Delhi HC opens telecom firms to CAG scrutiny

The Delhi High Court on Monday ruled that the Comptroller and Auditor General (CAG) of India can scrutinise revenues of private companies if they impact the government exchequer.

The ruling came in a three-year-old dispute over a CAG move to undertake audit revenue accounts the country’s private telecom operators. The court dismissed the pleas of Association of Unified Telecom Service Providers and Cellular Operators Association of India, representing private telecom firms, that the CAG, under Article 149, is empowered only to audit the accounts of the Union and of the States and of authorities or bodies prescribed under any law.

A bench of Justices Pradeep Nandrajog and V Kameswar Rao said telecom firms have taken up the accounting responsibilities on behalf of the Centre according to their licence agreements. So their accounts, in relations to revenue receipts, can be regarded the accounts of the Central government, which will bring them under the CAG’s ambit.

The significant ruling upheld the constitutional validity of laws empowering the CAG to conduct revenue audits of private telecom companies. The bench, however, confined the CAG audit to “receipts” of telecom firms only.

Elaborating on its order, the bench, in the 33-page judgment, said the synergy between the regulatory bodies and the telecom companies “would be not only for the benefit of the industry, the economy of the country, society at large but also go a long way in establishing public confidence in good corporate governance.”

The court maintained that since the states’ income, even from a contract, was the part of its general revenue, it could be the subject matter of CAG’s audit. The court was mindful of the ways in which large companies tried to sidestep the regulatory mechanism.

The dispute had reached the court in 2010 when the private operators, through their apex bodies, approached it against a decision of the Telecom Disputes Settlement and Appellate Tribunal for CAG audit, arguing that the public auditor can’t audit private telcos.

The CAG, in the course of its 2G audit, had entertained doubts that the private operators could be under-reporting their revenues and, in the process, depriving the government of its legitimate share in their revenues. 

Private telcos are required to pay 1-8 per cent of their revenue as spectrum usage charge to the government, apart from the annual licence fee.

The court order comes amid moves by the Aam Aadmi Party government in Delhi to refer private power distributors for audit by the CAG.