Revenue audit of telecom licence-fee receipts upheld as within CAG powers and supported by required books-production rules.

Article 149 permits Parliament to define the Comptroller and Auditor General's powers in relation to Union accounts, and Article 266 treats revenues received by the Government of India as part of the Consolidated Fund. On that basis, licence-fee receipts from telecom operations were treated as revenue accruing to the Union, and Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 was read as authorising audit of those receipts. Rule 5 of the Telecom Regulatory Authority of India (Maintenance of Books of Accounts and other Documents) Rules, 2002 was upheld as a facilitative requirement for producing books and information. The challenge to the rule and the statutory provision failed, and the revenue audit was confined to sums payable to the Union.

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Issues: Whether the Comptroller and Auditor General could conduct a revenue audit of telecom licensees' accounts relating to licence-fee receipts and whether 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 were ultra vires Article 149 of the Constitution of India.

Analysis: Article 149 authorises Parliament to prescribe the duties and powers of the Comptroller and Auditor General in relation to the accounts of the Union and also of other authorities or bodies. Article 266 was read to mean that all revenues received by the Government of India form part of the Consolidated Fund of India, and the expression 'revenues' was treated as including income accruing to the State from contractual or licensed sources. On the licence terms, the telecom licensees were obliged to maintain and furnish accounts, and the receipts from licensed activity formed the basis of the Government's share of revenue. Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 was held to authorise audit of such receipts, and Rule 5 merely facilitated production of relevant books and information for that statutory audit.

Conclusion: The challenge failed. Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 was not ultra vires Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971, and Section 16 was not ultra vires Article 149 of the Constitution of India. The Comptroller and Auditor General could undertake a revenue audit limited to receipts payable to the Union.

Ratio Decidendi: Where licence-fee receipts payable to the Union are generated from a regulated public resource and form part of Government revenue, Article 149 read with Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 authorises a revenue audit of those receipts, and a rule requiring production of books for that purpose is valid.

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