure under Section 20 of the CAG Act: The court found that the opportunity given to DISCOMs to represent against the audit proposal was not reasonable. The notice provided did not disclose the public interest grounds for the audit and was issued before consulting the CAG and finalizing the terms and conditions of the audit. The court held that consultation with the CAG and agreement on the audit's terms and conditions are essential components of the proposal, and the lack of these elements rendered the opportunity to represent inadequate. Consequently, the court struck down the audit directive for non-compliance with Section 20(3) of the CAG Act. 4. Period of Audit: Given the court's findings on the procedural flaws and lack of public interest justification, it did not delve into the specifics of whether the audit could cover the entire period from the inception of DISCOMs. The court's primary focus was on the procedural and substantive grounds for the audit directive's validity. 5. Issuance of Mandate for Audit: The court concluded that an audit under Section 20(1) of the CAG Act, aimed at determining tariff, is not expedient in public interest. The determination of tariff falls within the exclusive domain of the Delhi Electricity Regulatory Commission (DERC), which is empowered to conduct or commission necessary audits. The court emphasized that the CAG's audit report would not have any legal impact on tariff determination under the current regulatory regime. Therefore, the court did not issue a mandate for the audit, as it would be a futile exercise. Conclusion: The court quashed the directive for the CAG audit of DISCOMs, finding it procedurally flawed and not in public interest. The decision underscored the importance of following statutory procedures and the appropriate roles of regulatory bodies in tariff determination. The petitions of the DISCOMs were allowed, and the Public Interest Litigation (PIL) was dismissed.
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