Delhi HC quashes Delhi Govt order to conduct CAG audit of DISCOMs [Read Judgment]

In a major setback to Delhi Government, the Delhi High Court has quashed the order by the Governmentin exercise of powers under Section 20 of the CAG Act, asking the CAG to conduct an audit of the accounts of the DISCOMs. A Division bench of Chief Justice G Rohini and Justice RS Endlaw quashed the order on the ground that reasonable opportunity to represent with regard to the proposal for such audit was not given to DISCOMs.

The Court was considering a PIL filed against the DISCOMs and other petitions filed by three DISCOMs against the order asking CAG to Audit them. The Court dismissed the PIL and allowed the Writ petitions filed by the DISCOMs.

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 held.

However the Court rejected the contention that only 48 hours was given to represent against the proposal for audit. The Court remarked “we in one breath frown upon governance and administration inter alia for the reason of the same being very slow and nonresponsive, we in the other breath cannot strike down an action on the ground of the Government concerned having acted with speed. Seen in this light, the time of 48 hours to represent against cannot be said to be violative of the requirement of Section 20(3) of giving reasonable opportunity.”

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.”

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.

Read the Judgment here.