Court rules CERA lacked jurisdiction for private entity audit under CAG Act, emphasizing statutory authorization.

The court held that CERA lacked jurisdiction to audit a private entity's accounts under Section 16 of the CAG's (DPC) Act, emphasizing the necessity of statutory authorization for special audits. The impugned notice dated 10.01.2019 was deemed illegal and unconstitutional as it lacked statutory support or approval from the President or Governor. The court quashed the notice, ruling in favor of the petitioner and underscoring the limitations on CERA's auditing authority over private entities.

---

---

Issues Involved:
1. Jurisdiction of CERA to audit private entities.
2. Applicability of Section 16 of the CAG’s (DPC) Act.
3. Compliance with statutory provisions for special audit.
4. Validity of the impugned notice/intimation dated 10.01.2019.

Issue-wise Detailed Analysis:

1. Jurisdiction of CERA to audit private entities:
The petitioner contended that the impugned notice seeking audit of its accounts was without jurisdiction as there was no statutory provision enabling such an audit from a private entity. The respondents argued that CERA had the authority under Section 16 of the CAG’s (DPC) Act to conduct such audits. The court examined the statutory framework and concluded that the power of the CAG to audit is confined to government accounts and does not extend to private entities unless specifically requested by the President or Governor under Section 20 of the Act. The court found the respondents' reliance on Section 16 misplaced and held the impugned notice to be without jurisdiction.

2. Applicability of Section 16 of the CAG’s (DPC) Act:
The petitioner argued that Section 16 of the CAG’s (DPC) Act does not authorize the CAG to audit private companies unless requested by the President or Governor under Section 20. The court agreed, stating that Section 16 pertains to auditing receipts payable into the Consolidated Fund of India and does not extend to private entities. The court emphasized that the statutory scheme under Chapter III of the CAG’s (DPC) Act is limited to government accounts and does not cover private entities like the petitioner.

3. Compliance with statutory provisions for special audit:
The petitioner highlighted that specific statutes like the Companies Act, Income Tax Act, Central Excise Act, and Finance Act contain provisions for special audits, which were not invoked in this case. The court noted that the impugned notice did not comply with the procedural requirements under these statutes. The court underscored that any special audit must be traceable to a relevant statutory provision and conducted by a Chartered Accountant or Cost Accountant appointed by the Commissioner, not by CERA.

4. Validity of the impugned notice/intimation dated 10.01.2019:
The court examined the impugned notice and found it to be issued without jurisdiction, as it was not supported by any statutory provision authorizing CERA to audit the petitioner’s accounts. The court also noted that the respondents failed to show any request or sanction from the President or Governor for such an audit under Section 20 of the CAG’s (DPC) Act. Consequently, the court quashed the impugned notice as ex-facie illegal and unconstitutional.

Conclusion:
The court allowed the writ petition, quashing the impugned notice dated 10.01.2019, and held that CERA does not have the jurisdiction to audit the accounts of a private entity like the petitioner under Section 16 of the CAG’s (DPC) Act. The court emphasized the need for statutory backing for any special audit and highlighted the procedural requirements under relevant statutes.

---