The Delhi Government received a shot in the arm on Monday with the Delhi High Court allowing the national auditor Comptroller and Auditor-General to audit the accounts of private telecom operators in the country.
The judgement came at a crucial time when the Government has been pushing for the audit of privately-owned power distribution companies (discoms) in the Capital. The move is, however, being opposed by discoms saying they are private entities and hence fall outside the ambit of the Comptroller and Auditor-General (CAG).
The Delhi Electricity Regulatory Commission (DERC) has also advocated for a CAG audit into the accounts of Reliance and Tata-owned power distribution companies. The judgement comes as a legal backing for AAP leader and lawyer Prashant Bhushan who had filed a PIl in Delhi High Court seeking to bring discoms within the ambit of CAG. The matter will come up for hearing on January 22.
The High Court, in its order, said the existing laws empowered CAG to conduct revenue audits of private telecom firms. The court, while rejecting the petition of the association of private telecom firms, said an audit by CAG would not only benefit the industry and economy of the country, but would also go a long way in establishing public confidence in good corporate governance.
“The synergy between regulatory bodies and telecom companies would not only benefit the industry, the economy of the country and society at large, but would go a long way in establishing public confidence in good corporate governance,” a division bench comprising Justices Pradeep Nandrajog and V Kameswar Rao said.
The judgement assumes greater significance in wake of the case pending before the High Court with regards to CAG audit into the accounts of discoms. The petition was opposed by discoms which claimed that they are not Government entities under Section 617 of Companies Act, 1956 which automatically keeps them out of CAG’s ambit.
Also in 2002, when Delhi’s power sector was privatised, the CAG had stated that the duties and powers of the national auditor were with respect to audit of accounts of Union and State-owned Government companies or corporations and discoms were not Government bodies.
Dismissing pleas of the Association of Unified Telecom Service Providers and Cellular Operators Association of India (COAI), which represent private telecom firms, the bench said: “As per the terms of license agreements, private telecom companies had undertaken the responsibility of accounting on behalf of the Centre also and their accounts, in relation to revenue receipts, can be termed as the accounts of the Central Government also and hence, they would be the subject matter of CAG’s audit.”
The bench, however, reminded the CAG to confine its auditing to ‘receipts’ of telecom firms only. “A small caveat by way of reminder to CAG…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 CAG would not confuse himself with his wide, all-embracing power which includes enquiries into aspects like faithfulness, wisdom and economy in expenditures,” it maintained. Sources in Delhi’s power sector said the private companies could reply on this aspect of the judgement while seeking immunity from CAG audit into its accounts.
The bench, in its 33-page judgement, also had a word of caution for regulatory bodies like the CAG. The bench said: “At the same time, those who seek accountability (as regulators) must also understand that their best chance of success would be a courteous and a conciliatory demeanour towards those who are regulated; and by impressing on their minds that the object of the regulator’s visit is to assist them and not to fish out grounds for complaint. The prying eyes of those who seek accountability must adopt the vision of a friendly adviser, who treats those whom he visits as gentlemen desirous of doing right and not the vision of a suspicious opponent desirous of finding evil and ready to make the most of it.”