TaxTMI 
TaxTMI 
2015 (11) TMI 383
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Mr. Umang Joshi, Advs. for CAG. Mr. Meet Malhotra, Sr. Adv. with Mr. Ravi S.S. Chauhan and Ms. Pallak Singh, Advs. for DERC. Ms. Anjana Gosain & Mr. Pradeep Desodya, Advs. for UOI. RAJIV SAHAI ENDLAW, J. 1. The common questions involved in these proceedings which have been heard together are:- (I) Whether under Section 20(1) of the Comptroller and Auditor Generals' (Duties, Powers and Conditions of Service) Act, 1971 (CAG Act) the Comptroller and Auditor General of India (CAG) can be requested to undertake the audit of the accounts of the Distribution Companies (DISCOMs), entrusted with the work of distribution and retail of electricity in Delhi pursuant to the unbundling of the erstwhile Delhi Vidyut Board (DVB), which are public-private partnerships in which 51% shares are held by private entities and 49% shares are held by a company wholly owned by the Government of National Capital Territory of Delhi (GNCTD). (II) If the answer to the aforesaid question is in affirmative, whether the said decision to request such audit is to be of the Administrator, acting on his own, or on the aid and advice of the Council of the Ministers of GNCTD. (III) If the answer to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DISCOMs in dereliction of their statutory duties as Regulators. 3. The PIL was entertained and notice thereof issued. The DISCOMs contended that once there had been privatisation of the electricity companies, CAG had no jurisdiction qua them. 4. The GNCTD in its counter affidavit stated that, (a) the DERC vide its letter dated 8th July, 2010 had requested the GNCTD to request the CAG for an audit of the accounts of the three DISCOMs i.e. (i) BSES Rajdhani Power Limited (BRPL); (ii) BSES Yamuna Power Limited (BYPL); and, (iii) North Delhi Power Limited (NDPL) (since changed its name to Tata Power Delhi Distribution Ltd.(TPDDL)) for the financial years 2007-08, 2008-09 and 2009-10; (b) however GNCTD has no locus standi to accede to the said request of the DERC as there is no such enabling provision under the Electricity Act, 2003 or under the Delhi Electricity Reform Act, 2000 (Reforms Act) or under the tariff policy to refer the matter of audit of accounts of the DISCOMs; (c) there is no such power also under the Article 149 of the Constitution of India or under the CAG Act; and, (d) that otherwise also a routine audit by the CAG every year may not be desirable but in order t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CTD in the writ petitions was filed when it was being administered by the Central Government but by the stage of addressing arguments on behalf of GNCTD, the political party which while in power had issued the direction of audit, was back in power. 10. The counsels have addressed arguments with respect to the record of Writ Petition (c) No. 559/2014 and hence, while referring to the pleadings, we will be referring to the pleadings in the said petition only. We may also record that in accordance with the liberty given while reserving the judgment, written submissions have also been filed on behalf of the three DISCOMs, CAG and GNCTD. 11. It is the case of the DISCOMs in the writ petitions filed by them: (a) that during the period 2001-2003, Power Sector in NCT of Delhi and its performance was closely monitored by the Supreme Court in Writ Petition (C) No. 328/1999 tilted In Re: Power Crisis in NCT, Delhi vs. Union of India; this led to the Reforms Act which came into force on 23rd November, 2000; (b) that the GNCTD on 6th January, 2001, in exercise of powers under the Reforms Act decided to unbundle the Delhi Vidyut Board (DVB), its undertaking and assets into six succes....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 2014 challenged the power of GNCTD to direct audit of the DISCOMs and also protested that they had not been given resonable opportunity within the meaning of Section 20(3) of the CAG Act; on 6th January, 2014, the DISCOMs issued an additional response reiterating their concern; and (j) that on 7th January, 2014, the Deputy Secretary of Power, GNCTD issued the impugned order for audit of the DISCOMs by the CAG under Section 20 of the CAG Act. We at this stage are not recording the legal contentions urged in the writ petitions as oral arguments addressed are hereafter being recorded in detail. 12. The GNCTD in its counter affidavit dated 13th March, 2014 has pleaded: (i) that the issue of audit of DISCOMs by CAG had been raised time and again by the various stake holders over the previous four to five years alleging large scale discrepancies in the accounts; (ii) that the DERC also in its letter dated 8th July, 2010 had opined that it has become necessary to get the matter settled and the best way to do the same was an audit by the CAG; (iii) that after the GNCTD had filed its affidavit dated 9th November, 2011 in the PIL, the DERC had again vide its letter dated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ity Act or the Reforms Act which prohibits the audit by the CAG; and (xiii) that the CAG itself had issued Public Auditing Guidelines in case of Public Private Partnership (PPP) projects, as per which also, even where the Government is a minority partner, public audit should happen when there is a transfer of assets to the private party; the purpose of said audit is to ensure that the said partnership has yielded value for money and the public interest is adequately protected. We are again not recording the legal contentions urged in the counter affidavit, as the arguments addressed before the Court are hereafter being recorded in detail. 13. The CAG, in its counter affidavit has pleaded: (A) that under Regulation 107 of the CAG Regulations on Audit and Accounts, 2007, the time period of audit has been specified as "preferably for five accounts years" which essentially means that the initial period of entrustment for a period of five years, though extendable for a further period; (B) that though the entrustment by the GNCTD of the audit of the accounts of the DISCOMs since their inception is for more than five years but the CAG had agreed thereto; (C) that as per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s disclosed; (VI) that Section 41 of the Government of National Capital Territory of Delhi Act, 1991 (GNCTD Act) prescribes the matters in which the Administrator is to act in his own discretion; that as per the said provision, Administrator is to act in his own discretion in matters which fall outside the purview of the powers conferred on the Legislative Assembly and / or in which he is required by or under any law to act in his discretion and, in exercise any judicial or quasi-judicial functions; (VII) that the matters in respect of which Legislative Assembly of Delhi has power to make laws are prescribed in Article 239 AA (3)(a); (VIII) that under Article 149 of the Constitution of India, the CAG is to perform such duties and exercise such powers as may be prescribed by or under any law made by the Parliament; (IX) that Entry 76 of List I of the Seventh Schedule to the Constitution deals with audit of accounts; (X) that thus no law made by the Legislative Assembly of Delhi can be with respect to accounts of the Union and the States; (XI) that even as per the noting dated 1st October, 2013 on the file notings leading to the decision for directing audit by CAG, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he change in the political party at the helm, view was changed and which could not have been done; (XXV) that there is no financial assistance by GNCTD to meet the expenditure of DISCOMs; the expenditure incurred by DISCOMs is approved by DERC after prudence checks in terms of Electricity Act; (XXVI) that the decision to direct CAG audit of DISCOMs is of the persons not entitled to take such a decision; (XXVII) that accounts of only those bodies and authorities can be audited under Section 20 which are statutory bodies or authorities and not of any other body or authority, even if performing a public function; (XXVIII) that the words "body or authority" in Section 20 cannot include every company incorporated under the Companies Act, 1956 and or every firm under the Partnership Act, 1932; (XXIX) that the Government has no deep or pervasive control of the DISCOMs; the DISCOMs are not performing a public function; reliance is placed on Jatya Pal Singh Vs. Union of India (2013) 6 SCC 452; (XXX) reference was made to Pradeep Kumar Biswas Vs. Indian Institute of Chemical Biology (2002) 5 SCC 111 holding that the tests formulated in Ajay Hasia Vs. Khalid Mujib Sehravardi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which could never have been intention; (XL) CAG in these proceedings is seeking to justify its jurisdiction under Sections 13 to 15 of the CAG Act but the action impugned in these proceedings is the one under Section 20 and the validity has to be decided only on the anvil of Section 20 and not any other provisions. 16. Mr. Dhruv Mehta, senior counsel also appearing for TPDDL contended: (A) that CAG Act being a law made by the Parliament, the Administrator in taking decision under Article 239 AA(4) of the Constitution of India is not to act on the aid and advise of the Council of Ministers; (B) reliance was placed on Delhi Bar Association (Regd.) Vs. Union of India (2008) 13 SCC 628 where the challenge to a notification issued by the Administrator dividing the NCT of Delhi into nine civil districts on the ground that the same was beyond the competence of the GNCTD and should have been issued only by the Union of India was dismissed finding that the subject matter thereof fell under the discretionary powers of the Administrator; (C) that the procedure prescribed in Sub-section (3) of Section 20 of the CAG Act has not been followed; (D) reliance was placed on Bhuri ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Kerala (1999) 3 SCC 422 to contend that the procedure prescribed has to be followed; (P) the argument, that DISCOMs, from denial of reasonable opportunity to object / represent, have not suffered any prejudice, does not apply because the prejudice doctrine applies to common law and not to statutory compliances; reliance in this regard was placed on paras 88 to 91 of Swadeshi Cotton Mills Vs. Union of India (1981) 1 SCC 664 and on Smt. Chatro Devi Vs. Union Of India 137 (2007) DLT 14 approved in Union of India Vs. Chatro Devi (2014) 7 SCALE 217; (Q) that under Section 69 of the Electricity Supply Act, 1948, the accounts of the Electricity Boards were to be audited by the CAG-however while enacting the Electricity Act and the Reforms Act, no provision for such an audit of DISCOMs was made-therefrom the intention of the Parliament that the accounts of DISCOMs are not to be audited by CAG is clear; on the contrary audit by the CAG of the Electricity Regulatory Commissions has been provided; (R) that the Hayden's mischief rule is thus attracted; (S) that the whole purpose of the electricity reforms was to increase competition to benefit the consumers and free electricity ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (2) prohibits such audit if the law by which such body or authority is established provides for audit of accounts of such body / authority by an agency other than CAG; (iv) Section 19 provides for audit of government companies and corporations; Section 19(3) is pari materia to Section 20(1); (v) thus the expression "any body or authority" in Section 20 has to take colour from preceding Sections 14 & 15 i.e. that body / authority which is not a government company or corporation for which provision is made in Section 19(3); (vi) that thus 'body or authority' within the meaning of Section 20 has to be a body or authority owned / controlled by the government and / or performing a sovereign function; (vii) while sub-section (1) of Section 20, empowering the President / Governor / Administrator to order audit of any body or authority does not have any such condition, sub-section (2) thereof empowering the CAG to seek such authorisation from the President / Governor / Administrator for audit is limited only to those body or authority in which substantial amount is invested by the Central or the State Government-it follows that the expression "any body or authority" in Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndation had been laid in the pleadings, he was asked to confine his argument to DISCOMs being a body or authority within the meaning of Section 20 of the said Act; he argued: (a) that the present controversy is covered by the judgment of the Apex Court in Association of Unified Tele Services Providers supra; (b) that though Article 12 of the Constitution does not use the expression "body" but the Supreme Court in Pradeep Kumar Biswas supra has held the same to be included in State; the test is whether the functions performed by such body has imprimatur of State; (c) that the word "Comptroller" as per Black's Law Dictionary IX Edition means, an officer who is charged with duties relating to fiscal affairs including auditing and examining accounts and reporting the financial status periodically; therefore the functions of the CAG are not merely that of an auditor; (d) that any body or authority having financial relationship with the Union or the State would be covered by Section 20 of the CAG Act; (e) It matters not, whether such body or authority is owned by the government or privately; (f) that the words body or authority mean aggregation of persons, irrespective ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ublic Auditing Guidelines, 2009 supra for PPP in infrastructure projects to contend that public purpose projects, financed / managed by private persons also fall in the ambit thereof; (s) reliance was placed on Tinsukhia Electric Supply Co. Ltd. Vs. State of Assam (1989) 3 SCC 709 where it was held that it is undisputed that the electricity generated and distributed by the undertaking therein constituted material resources of the community for the purpose and within the scope and meaning of Article 39(b) of the Constitution; (t) with respect to the letter dated 22nd August, 2002 of the CAG, it was stated that it was in the context of Section 19 and not Section 20; it was further submitted that the clarity emerged only after the Telecom judgment; (u) attention was invited to the Government of India (Audit & Accounts) Order, 1936 under which the Auditor General was entrusted to audit all expenditures from the revenues of the Federation and of the Provinces and to ascertain whether monies shown in the accounts as having been disbursed were legally available for and applicable for the services or purpose to which they have been applied or charged and it is contended that the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thus for the purposes of determination of tariff has to accept the same; (b) that DERC was however of the view that DISCOMs were effecting purchases from their sister concern for inflated value thereby increasing the cost of distribution and which in turn leads to higher tariff; (c) that it is for this reason only that DERC had asked the GNCTD to have the accounts of DISCOMs audited. 23. Dr. Rajiv Dhawan, senior counsel appearing for GNCTD has argued: (i) that an opportunity to file objections / representations was duly given to DISCOMs before directing audit of their accounts; (ii) that there has been no violation of the principles of natural justice; (iii) that the decision was not taken hurriedly; the said question was under consideration right since the letter dated 8th July, 2010 of the DERC to the GNCTD for having the accounts of DISCOMs audited; (iv) reference was made to Pathan Mohammed Suleman Rehmatkhan Vs. State of Gujarat (2014) 4 SCC 156, Shahid Balwa Vs. Union of India (2014) 2 SCC 687 and Association of Unified Tele Services Providers supra with respect to the role of CAG; (v) that the decision to direct audit is Wednesbury reasonable, within....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court cannot direct any action to be taken on the basis of CAG reports; thus the PIL aforesaid is infructuous upon audit having been ordered; (C) that Section 20(3) is couched in a negative form-it is therefore peremptory; (D) that before Section 20 can be invoked, notice must be given to the body or authority of the proposal for audit; the same has not been done in the present case; (E) that 49% share in DISCOMs is owned by DPCL and not by GNCTD; it matters not, if the shares of DPCL in turn are held by GNCTD; (F) that in the notice dated 28th December, 2013 issued to DISCOMs, no terms on which audit by the CAG was proposed, were mentioned; (G) that though the senior counsel for GNCTD has argued on the premise of the audit having been ordered for three years but in fact it has been ordered for fourteen to fifteen years, for which it was not even proposed; (H) that the hearing prior to the decision / direction dated 7th January, 2014 given was by the Principal Secretary (Power) who is on the Board of Directors of DISCOMs; (I) that though another notice dated 31st December, 2013 was given but there were no particulars therein also; (J) that the impugned decis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or statutory bodies only; (X) that the functioning of DISCOMs is to be governed by the share purchase agreement on the file of the PIL and there is no power in the Legislative Assembly of Delhi to issue any direction to DISCOMs; (Y) that thus the exercise, even if any undertaken by the CAG under Section 20 of the CAG Act would be a futile one; no direction can be issued to DISCOMs in pursuance thereto; (Z) that government companies are not a body or authority; that it is for this reason only that a special provision with respect thereto was made in Section 19 of the CAG Act; (AA) attention was invited to Article 283 of the Constitution providing for control over the CFI; (BB) the judgments cited by the senior counsel for GNCTD qua public interest were distinguished; (CC) that there is no guidance in Section 20 of the CAG Act as to accounts for what period can be ordered / directed to be audited; unless interpreted reasonably i.e. of 2 or 3 years, it will be violative of Article 14; (DD) that in the file notings, at different places different reasons have been given for wanting CAG audit. 25. Mr. Sandeep Sethi, senior counsel in rejoinder reiterated that as o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10 - Comptroller and Auditor-General to compile accounts of Union and States (1) The Comptroller and Auditor-General shall be responsible- (a) for compiling the accounts of the Union and of each State from the initial and subsidiary accounts rendered to the audit and accounts offices under his control by treasuries, offices or departments responsible for the keeping of such accounts; and (b) for keeping such accounts in relation to any of the matters specified in clause (a) as may be necessary: Provided that the President may, after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for compiling- (i) the said accounts of the Union (either at once or gradually by the issue of several orders); or (ii) the accounts of any particular services or departments of the Union: Provided further that the Governor of a State may, with the previous approval of the President and after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for compiling- (i) the said accounts of the State (either at once or gradually by the issue of several orders), or (ii) the accounts o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... preparation and submission of the accounts relating to annual receipts and disbursements for the purpose of the State. Section 12 - Comptroller and Auditor-General to give information and render assistance to the Union and States The Comptroller and Auditor-General shall, in so far as the accounts, for the compilation or keeping of which he is responsible, enable him so to do, give to the Union Government, to the State Governments or to the Governments of Union territories having Legislative Assemblies, as the case may be, such information as they may, from time to time, require, and render such assistance in the preparation of their annual financial statements as they may reasonably ask for. Section 13 - General provisions relating to audit It shall be the duty of the Comptroller and Auditor-General- (a) to audit all expenditure from the Consolidated Fund of India and of each State and of each Union territory having a Legislative Assembly and to ascertain whether the moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thority for a further period of two years notwithstanding that the conditions specified in sub-section (1) or sub-section (2) are not fulfilled during any of the two subsequent years. Section 15 - Functions of Comptroller and Auditor-General in the case of grants or loans given to other authorities or bodies (1) Where any grant or loan is given for any specific purpose from the Consolidated Fund of India or of any State or of any Union territory having a Legislative Assembly to any authority or body not being a foreign State or international organisation, the Comptroller and Auditor-General shall scrutinise the procedures by which the sanctioning authority satisfies itself as to the fulfilment of the conditions subject to which such grants or loans were given and shall for this purpose have right of access, after giving reasonable previous notice, to the books and accounts of that authority or body: Provided that the President, the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be may, where he is of opinion that it is necessary so to do in the public interest, by order, relieve the Comptroller and Auditor-Gener....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments which deal with or form the basis of or are otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may appoint for his inspection; (c) to put such questions or make such observations as he may consider necessary, to the person in charge of the office and to call for such information as he may require for the preparation of any account or report which it is his duty to prepare. (2) The person in charge of any office or department, the accounts of which have to be inspected and audited by the Comptroller and Auditor-General, shall afford all facilities for such inspection and comply with requests for information in as complete a form as possible and with all reasonable expedition. Section 19 - Audit of Government companies and corporations (1) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956. (2) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of corporations (not being ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y on such terms and conditions as may be agreed upon between him and the concerned Government and shall have, for the purposes of such audit, right of access to the books and accounts of that body or authority: Provided that no such request shall be made except after consultation with the Comptroller and Auditor-General. (2) The Comptroller and Auditor-General may propose to the President or the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be, that he may be authorised to undertake the audit of the accounts of any body or authority, the audit of the accounts of which has not been entrusted to him by law, if he is of opinion that such audit is necessary because a substantial amount has been invested in, or advanced to, such body or authority by the Central or State Government or by the Government of a Union territory having a Legislative Assembly, and on such request being made, the President or the Governor or the Administrator, as the case may be, may empower the Comptroller and Auditor-General to undertake the audit of the accounts of such body or authority. (3) The audit referred to in sub-section (1) or su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the words 'other authority or body'. Thus, Article 149 creates domain of the CAG over the accounts not only of the Union of India and the States but also of any other authority or body but leaves it to the Parliament to by law prescribe the duties and powers which CAG shall exercise in relation to the accounts of the Union, States and of any other body or authority. Article 149 or for that matter no other Article of the Constitution does not prescribe the duties and powers of the CAG in relation to the accounts of the Union and the States also. The law made by Parliament is thus not required to specify the "authority or body" in relation to whose accounts CAG may exercise powers but is only required to specify the duties and power which the CAG may perform / exercise in relation to accounts of any 'authority or body'. 30. Parliament, while making any law, can thus prescribe the duties and powers which the CAG may perform and / or exercise in relation to accounts of any body or authority established under the said law or which may be subject matter of such law. Instances, thereof are to be found, as contended by the counsels, in the DDA Act and MCD Act. Section 104 of the Electr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties and exercise powers in accordance with the provisions of such law. It may be highlighted that none of the aforesaid provisions expressly name any body or authority and become applicable to whichsoever body or authority satisfies the parameters thereof. Thus if a body or authority has been substantially financed by grants or loans from CFI or of any State, notwithstanding whether any such condition has been laid down in the terms of grant of loan or not, CAG would be required to exercise the powers in terms of Section 14(1) with respect thereto. Similarly, where any body or authority has been given a grant or loan for any specific purpose from the CFI or of any State, CAG is vested with powers with respect thereto as provided in Section 15, again notwithstanding whether it is so provided in terms of the grant of loan or not. And, CAG has powers as under Sections 19(1) and 19(2) with respect to government companies and government corporations irrespective of whether provision therefor is made in their Articles of Association or not or in the law by which they have been established, respectively. 32. The question which we are required to answer is, what is the meaning to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t been defined, neither in the Constitution nor in the CAG Act, have to be given a meaning as ascribed under Article 12 of the Constitution of India i.e. would mean only such body or authority which satisfies the test of being a State under Article 12 of the Constitution of India. The contention of the GNCTD and CAG of course is that the said words are not subject to such limitation and would include any aggregation of persons, even if of a purely private character. 37. The gravamen of the contention of the DISCOMs is that because the DISCOMs are not State within the meaning of Article 12, they would not be a body or authority within the meaning of Article 149 of the Constitution or the CAG Act. 38. We are unable to agree. We see no reason to so limit the domain and jurisdiction of the CAG particularly when framers of our Constitution have not chosen to do so. The reasons which prevail with us to hold so are as under: A. Neither counsel has contended that the meaning to be ascribed to the words "body or authority" in Article 149 and in the CAG Act is to be different. We also do not find any reason therefor. Once Articles 148 & 149 have created the CAG and vested it with du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Parliament to by law prescribe the duties / powers which CAG may perform / exercise in relation to accounts of any body or authority. Article 149 does not place any limitation on the said power of Parliament to make law thereunder even with respect to a private body or authority which the DISCOMs claim themselves to be. We are not told of or have been able to fathom any such limitation on the law making power of Parliament. E. It thus follows that the powers of the CAG under Article 149 read with the CAG Act cannot be restricted only to that body or authority which satisfies the test of Article 12 of the Constitution of India. F. Independently of the above also, we do not find it in the fitness of the constitutional scheme to so limit the powers of the CAG. G. Article 148 of the Constitution provides that there shall be a Comptroller and Auditor General of India which shall be appointed by the President by warrant under his hand and seal and shall only be removed from office in like manner and / on the like grounds as a Judge of the Supreme Court. The salary and other conditions of service of the CAG are to be determined not by the Executive but by the Parliament by la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urts under Article 226 and the Supreme Court under Article 32 exercise judicial powers and that duties and powers conferred by the Constitution on the CAG under Article 149 cannot be taken away by the Parliament being the basic structure of our Constitution, like Parliamentary democracy, independence of judiciary, rule of law, judicial review, unity and integrity of the country, secular and federal character of the Constitution and so on. It was further held that the functioning of the government is controlled by the government, laws of the land, legislature and the CAG; CAG has the power to examine the proprietary, legality and validity of all expenses incurred by the government and the office of the CAG exercises effective control over the government accounts and expenditure on the schemes, after implementation of the schemes; as a result the duty of the CAG arises only after the expenditure has been incurred. It was reiterated that Constitution is a living organic thing and must be applied to meet the current needs and requirements; Constitution is not bound to be understood and accepted to the original understanding of the constitutional economics; parliamentary debates may not....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or authority but the extent to which CAG is to exercise such jurisdiction has been left to be prescribed by law to be made by Parliament. Thus, unless the Parliament has made a law in that respect, CAG would not be in a position to perform any duty or exercise any power in relation to accounts of any authority or body. The same allays the fears expressed by the petitioners, of the words "body or authority" if not restricted to the meaning as under Article 12 of the Constitution, vesting the CAG with power over accounts also of private companies. CAG would not have any jurisdiction or domain over the accounts of private companies till a provision therefor has been made by law of Parliament. Such law when made would remain amenable to challenge if any thereto. N. That brings us to Section 20 which is such a law and which is not under challenge. O. It is not as if under Section 20 accounts of every body or authority, even if of a purely private nature and character, become amenable to the CAG. Under Sub-Section (1) thereof accounts of only such body or authority become amenable to audit by CAG which are directed to be so audited by the President / Governor / Administrator. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmittee for Protection of Democratic Rights (2010) 3 SCC 571 it was held that constitutional provisions have to be construed broadly and liberally having regard to the changing circumstances and the needs of time and polity. Recently, also in Manoj Narula Vs. Union of India (2014) 9 SCC 1 it was reiterated that a Constitution must not be construed in a narrow and pedantic sense and the full import and true meaning of the words therein has to be appreciated considering the true context in which the same are used and the purpose which they seek to achieve. S. Reference may also be made to I.R. Coelho Vs. State of Tamil Nadu (2007) 2 SCC 1 holding that the principle of constitutionalism requires control over the exercise of governmental power to ensure that it does not destroy the domestic principle upon which it is based and that the said principle advocates a check and balance model of the separation of power, it requires the diffusion of power necessitating different independent centres of decision making. In our opinion, the constitutional office of CAG is one of such powers, necessary for operation of the check and balance model. T. We, more today than perhaps in the first ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....40. However, our aforesaid proposition was not accepted by either of counsels except Mr. Dhruv Mehta who, in his rejoinder arguments tend to agree therewith. 41. However on further consideration, including for the reasons hereinabove given and considering that there is no challenge to vires of Section 20, we have not pursued the said reasoning. The same may be relevant in the event of a challenge to Section 20 and the same being successful, to save / read down the same. We also now feel that the audit of bodies or authorities subject matter of Sections 14 to 16 having been entrusted to CAG by law made by Parliament i.e. the CAG Act, Section 20 would not apply to them. We though still wonder the purport of the words "save as otherwise provided in Section 19" in Section 20 of the CAG Act. 42. Once it is held that the words 'body or authority' are not restricted only to those entities which satisfy the test of Article 12 of the Constitution, the need to adjudicate, whether DISCOMs are State within the meaning of Article 12 of the Constitution, does not arise. 43. However, DISCOMs have also challenged the direction under Section 20(1) to the CAG for their audit, on the grounds....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NCTD only which alone is concerned with the State level transmission and distribution of electricity. (D) Once it is held that the Administrator of Delhi in the matter of issuance of a direction under Section 20 does not act as the representative of Union of India, the next question which arises is whether the Administrator, in exercise of such power, is to act eo nomine i.e. by or in that name or on the aid and advise of the Council of Ministers of GNCTD. (E) Supreme Court in State of Gujarat Vs. Hon'ble Mr. Justice R.A. Mehta (Retd.) (2013) 1 SCC 1 held / reiterated:- (i) that the universal rule is that the Governor is bound to act only in accordance with aid and advice of Council of Ministers headed by Chief Minister in whom the real executive power vests; (ii) whenever the Constitution requires the satisfaction of the President or the Governor for the exercise of such power, such satisfaction is not the personal satisfaction of the President or Governor in their personal capacity but satisfaction of the Council of Ministers on whose aid and advise the President or Governor generally exercises all their powers and functions; (iii) mere use of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al for such audit having not been given. The said challenge is under two heads. Firstly, of sufficient time to represent against having not been given and secondly, of the same being not reasonable. While we do not find any merit in the former, we uphold the latter. The reasons therefor are as under: (I) The challenge on the ground of sufficient time having not been given is on the ground of, time only of 48 hours having been given to represent against the proposal for audit. It is unfortunate that we all have got used to time ceasing to be of any essence and which explains the ground urged of a 48 hours notice to represent against being called not reasonable. We have got used to testing reasonableness in terms of days and months and that is why a legal plea of time given of hours being unreasonable and insufficient. (II) In our opinion, a time has come for changing such mindset. While we in one breath frown upon governance and administration inter alia for the reason of the same being very slow and non-responsive, we in the other breath cannot strike down an action on the ground of the Government concerned having acted with speed. Seen in this light, the time of 48 hours to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al and legal limitations / constraints" that the National Tariff Policy on electricity stipulated and directs SERC to institute a system of independent scrutiny of financial and technical data submitted by licensee and accordingly DERC was asked the steps it had taken in this regard; iii) Cabinet of GNCTD on 26th December, 2011 approved infusion of equity and audit of DISCOMs by CAG since inception; iv) however the matter continued to be debated, awaiting the decision of this Court in the PIL, in which the DISCOMs were opposing audit by CAG; v) on 28th December, 2013, a decision was taken to obtain approval of the Administrator for the proposal for conducting audit of DISCOMs by CAG, "keeping in view larger public interest involved, to carry the conviction of the general public / consumers about the authority of the claims of the DISCOMs" and to, in accordance with Section 20 of the CAG Act hold consultation with CAG; vi) on 1st January, 2014, the representations of DISCOMs against the proposal of audit by CAG was considered and, it was reasoned, a) that the reluctance of DISCOMs could not be understood; b) conduct of audit may bring out several possibilities of scope of reduction ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns or terms and conditions of audit were mentioned therein also. (XI) Rather, what transpires from the file notings is, that till 30th December, 2013, neither had the approval of Administrator been sought nor the terms and conditions of audit been finalized with CAG. (XII) What emerges is that the DISCOMs were given an opportunity to represent, even before any such consultation had taken place between the Administrator and CAG and before any terms and conditions of such audit had been agreed upon between CAG and the concerned government i.e. GNCTD. (XIII) What further emerges is that the GNCTD first wrote to CAG in this regard on 31st December, 2013 and on 1st January, 2014 conveyed to CAG that approval of Administrator had been obtained. (XIV) Even in the impugned letter dated 7th January, 2014 of GNCTD to DISCOMs informing that CAG will be conducting audit of DISCOMs since inception, under Section 20 of the CAG Act, no terms and conditions agreed with CAG were mentioned. (XV) What is thus evident is that there was no 'proposal of audit' within the meaning of Section 20, till the time opportunity to represent against was given. (XVI) In our opinion, 'proposal of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....XII) Supreme Court in Mr. Justice Chandrashekaraiah (Retd.) Vs. Janekere C. Krishna (2013) 3 SCC 117 held that consultation is never meant to be a formality, but meaningful and effective. Similarly in Hon'ble Mr. Justice R.A. Mehta supra, on an examination of a host of case law, it was held that (i) the object of consultation is to render its process meaningful, so that it may serve its intended purpose; (ii) consultation requires the meeting of minds between the parties that are involved in the consultation process, on the basis of material facts and points, in order to arrive at a correct or at least a statutory solution; (iii) if certain power can be exercised only after consultation, such consultation must be conscious, effective, meaningful and purposeful; to ensure this, each party must disclose to the other, all relevant facts for due deliberation and the consultee must express his opinion only after complete consideration of the matter on the basis of the relevant facts and quintessence; (iv) consultation may have different meanings in different situations depending upon the nature and purpose of the statute; (v) consultation or deliberation can neither be complete nor effe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....strator / concerned Government to, in agreement with CAG, formulate the functions and duties which CAG may perform in relation to the said accounts; the body or authority with respect whereto such power is exercised, if not entitled to know from law, is certainly entitled to know the functions and duties which are proposed to be performed in relation to its accounts. (XXIV) We are further of the view that there can be no reasonable opportunity to represent against without disclosing to the DISCOMs the public interest in which it was deemed expedient to direct audit of DISCOMs; the nature and content of the representation would be dependent on the reason for which audit is proposed; for instance, representation against an audit on the ground of whether privatisation of electricity distribution in Delhi has served the objectives thereof would be different from representation against audit for tariff determination; we have already noticed above that CAG refused to include in the terms of reference the unbundling of DVB on the ground of the same having already been subject matter of audit report of earlier years; the nature of representation against such audit would have been entire....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot in public interest as we fear that the GNCTD, in the absence thereof, may undertake another misguided exercise in this regard, after giving reasonable opportunity and which may ultimately not serve any purpose. 50. Article 151 of the Constitution provides for the reports of CAG relating to the accounts of Union to be laid before each House of the Parliament and relating to the accounts of State to be laid before the Legislature of the State. We have in Sarvesh Bisaria supra held that the Executive and the Courts have no jurisdiction to use the information contained in the CAG Report for initiation of any action and it is only the Legislative Assembly which has exclusive jurisdiction on CAG Report. Reliance was placed on Centre for Public Interest Litigation Vs. Union of India (2012) 3 SCC 1 holding that since the PAC and Parliamentary Committee of Parliament were seized of the CAG Report, it would not be proper for Court to refer to the findings and conclusions therein and on Centre for Environment & Food Security Vs. Union of India (2011) 5 SCC 668 holding that investigation by CBI on the basis of CAG Report could be ordered only after the CAG Report had been accepted by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tricity Act, 2003, the supply of electricity in the country was governed by the Indian Electricity Act, 1910, The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998. Though the 1910 Act envisaged growth of electricity through private licensees but the 1948 Act mandated the creation of State Electricity Boards and vested them with the responsibility of arranging the supply of electricity in the State and with the power to fix tariff. However, over a period of time it was realised that the performance of the State Electricity Boards had deteriorated, including on the ground that they had been unable to take decision on tariffs in a professional and independent manner and tariff determination in practise had been done by the State Governments. To address this issue, the 1998 Act was enacted establishing Central and Sate Electricity Regulatory Commissions inter alia to determine tariff. 57. The aforesaid development also having not served any purpose and with the policy of encouraging private sector participation in generation, transmission and distribution and with the objective of distancing the regulatory responsibilities from the government to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance with the methods and principles as may be specified by the concerned State Commission and in the conditions of its licence and further in accordance with the provisions of the Act and the Rules made by the concerned State Commission. v) Section 51 enables a distribution licensee to, with prior intimation to the appropriate Commission, engage in any other business for optimum utilization of its assets subject to a proportion of the revenues derived from such business being utilized for reducing its charges for wheeling. vi) Section 57 empowers the appropriate Commission to specify the standards of performance of a licensee or a class of licensees and penalties for failure to meet the same (in our opinion, under this power the appropriate Commission can specify the Standard Operating Cost for a distribution licensee with penalties for not achieving the same). viii) Section 61 empowers the appropriate Commission to specify the terms and conditions for the determination of tariff guided by commercial principles, intended to encourage competition and efficiency, safeguarding consumer interest while at the same time recovering the cost of electricity, rewarding the efficiency in per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the appropriate Commission. xix) Section 125 provides for appeal to the Supreme Court against the orders of the Appellate Tribunal. xx) Section 131 provides for vesting of the property of the erstwhile State Electricity Boards in the concerned government to be re-vested by the concerned State Government in a government Company or in a company in accordance with transfer scheme to be framed thereunder. xxi) Section 174 gives the provisions of the Act an overriding effect notwithstanding anything contained in any other law for the time being in force; however Section 175 provides that the provision of the Act are in addition to and not in derogation of any other law. xxii) Section 181 empowers SERC to make regulations providing inter alia for the conditions of licence, standards of performance of a licensee, the terms and conditions for determination of tariff, the details to be furnished by the licensee and the minimum information to be maintained by a licensee. 61. The Delhi Electricity Reforms Act, 2000 as per its Preamble was enacted to provide for the constitution of an Electricity Regulatory Commission, restructuring of the electricity industry, increasing avenues for par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e conditions of the licence. v) Section 12 titled "General Power of the Government" provides for the DERC, in the discharge of its functions being guided by the directions in matters of policy involving public interest as the Government may issue from time to time (we emphasize, the role of the GNCTD is limited to this only). vi) Section 14 prescribes for incorporation of companies for the purpose of generation, transmission and distribution of electricity. vii) Section 15 provides for re-organization of the Delhi Vidyut Board (DVB) and transfer of its properties, functions and duties to the Government and further empowers the Government to transfer such property, interest in property, rights and liabilities to any company or companies established under Section 14. viii) Section 19 prohibits any person from engaging in transmission and supply of electricity save with the licence from the DERC. ix) Section 20 empowers the DERC to issue licences authorizing any person to transmit and supply electricity on specified terms including a condition to comply with the requirements of the Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 or the Rules framed thereunder as may be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Delhi Electricity Regulatory Commission (Terms and Conditions for Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 to determine the tariff for wheeling of electricity and for retail supply of electricity. i) Regulation 7 thereof empowers the DERC to set targets for each year for items or parameters that are deemed to be controllable including AT&C loss, distribution loss, operation and maintenance expenditure including employee expenses, repair and maintenance expenses, administrative and general expenses and other miscellaneous expenses return of capital employed, depreciation, quality of supply etc. ii) Regulation 14 thereof provides for approval by the DERC of the capital investment plan of the licensee. iii) Regulation 18 provides that capital expenditure shall normally be incurred by the licensee after approval of the Commission. The said Regulations are found to be providing for detailed methodology for working out inter alia of the tariff and maintenance expenses, return on capital, working capital etc. 63. Though we have already referred hereinabove to Section 20 and particularly Sub-Section (6) of the Reforms Act but deem it necessary to set ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and sold] requisite for that purpose, and afford to him, and them all facilities for the proper execution of his and their duty; (c) The audit shall be made and conducted in such manner as the [State Government] may direct; (d) Any report made by auditor, or such portion thereof as the [State Government] may direct, shall be appended to the annual statement of accounts of the licensee, and shall thenceforth form part thereof; (e) Notwithstanding the foregoing provisions of the clause, the [State Government] may, if it thinks fit, accept the examination and audit of an auditor appointed by the licensee. III. Separate accounts. - The licensee shall unless the [State Government] otherwise directs, at all times keep the accounts of the [undertaking relating to the generation, supply or distribution of energy] distinct from the accounts kept by him of any other undertaking or business." (emphasis added) As per Section 20(6) supra of the Reforms Act, the aforesaid conditions shall be deemed to be incorporated with and forming part of the licence granted to the DISCOMs save insofar as they are expressly varied or accepted by the DERC. 65. Though the DISCOMs, in....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../ or as may be prescribed by the Commission. 7.4 References in this Clause 7 to costs or liabilities of, or reasonably attributable to the Licensed Business or the Other Business shall be construed as excluding taxation, and capital liabilities which do not relate principally to such Business and interest thereon. 7.5 The Commission may, from such time it considers appropriate, require the Licensee to comply with the provisions of Clause 7.1 to 7.4 above treating the Distribution Business and the Retail Supply Business of the Licensee as separate and distinct businesses. 7.6 Notwithstanding anything contained in this Clause 7, whenever deemed fit, the Commission may require the submission of a report prepared by an independent Auditor at the expense of the Licensee to be included as an expense in the determination of aggregate revenues made in accordance with Clause 24." [emphasis added] 66. Clauses 2.3 (i), (ii), (iv), (xxxix) and (xivi) of the Distribution Licence are found to contain a precise definition of "Accounting Statement", "Annual Accounts", "Auditors", "Overall Performance Standards", "Standards of Performance" respectively. Clause 3.2 e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the time required to implement the Scheme. The Licensee shall furnish to the Commission such further details and clarifications as to the schemes proposed, as the Commission may require from time to time. 10.3 The schemes proposed may be implemented by Licensee, subject to the following conditions: a. If the scheme does not involve major investment as defined hereunder, without the need for any specific approval from the Commission but subject to any direction or condition which the Commission may give or impose during the implementation of the scheme; b. If the scheme involves major investment, after taking specific prior written approval of the Commission as provided in Clause 10.4; c. The Licensee shall implement the scheme in an efficient manner within the specified time. 10.4 The Licensee shall make an application to the Commission for obtaining prior approval of the Commission for schemes involving major investments as per the procedure which the Commission may specify from time to time and demonstrate to the satisfaction of the Commission that: a. there is a need for the major investment in the Distribution System which the Licensee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... make investments in a scheme that does not find a place in the annual investment plan, the Licensee may do so subject to the condition that such investment in respect of individual projects shall not exceed Rs. 1,00,00,000.00 (Rupees one crore only) and on an aggregate basis shall not exceed Rs. 10,00,00,000.00 (Rupees ten crore only) in any financial year or such other amounts as may be notified by the Commission from time to time. Also, the Licensee shall satisfy the Commission, within 30 days thereof, that such investment was the result of a prudent decision warranted by compelling circumstances." 68. The aforesaid takes care of the allegations of DISCOMs, by inflating their procurement costs becoming entitled to a higher tariff. The DERC, under the terms of licence and the laws, rules and regulations is entitled to control the said costs and no costs can be incurred without approval of DERC. We really wonder as to how, after the DERC has approved of such costs, the report of CAG can be of any help. Section 51 of the Reforms Act, requires the DERC to prepare its annual report giving account of its activities in the previous years and to forward the same to the Government. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld that the Regulatory Commission having approved the regulated purchase price could not have re-fixed the regulatory purchase price by resorting to tariff fixation and held that a special provision would exclude the application of the general provisions. It was further held that the Regulatory Commission has no executive or plenary power and / or to interfere in the statutory agreements as a power purchase agreement. 70. Reference in this regard may also be made to BSES Limited Vs. Tata Power Company Limited (2004) 1 SCC 195 holding that the Court should not adopt any interpretation so as to oust the jurisdiction of the Regulatory Commission as it would defeat the very object of enacting the Act. 71. Supreme Court in Avishek Goenka Vs. Union of India (2012) 5 SCC 275 held that the concept of regulatory regime is expected to fully regulate and control the activities in all spheres to which the particular law relates and the scope of interference by the Court has to be confined to direct the regulatory / technical body to consider the matter in accordance with law. Finding that the matter with respect to which directions were sought in the writ petition was in the domain of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be ultra vires. 74. The Electricity Act and the Reforms Act having re-enacted the law relating to the electricity and having substituted the State Government with the Regulatory Commissions constituted under the new law, we are unable to find any purpose which the report of the CAG under directions of the GNCTD in exercise of powers under Section 20 would serve. We repeat that all the powers of the State Government relating to electricity now stand vested in the DERC. Upon such vesting, the power which the State Government earlier on under the Schedule of the 1910 Indian Electricity Act, 1910 to have the accounts of a licensee, which is not a local authority, audited by such person as the State Government may appoint or approve also stands transferred to the DERC. Clause 10 of the Licence supra also nullifies the only argument raised for the need of an audit by the CAG, of the inflation of expenditure by the DISCOMs with an intent to have the tariff fixed at a higher rate also stands nullified. Once the DISCOMs before incurring any expenditure above a certain limit are required to obtain the prior approval of the DERC therefor and once the DERC has approved the said expenditure....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion were not found to be different. It was held that the mere fact that the Board and the District Courts use different procedure for determination would not make any difference when there was no reason to doubt the quality, extensiveness or fairness of the procedure before both. 76. We thus hold that once a specialized body constituted by law has been created to determine a particular issue, the said issue is no longer open for adjudication in another fora. Reference in this regard may also be made to West Bengal Electricity Regulatory Commission Vs. C.E.S.C. Ltd. (2002) 8 SCC 715 holding that though tariff fixation by the State Electricity Regulatory Commission is in the nature of a legislative action and no rule of natural justice is applicable but where the statute itself has provided a right of representation and / or a right of hearing to the consumers, the consumers will have such a right though such right is to be regulated by the Commission. It was further held that the said State Electricity Regulatory Commission is the sole authority to determine the tariff. 77. Difficulty involved in implementing a law is no ground to apply the provisions of law in a manner differ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the CAG Act; the said provisions operate in different fields and serve different purpose or object with Section 28 of the NDDB Act dealing with normal financial audit each year and audit by the CAG under Section 14(2) enabling the CAG to examine whether the corporation has acted in conformity with the prescribed law, rules and procedures and whether there are any improper, extravagant and infructuous expenditure. Accordingly, the petition was dismissed. The matter does not appear to have been taken up further. However the present matter is distinct. Here not only are the DISCOMs required to be audited in accordance with the law of the land i.e. the Companies Act but function under a regulatory regime and which regime has been expressly vested with the powers of audit of the accounts of the DISCOMs if so required. 80. We therefore in continuation of our discussion hereinabove under Section 20 of the CAG Act hold that audit by the CAG of the accounts of an entity under the regulatory regime even though possible owing to such entity satisfying the test of a body or authority but would be a futile exercise and not be in public interest. The failure if any of a statutory / regulator....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... realised by the Union of India and credited to the Consolidated Funds of India. It was held that the power of the CAG under Section 13 of the CAG Act to audit all transactions of Union would include a transaction of conducting business. It was further held that Section 13 read with Section 16 empowering the CAG to audit all transactions empowers the CAG to audit all transactions which Union or the States have entered into which have nexus with consolidated fund, especially when the receipts have direct connection with the revenue sharing. On the contrary, in the present case, the nexus, if any of the transaction of GNCTD with DISCOMs was in the matter of transfer scheme and the power of the CAG, if any was to examine the said transfer scheme in exercise of powers under Sections 13 & 16 of the Act and which the CAG as aforesaid refused to do. The reason for which CAG audit has been directed is not to examine the transaction but on the suspicion of the tariff having not been properly determined and which is in the exclusive domain of DERC. The tariff is not shown to have any nexus with the CFI. 85. We thus summarise our findings as under: A. The words "body or authority" in Ar....