High Court refuses to stay government's decision on CAG audit of discoms

In a jolt to three private discoms, the Delhi High Court today refused to stay the city government's decision asking the Comptroller and Auditor General (CAG) of India to audit their accounts.

The court also asked BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd of Reliance Anil Dhirubhai Ambani Group and Tata Power Delhi Distribution Ltd to cooperate with CAG in auditing and asked the top auditor not to submit its report till it hears the discoms' petitions on March 19.

"This court is of the view that these matters require detailed hearing. Issue notice....However, the prayer for the stay on the audit/impugned order (of Delhi government) is declined. The Comptroller and Auditor General (CAG) of India shall not submit the report (to the government) till March 19, next date of hearing," Justice Manmohan said.

Discoms had moved the court against the January 7 decision of the Aam Aadmi Party-led government ordering CAG audit, saying that the top auditor is not empowered to scrutinise accounts of private companies.

During the hearing, Prashant Bhushan, appearing for the Delhi government, opposed the plea of the discoms that CAG was not empowered to audit them and rather sought transfer of the pleas to a division bench which is hearing a PIL on the same issue.

Senior advocate Harish Salve, appearing for the Tata firm, said the CAG Act provides for "safeguard" and deals with "body and authorities", besides the central and state government and their companies, which can be subjected to an audit by CAG and private firms cannot be audited by the auditor.

"Genesis of the problem is this. I am a private company registered under the Companies Act and the Delhi government is a minority stake holder. Who will decide on the auditor and my answer is only a majority stake holder can do it," he said.

"If you (government) are ordering audit to reduce the electricity tariff then the government has no role to decide it," he said, adding the issue of CAG audit should have been decided by the Lt Governor and not by Additional Power Secretary.

Countering the plea, Bhushan said, "The dispute has not started on a clean slate. The private companies were given away the assets of erstwhile Delhi Vidyut Board worth rupees thousands of crores in consideration of Rs one. The CAG provisions provide for such an audit." 

Referring to a recent letter, Salve said, "Somebody (Addl Power Secretary) hears us and somebody else (LG) decides. This is all farcical because the government has taken a political decision. The government has no business to touch my tariff.

This is all a public 'tamasha'."

Justice Mammohan, during the hearing, remarked, "Whenever you hear the cases related to these discoms, you find that everything is in mess."

Salve submitted, "One wrong cannot justify the other. You (government) cannot be generous to public at my cost. You can either give subsidy or it is only and only the electricity commissions that can decide the tariff.

He opposed the plea that the case be transferred to the division bench.

Senior advocate Mukul Rohatgi, appearing for two Reliance firms, alleged the decision was the example of "malice" in law as the government before hearing the companies and their representations had already made up its mind on the issue.

"This is malice in law. If you have decided the issue then the subsequent hearing is merely a formality," he said.

Replying to the submissions, Bhushan, who was earlier appearing for an NGO in a PIL seeking CAG audit and CBI probe against discoms, gave details of the history of the dispute.

"We had the feeling that the previous Delhi government was in connivance with the discoms. The Delhi government has 49 per cent stakes in these private companies which were given the assets and equipment etc, worth thousands of crores of rupees, on a token amount of Rs 1 and not only that, I am told that these firms owe around Rs 4,000 crore to the government," he said.

CAG has already said that public private partnership (PPP) projects "must be subjected to CAG audit", Bhushan said.

Bhushan opposed the plea of discoms that the government has been acting in haste, saying, "The government cannot be faulted for acting in an expeditious manner." Senior advocate Aman Lekhi, appearing for CAG, said, "Politics apart, CAG was legally empowered to conduct audit of the power distribution companies."

The court has now asked the Delhi government to file reply to the pleas within two weeks and CAG would file its response within a month.

The AAP government, which halved the electricity charge for consumption of power upto 400 units, had alleged financial irregularities and ordered the CAG audit of the discoms' account books.

The three private firms had come into being in 2002 when the then Delhi government decided to privatise power distribution in the national capital.

Delhi discoms are a 51:49% joint venture between private companies and the Delhi government.