Performance audit powers of the CAG upheld; audit regulations confirmed as within the constitutional and statutory framework.

Article 149 permits Parliament to define the Comptroller and Auditor General's duties and powers, and section 16 of the 1971 Act authorises audit of receipts and examination of accounts to secure effective checks on assessment, collection and allocation of revenue. On that basis, examination of economy, efficiency and effectiveness in the use of public resources was treated as part of the statutory audit framework, rather than an extra-statutory function. Article 151 was also relied on to show that audit reports are placed before the Legislature for scrutiny. The Regulations on Audit and Accounts, 2007 were held intra vires, and the challenge to power to issue performance audit reports failed.

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Issues: Whether the Comptroller and Auditor General of India had power to conduct performance audit and whether the Regulations on Audit and Accounts, 2007 were unconstitutional.

Analysis: Article 149 of the Constitution of India authorises Parliament to prescribe the duties and powers of the Comptroller and Auditor General. Section 16 of the Comptroller & Auditor General's (Duties, Powers and Conditions of Services) Act, 1971 requires audit of receipts and authorises examination of accounts as considered fit for securing an effective check on assessment, collection and proper allocation of revenue. On that basis, the function of examining economy, efficiency and effectiveness in the use of public resources was held to be built into the statutory framework. Article 151 further provides for submission of audit reports to the President or the Governor for being laid before the Legislature, indicating legislative scrutiny of such reports.

Conclusion: The Regulations on Audit and Accounts, 2007 were held to be intra vires and the challenge to the CAG's power to issue performance audit reports failed.

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