Parliamentary control over audit framework bars judicially mandating CAG audit for special-statute banks and financial institutions.

The Delhi High Court held that compulsory audit by the Comptroller and Auditor General could not be judicially directed for the Reserve Bank of India, the State Bank of India, and other public sector banks, because Articles 148 and 149 leave the CAG's functions to parliamentary determination and the governing banking statutes already provide specific audit mechanisms. It further held that Government company provisions of the Companies Act did not apply to these bodies, as they are creatures of special statutes rather than companies incorporated under that Act. The Court therefore declined to extend audit obligations by judicial interpretation and left the matter to legislative policy.

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Issues: (i) Whether the writ court could direct compulsory audit by the Comptroller and Auditor General of India of the Reserve Bank of India, the State Bank of India, and other public sector banks and financial institutions; (ii) Whether the provisions relating to Government companies under the Companies Act applied to the Reserve Bank of India, the State Bank of India, and other public sector banks.

Issue (i): Whether the writ court could direct compulsory audit by the Comptroller and Auditor General of India of the Reserve Bank of India, the State Bank of India, and other public sector banks and financial institutions.

Analysis: The constitutional scheme under Articles 148 and 149 leaves the duties and powers of the Comptroller and Auditor General to be prescribed by Parliament. The relevant enactment and banking statutes provided specific audit mechanisms for the Reserve Bank of India, State Bank of India, and other banking institutions, including audit by auditors appointed under the governing statutes and, in some cases, discretionary audit at the instance of the Central Government. The Court held that the question whether to extend compulsory audit by the Comptroller and Auditor General is a matter of legislative policy and lies within parliamentary discretion. Consistent with judicial restraint, the Court declined to formulate auditing norms or direct the legislature on how to structure such policy.

Conclusion: The prayer for a judicial direction requiring compulsory audit by the Comptroller and Auditor General was rejected and was against the petitioners.

Issue (ii): Whether the provisions relating to Government companies under the Companies Act applied to the Reserve Bank of India, the State Bank of India, and other public sector banks.

Analysis: The Court examined the scheme of the Companies Act and held that Government company provisions apply to companies incorporated under that Act. The Reserve Bank of India and the State Bank of India, including nationalised public sector banks, are bodies created by special statutes and not companies registered under the Companies Act. Their audit and supervision are governed by their respective enactments and the Banking Regulation Act, which provide a separate statutory framework. The Court therefore found no legal basis to import the Government company audit provisions into these institutions.

Conclusion: The contention based on the Government company provisions of the Companies Act was rejected and was against the petitioners.

Final Conclusion: The writ petition failed because the relief sought would require the Court to enter the field of legislative policy, while the existing statutory framework already provided for audit and supervisory mechanisms for the concerned banking institutions.

Ratio Decidendi: Where Parliament has enacted a specific statutory audit framework for public financial institutions, the Court will not direct the creation of a compulsory audit regime or extend Government company provisions by judicial interpretation to bodies constituted under special statutes.

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