Case Law Details

Case Name : Association of Unified Telecom Service Providers of India Versus Union of India & Others (Delhi High Court)
Appeal Number : WP(C) NO. 3673/2010
Date of Judgement/Order : 06/01/2014
Related Assessment Year :
Courts : All High Courts (3629) Delhi High Court (1146)

The Delhi High Court has delivered a judgement in the case of Association of Unified Telecom Service Providers of India Versus Union of India & Others on the powers of CAG to audit the revenues of Private Telecom Companies flowing to the Consolidated Fund of India under Section 16 of the CAG (DPC) Act, 1971.  The Court has held under the constitutional scheme of every rupee flowing into the Consolidated Fund of India, by way of revenue, to be audited by the CAG of India.

The ruling could give ammunition to Delhi chief minister Arvind Kejriwal, who has announced a CAG audit of the Delhi’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.

Some of the Relevant Paras of the Order are as follows :-

50. The legal position could be stated in simple language as follows : The Constitution (Article 149) mandates the Comptroller and Auditor General to perform such duties and exercise such powers in relation to the accounts of the Union. Accounts would include a record of money received and spent by the Union. Power in relation to the account envisaged under Article 149 would be as prescribed by or under any law made by Parliament which would mean that Parliament can make a law with respect to compiling accounts and auditing the same. While enacting the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971, vide Section 10, the Parliament has prescribed the manner in which power contemplated by Article 149 shall be exercised by the Comptroller and  Auditor General in relation to compiling and keeping accounts and vide Section 13 has prescribed the manner in which the expenditure shall be audited and vide Section 16 has prescribed the manner in which the receipts have to be audited.

51. We see no scope for any argument of there being any conflict between Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 and Article 149 of the Constitution of India. We see no scope for an argument to urge any conflict between Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 and Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 for the reason, interpreting the contract, we have already held hereinabove that in a very real sense the licensees are the accountant of the Central Government with respect to the complete, accurate and honest maintenance of the books as to any transaction(s) involving revenue. (See para 33 above). We have already held in paragraph 31 above that under the terms of the licence agreement the licensee has undertaken the accounting responsibility for the Central Government as well as itself. Thus, the accounts of the licensees, in relation to the revenue receipts can be said to be the accounts of the Central Government and thus subject to a revenue audit as per Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971.

52. We note that the power of the Comptroller and Auditor General to conduct a revenue audit of the accounts drawn up by the licensees does not flow from Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 but flows from Article 149 of the Constitution of India and with the concept of revenue as explained by us hereinabove with reference to Article 266 of the Constitution of India, finding flesh and blood from Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971.

53. We conclude by holding that neither Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 is ultra vires Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 nor is Section 16 ultra vires Article 149 of the Constitution of India. 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. The Rule, the Section and the constitutional provisions as interpreted by us perfectly fit the critical features of the new emerging regulatory State which has to reconstruct institution on the ruins of the club government requiring displacing the key feature of the club with standardization and formality; the provision of systematic information accessible both to insiders and outsiders and strengthening the control mechanism and public reporting.

54. A small caveat by way of reminder to the Comptroller and Auditor General. In relation to the accounts of the Telecom Service Providers, the audit has to be only an audit pertaining to the receipts and no more. The Comptroller and Auditor General 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 Telecom Service Providers would be reminded by us of  what we have written in paragraphs 18 and 19 above and the Comptroller and Auditor General of India would be reminded by us of what we have written in paragraph 20 above. A synergy between the two would be not only for the benefit of the industry, the economy of the country, the society at large but would go a long way in establishing public confidence in good corporate governance.

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