Pvt firms including telcos come in CAG ambit: SC

The Supreme Court today virtually brought all private companies using natural resources on the basis of revenue-sharing arrangement with government within the scrutiny of CAG as it allowed the official auditor to go into the accounts of telecom firms.

The apex court said that CAG audit of such private firms is necessary to ensure that there is no unlawful loss to government as there has been instances where the Executive "acts hand in glove" with companies for their benefits.

"When nation’s wealth, like spectrum, is being dealt with either by the Union, State or its instrumentalities or even the private parties, like service providers, they are accountable to the people and to Parliament," the court said.

A bench headed by Justice K S Radhakrishnan gave the order while dismissing the appeal of telecom firms which pleaded that they cannot be subjected to CAG audit.

"CAG’s examination of the accounts of the Service Providers in a Revenue Sharing Contract is extremely important to ascertain whether there is an unlawful gain to the Service Provider and an unlawful loss to the Union of India, because the revenue generated out of that has to be credited to the Consolidated Fund of India," it said.

Holding that government is bound to protect natural resources for the enjoyment of general public rather than permit their use for purely commercial purposes, the bench said that CAG audit is needed to ensure that Centre is getting its legitimate share by way of revenue sharing.

"We are of the view that unless the underlying records which are in the exclusive custody of the Service Providers are examined, it would not be possible to ascertain whether the Union of India, as per the agreement, has received its full and complete share of Revenue, by way of licence fee and spectrum charges," the bench said.

"Instances are not rare, where even the Executive, at times, acts hand-in-glove with licence holders, who deal with the natural resources, hence, necessity of proper parliamentary control over the resources," it said.

It said CAG can carry out examination into the economy, efficacy and effectiveness with which the Union of India has used its resources, and whether it has realised the entire licencee fee, spectrum charges and also whether the Union of India has correctly carried out the audit under Clauses of Licence Agreement.