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UNITED RWAS JOINT ACTION AND OTHERS Versus UNION OF INDIA AND ORS

2015 (11) TMI 383 - DELHI HIGH COURT

Audit of the accounts of the Distribution Companies (DISCOMs), entrusted with the work of distribution and retail of electricity in Delhi - 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 DISCOMs - Whether the audit so directed can be since the date of inception of DISCOMs i.e. 1st July, 2002 and if n .....

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Delhi for audit of DISCOMs in exercise of power under Section 20 of the CAG Act has to be on the aid and advice of the Council of Ministers, GNCTD and not eo nomine.

Though the opportunity to represent against the proposal for audit, under Section 20(3) of the CAG Act, given to the DISCOMs, cannot be faulted on the ground of insufficiency of time but was not reasonable, having been given without disclosing the public interest in which audit of accounts of DISCOMs was deemed expedient .....

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is well empowered to itself conduct the same or have the same conducted and the report of CAG of audit of DISCOMs has no place in the Regulatory Regime brought about by the Electricity Act and the Reforms Act.

Thus, the impugned direction for audit of DISCOMs under Section 20(1) of the CAG Act is quashed / set aside.

We therefore allow the petitions of the DISCOMs by quashing the impugned directives of the GNCTD and dismiss the PIL. Needless to state, all actions undertake .....

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Mr. Vikas Singh and Mr. Dhruv Mehta, Sr. Advs. with Mr. Amit Kapur, Mr. Anupam Varma, Mr. Nikhil Sharma, Mr. Rahul Kinra, Mr. Ameen Jauhar & Mr. Abhishek Puri, Advs. for TPDDL. Mr. Sandeep Sethi, Sr. Adv. with Mr. Ajit Warrier, Mr. Dushyant and Mr. Paresh B. Lal, Advs. for BRPL & BYPL. Mr. Prashant Bhushan, Adv. For The Respondent : Dr. Rajeev Dhawan, Sr. Adv. with Ms. Zubeda Begum, Mr. S. Wasim A. Qadri, Mr. Zaid Ali, Mr. Rahul Mehra, Mr. Tamim Qadri and Ms. Sana Ansari, Advs. for GNCT .....

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f 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 T .....

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V) Whether the audit so directed can be since the date of inception of DISCOMs i.e. 1st July, 2002 and if not, for what period. (V) If it were to be held that the CAG can conduct audit of DISCOMs but the direction impugned in these proceedings is bad for the reason of having been issued without compliance with the proper procedure, whether a mandate ought to be issued to the GNCTD or to the CAG to conduct the audit of the DISCOMs 2. Writ Petition (c) No. 895/2011 was filed as a Public Interest L .....

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ariff had been based on the correct data; (ii) that the Delhi Electricity Regulatory Commission (DERC) had also taken into cognizance the continuous fraud being played by the DISCOMs; (iii) that several stake holders also during the public hearing held for determination of tariff for the financial year 2010-11 had raised objections in this regard including that the DISCOMs had indulged in procurement of capital goods from sister concerns at much higher prices and demanded audit by the CAG; (iv) .....

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Ms was arbitrary and violative of Article 14 of the Constitution of India; and (vi) that some of the members of the DERC were playing into the hands of the 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 .....

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nder 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 to respect the public sentiment it may be desirable to get an occasional CAG audit done. 5. During the pendency of the aforesaid PIL, elections were hel .....

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Judge of this Court on 24th January, 2014 when notice thereof was issued but on the application of DISCOMs for interim relief of stay of the decision directing CAG to conduct audit, the only ad interim relief granted was that the CAG shall not submit its final report. 6. Aggrieved therefrom, LPAs No. 125/2014, 140/2014 and 141/2014 were filed by the three DISCOMs. The Division Bench which was seized of the said LPAs, on 24th March, 2014, withdrew the writ petitions pending before the Single Judg .....

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he senior counsel appearing for the GNCTD. Arguments in the writ petitions having been heard, the LPAs aforesaid have become redundant and are disposed of as such. 9. We may at this stage record that the political party which had formed the government on 28th December, 2013 and which had ordered the impugned audit by CAG, lasted till 14th February, 2014 only. Thereafter, GNCTD was being administered by the Central Government and on 4th November, 2014 the Legislative Assembly of Delhi was dissolv .....

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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 .....

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elating to transfer and vesting of assets liabilities, proceedings and personnel of the erstwhile DVB in the successor entities; (c) that in the meanwhile, the three DISCOMs, the Delhi Transco Limited, the two generating companies namely Indraprastha Power Generation Company Ltd. (IPGCL) and Pragati Power Corporation Ltd. (PPCL) and one holding company namely Delhi Power Supply Company Limited (DPCL) were formed by GNCTD; (d) that the International Competitive Bidding for sale of 51% equity, man .....

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decision that the DISCOMs having ceased to be government companies, the CAG could not appoint its statutory Auditor; (f) that the Reforms Act established the DERC with function inter alia of determination of tariff and with provision for appeals against the orders of the DERC first to the Appellate Tribunal for Electricity and thereafter to the Supreme Court; the DERC thereafter has been determining tariff for the electricity to be distributed and retailed by the DISCOMs; (g) that the DISCOMs o .....

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ng the right of the GNCTD to direct/order the audit of DISCOMs; (h) that on 31st December, 2013 the DISCOMs were given an opportunity to submit additional documents and to come for personal hearing at 1200 hours on 1st January, 2014; (i) that the DISCOMs in the hearing which took place on 1st January, 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 Ja .....

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udit 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 22nd February, 20 .....

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el in his opinion dated 23rd December, 2013 had opined that the GNCTD was empowered to entrust the audit of the DISCOMs to the CAG under Section 20 of the CAG Act; (vi) that acting on the aforesaid opinion, the notices dated 28th December, 2013 were issued to the DISCOMs; (vii) approval of the Administrator, Delhi was sought which was granted on 30th December, 2013; consultation with the CAG was also held; thereafter, again vide letter dated 31st December, 2013 (supra) opportunity was given to t .....

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lso felt that it may lead to overall reduction in electricity tariff by the DERC; it was yet further felt that it was important to carry the conviction of the general public/consumers about the authenticity of the claims made by the DISCOMs of suffering losses; (ix) that the pre-requisite of Section 20 have been complied with; (x) that the Administrator, Delhi, after considering the replies of the DISCOMs, on 1st January, 2014 granted his approval to request the CAG to conduct the audit of the t .....

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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 de .....

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AG had agreed thereto; (C) that as per the Regulations, in respect of taking up Audit under Section 20 of the CAG Act, CAG during the audit is authorised to put such questions or make such observations as it may consider necessary and to call for such information as it may require for preparation of the report; (D) that accounts do not mean financial account only and includes all types of audit that is financial / compliance / performance; (E) that as per the terms of reference agreed with GNCTD .....

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iting standards. 14. Though rejoinders to the counter-affidavits and additional affidavits have also been filed but we do not deem it necessary to record the contents thereof, as the same were not referred to during the hearing. 15. Dr. Abhishek Manu Singhvi, senior counsel appearing for TPDDL, has argued: (I) that the Political Party which formed the Government on 28th December, 2013 and directed audit of the DISCOMs by CAG had in its election manifesto itself promised a reduction in electricit .....

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under any law required to act in his discretion); (IV) that the Audit under Section 20 of the CAG Act can be directed only where the Administrator is satisfied that it is expedient to do so in public interest and only after giving reasonable opportunity to make representation to the entity sought to be audited; (V) that the opportunity to represent cannot be reasonable unless the proposal for audit is disclosed; (VI) that Section 41 of the Government of National Capital Territory of Delhi Act, 1 .....

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aws 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 O .....

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of the CAG Act; (XIII) that for such a satisfaction, the Administrator ought to be the originator of the decision for having the accounts so audited; (XIV) that from the file notings, it is evident that the Administrator in the present case merely acted on the aid and advise of the Council of the Ministers without recording his personal satisfaction; (XV) that if a proposal mooted by another is merely approved by the Administrator, the same does not amount to the Administrator acting in his own .....

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y the CAG and it has to be determined by the DERC; (XIX) that the representation made by the DISCOMs against the proposal for audit for CAG has not been decided; (XX) that the Administrator has not given any reasons whatsoever for forming an opinion that the audit by CAG is expedient in public interest; (XXI) that even the so called hearing given to the DISCOMs before issuance of the order for audit was by the Additional Secretary Power and not by the Administrator Delhi; (XXII) that though in t .....

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hanged 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 o .....

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n Institute of Chemical Biology (2002) 5 SCC 111 holding that the tests formulated in Ajay Hasia Vs. Khalid Mujib Sehravardi (1981) 1 SCC 722 for determining whether a body is to be considered to be a State within the meaning of Article 12 of the Constitution of India or not are not a rigid; (XXXI) that audit under Section 20 of the CAG Act can be directed only of such bodies or authorities which have the colour of the Union or the State; (XXXII) that though Article 149 does not use the word Sta .....

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the CAG, a provision therefor has been made; reference in this regard was made to Section 24 of the Delhi Development Act, 1957 and Section 203 and Section 204 of the Delhi Municipal Corporation Act, 1950; (XXXV) that no such provision was made in the Electricity Laws while providing for privatisation of the DISCOMs; (XXXVI) that the recent Judgment of the Supreme Court in Association of Unified Tele Services Providers Vs. Union of India (2014) 6 SCC 110 upholding CAG Audit of Telecom Licensees .....

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s been given and of which only a limited audit is provided and for which the DISCOMs are ready; (XXXVIII) the question is not as to what harm the DISCOMs will suffer from the CAG audit but whether the DISCOMs can jurisprudentially be subjected to CAG audit; (XXXIX) if it were to be held that meting out any such state benefit to any body or authority makes it a body or authority within the meaning of Section 20 of the CAG Act, it would bring every private enterprise within the ambit of CAG and wh .....

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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 di .....

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ter giving the Board reasonable opportunity of being heard i.e. observing principles of natural justice and after an objective consideration of the material placed before him and it was contended that no such opportunity has been given in the instant case; there is no speaking order also with respect to the objection / representation of DISCOMs; (E) that the file notings in the present case do not show the Administrator to have reached any such satisfaction; (F) that there is no mention even tha .....

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en 28th December, 2013 to 7th January, 2014 and in which also there were several holidays; (K) that the file notings show that the decision on the objection / representation of DISCOMs, of they being not a body or authority within the meaning of Section 20 of the CAG Act, was left to the CAG; (L) reliance was placed on S.N. Mukherjee Vs. Union of India (1990) 4 SCC 594 in support of the proposition that such an order has to be a reasoned one; (M) that file notings cannot be an order / direction .....

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n paras 31 to 34 of Babu Verghese Vs. Bar Council 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 D .....

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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 from over-regulation and such purpose cannot be permitted to be defeated; (T) attention was invited to the letter dated 22nd August, 2002 supra of the CAG to the effect that since DISCOMs had ceased to be government companies, it was not required to audit the ac .....

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; (W) in view of the specific statutory prescription under the Electricity Act, the CAG Report and even any scrutiny of the same by Public Accounts Committee would not be of any consequence as neither the legislature of NCT of Delhi nor the GNCTD can direct any reduction of tariff charged by DISCOMs, which is determined by DERC; the legislative field of determination of tariff is occupied by Electricity Act and proposed CAG audit can in no manner affect the determination of tariff or process the .....

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ving a Legislative Assembly, CAG shall subject to the provisions of any law applicable to such body or authority, audit all receipts and expenditure of that body or authority; it is argued, that the audit thereunder is not of accounts but only of receipts and expenditure; (iii) Section 15 again uses the words any authority or body and provides for scrutiny by the CAG as to fulfilment of conditions subject to which any grant or loan is given for any specific purpose to any body or authority from .....

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ctions 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) .....

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also by the Regulator i.e. DERC; attention in this regard was invited to the proviso to Sections 128, 129 and 61 of the Electricity Act; (ix) on enquiry, it was informed that in the matter of taxation for the purposes of property tax of the immovable properties of the erstwhile DVB vested in DISCOMs, it has been held that DISCOMs vis-a-vis the said properties are the licensees of the State; (x) attention was invited to Parliamentary Debates with respect to the CAG Act (Mr. Paras Kuhad, senior c .....

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on 20 were to be interpreted to include private companies, it would create a situation where even though CAG would prepare a report, there would be no procedure established by law to govern the said report. 18. Dr. Singhvi, senior counsel further contended that telecom is different from electricity in the sense that spectrum on which telecom is dependent has been held to be a natural resource. He further contended that Rule 5 of The Telecom Regulatory Authority of India, Service Providers (Maint .....

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. Mr. Paras Kuhad, senior counsel appearing for the CAG wanted to assert the right of CAG to audit DISCOMs de hors the direction under Section 20 of the CAG Act but since no such foundation 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 .....

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ctions 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 of whether private or public; (g) that had the arguments of the appellant in Association of United Tele Services Providers supra as recorded .....

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hen the funding enjoyed by them is of over ₹ 5000 crores; attention in this regard was invited to Section 15(1) of the Reforms Act whereunder all property, interest in property, rights and liabilities of the erstwhile Delhi Vidyut Board is vested in the GNCTD and to Section 15(2) empowering GNCTD to transfer the same inter alia to DISCOMs; (j) that DISCOMs thus have nexus with the Consolidated Fund of the State; consolidated fund includes fixed assets; (k) that the transactions and the rel .....

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s allowed; however, the said functions along with distribution and retail were vested in DISCOMs; (o) that the Supreme Court in para 46 in Association of Unified Tele Services Providers supra equated public accounts to CFI; (p) that though the CAG has not invoked its own power to audit DISCOMs but the same is not material as the validity of the action and permissibility of the audit is under consideration; (q) that it would be ridiculous to say that in the case of government lending ₹ 5000 .....

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ssam (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) .....

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ld have thus been empowered to audit an entity as the DISCOMs; (v) that the expression in relation to used in Article 149 as well as in the CAG Act is a broad expression; reliance in this regard is placed on Doypack Systems Pvt. Ltd. Vs. Union of India (1988) 2 SCC 299; (w) that the object of Article 149 and the CAG Act is to provide Parliamentary control of executive and the public funds; the ambit of powers of CAG cannot be limited to scrutiny of accounts of Union but has to extend to all matt .....

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that the DERC had also recommended a CAG audit of DISCOMs; (IV) that DERC is to regulate tariff on the basis of cost incurred by DISCOMs-the value of the cost as potrayed by DISCOMs cannot be taken on the face of it, as by inflating the cost, DISCOMs become entitled to a higher tariff; (V) that unless the costs of distribution as put forward by the DISCOMs are audited, the consumer will suffer; (VI) that the PIL seeks an audit of such cost by the CAG, whether under Section 20 or under any other .....

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, after the audit had been ordered, had become infructuous. 22. Mr. Meet Malhotra, senior counsel for DERC which is a party only in the PIL contended: (a) that DERC has no wherewithal to investigate into the balance sheet prepared and submitted by DISCOMs and 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 an .....

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nsideration 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 jurisdiction and meets the test of proportionality; (vi) that no .....

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dates of hearing, when the other counsels had addressed arguments. We as such at the close of hearing apprised in a nutshell the senior counsel for GNCTD of the issues arising for adjudication and upon on his request the hearing was adjourned to enable him to address the same. During the hearing on 2nd March, 2015, he contended, (a) that DISCOMs are performing a public function; (b) that at least two of them are in grave financial crises; (c) that the writ jurisdiction under Article 226 of the .....

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is to protect the interest of the consumers; attention in this regard was drawn to the Sections 3, 10(5), 10(10), 28(2)(e) of Reforms Act; (g) that the test of applicability of Article 12 or Article 226 would not be relevant as Section 20(1) enables audit by CAG wherever deemed so in public interest. 24. Mr. Dhruv Mehta, senior counsel in rejoinder contended: (A) invited attention to our judgment dated 3rd December, 2014 in W.P.(C) No.8502/2014 titled Sarvesh Bisaria Vs. Union of India where we .....

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gative 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 counse .....

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irection dated 7th January, 2014 is a non-speaking one and there is nothing therein to indicate that the objections / representations of DISCOMs were considered and negatived; (K) that the Administrator has merely acted on the dictates of the GNCTD and has not reached any satisfaction as he was required to; (L) that the judgments on the powers of the CAG cited on behalf of the GNCTD are general, having no relevance to the matter in controversy; (M) that the CAG is beyond the jurisdiction of the .....

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provision for laying CAG reports with respect to Municipal Corporations before the Parliament / Legislative Assembly; (R) that Article 151 also does not provide for reports of body / authority to be laid before Legislative Assembly; (S) that Section 19A of the CAG Act provides for laying of reports of CAG in relation to audit of government companies or corporations referred to in Section 19 before the Parliament / Legislature of the State but there is no provision for laying of CAG reports unde .....

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k of India and other public sector banks and financial institutions should be audited by the CAG; (V) that it will be incongruous that while the audit by the CAG of a government company under Section 19 can be a limited one, the audit of a private company, if ordered under Section 20, would be an unlimited one; (W) that Section 20 is clearly intended for 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 i .....

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oviding 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 .....

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or not, could not have been left to the CAG. Reliance in this regard was also placed on Marathwada University Vs. Seshrao Balwant Rao Chavan (1989) 3 SCC 132 to reiterate that the language of Section 20 is peremptory; reliance was also placed on A.K. Roy Vs. State of Punjab (1986) 4 SCC 326 in this regard. 26. Before proceeding to analyse the aforesaid contentions and adjudicate the controversy, we deem it appropriate to set out herein below Articles 149 & 151 of the Constitution of India: .....

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sable by the Auditor-General of India immediately before the commencement of this Constitution in relation to the accounts of the Dominion of India and of the Provinces respectively. Article 151 - Audit reports (1) The reports of the Comptroller and Auditor-General of India relating to the accounts of the Union shall be submitted to the President, who shall cause them to be laid before each House of Parliament. (2) The reports of the Comptroller and Auditor-General of India relating to the accou .....

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d 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 or .....

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e or gradually by the issue of several orders), or (ii) the accounts of any particular services or departments of the State: Provided also that the President may, after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for keeping the accounts of any particular class or character. (2) Where, under any arrangement, a person other than the Comptroller and Auditor-General has, before the commencement of this Act, been responsible- (i) for compiling .....

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by an order of the President. Section 11 - Comptroller and Auditor-General to prepare and submit accounts to the President, Governors of State and Administrators of Union territories having Legislative Assemblies The Comptroller and Auditor-General shall, from the accounts compiled by him or by the Government or by any other person responsible in that behalf, prepare in each your accounts (including, in the case of accounts complied by him, appropriation accounts) showing under the respective h .....

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l, by order, relieve him from the responsibility for the preparation and submission of the accounts relating to annual receipts and disbursements for the purpose of the Union or of a Union territory having a Legislative Assembly: 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 the preparation and submission of the accounts relating to a .....

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y, 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 availa .....

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or accounts so audited by him. Section 14 - Audit of receipts and expenditure of bodies or authorities substantially financed from Union or State Revenues (1) Where any body or authority is substantially financed by grants or loans from the Consolidated Fund of India or of any State or any Union territory having a Legislative Assembly, the Comptroller and Auditor-General shall, subject to the provisions of any law for the time being in force applicable to the body or authority, as the case may .....

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uthority shall be deemed, for the purposes of [this sub-section], to be substantially financed by such grants or loans, as the case may be. (2) Notwithstanding anything contained in sub-section (1), the Comptroller and Auditor-General may, with the previous approval of the President or the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be, audit all receipts and expenditure of any body or authority where the grant or loan to such body .....

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r authority 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 .....

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n 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-General, after consultation with him, from making any such scrutiny in respect of any body or authority receiving such grant or loan. (2) Except where he is authorised so to do by the President, the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be .....

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t after consultation with the Comptroller and Auditor-General and except after giving the concerned corporation a reasonable opportunity of making representations with regard to the proposal to give to the Comptroller and Auditor-General right of access to its books and accounts. Section 16 - Audit of receipts of Union or of States It shall be the duty of the Comptroller and Auditor-General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each .....

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and stock kept in any office or department of the Union or of a State. Section 18 - Powers of Comptroller and Auditor-General in connection with audit of accounts (1) The Comptroller and Auditor-General shall, in connection with the performance of his duties under this Act, have authority- (a) to inspect any office of accounts under the control of the Union or of a State, including treasuries and such offices responsible for the keeping of initial or subsidiary accounts, as submit accounts to hi .....

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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 Govern .....

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tive Assembly may, where he is of opinion that it is necessary in the public interest so to do, request the Comptroller and Auditor-General to audit the accounts of a corporation established by law made by the Legislative Assembly of the State or of the Union territory, as the case may be, and where such request has been made, the Comptroller and Auditor-General shall audit the accounts of such corporation and shall have, for the purposes of such audit, right of access to the books and accounts .....

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in section 19, shall be submitted to the Government or Governments concerned. (2) The Central Government shall cause ever report received by it under sub-section (1) to be laid, as soon as may be after it is received, before each House of Parliament. (3) The State Government shall cause every report received by it under sub-section (1) to be laid, was soon as may be after if it is received, before the Legislature of the State. Explanation:- For the purposes of this section, Government or State G .....

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n territory having a Legislative Assembly, as the case may be, undertake the audit of the accounts of such body or authority 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 .....

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nion 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 sub-section (2) shall not be entrusted to the Comptroller and Auditor-General except where the President or the Governor of a State or the Administrator of a Union territory having a Legis .....

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e by Parliament is to specify the authority or body qua which CAG can exercise powers. The said question, in our view arises more so because of the observation of the Supreme Court in para 59 of T.N. Godavarman Thirumulpad Vs. Union of India (2006) 1 SCC 1: Section 20 is in the nature of a residuary provision providing that CAG, if requested by the President of India or the Governor of a State or the Administrator of a Union Territory having a Legislative Assembly to undertake the audit of the a .....

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hall perform such duties and exercise such powers. B. In relation to the accounts of the Union and of the States. C. And of any other body or authority as may be prescribed by or under any law made by Parliament. 29. In our view the words, as may be prescribed by or under any law made by Parliament relate to the words such duties and exercise such powers and not to the words any other authority or body . We hold so because the word such precedes the words duties and powers; if the intent had bee .....

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d 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. Parl .....

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same rights and privileges and authority in connection therewith as in connection with audit of Government Accounts. The Reforms Act also provides so with respect to DERC, in Section 50 thereof. 31. However the Parliament has also enacted the CAG Act whereunder besides prescribing the duties to be performed and powers to be exercised by the CAG in relation to the accounts of the Union and the States, CAG has also been vested with certain duties and powers to be exercised not with respect to any .....

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r any specific purpose from the CFI or of any State to any body or authority, satisfies itself as to the fulfilment of the conditions subject to which such grant or loan has been given and for this purpose gives the CAG a right to access the books and accounts of the body or authority which has received the loan or grant; however if the law by or under which such body or authority which has received the grant or loan has been established provides for the audit of accounts of such body or authori .....

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anies Act, 1956 in relation to the audit of accounts of government companies; (v) Section 19(2) empowers the CAG to in relation to the accounts of Corporations (not being companies) established by or under law made by Parliament, perform duties 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. Th .....

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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 ascribed to the words body or authority . The said question assum .....

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foresaid, empowers the CAG, a) if requested so by the President / Governor / Administrator b) to undertake audit of the accounts of such a body or authority, audit of accounts whereof has not been entrusted to the CAG by or under any law made by Parliament c) on such terms and conditions as may be agreed upon between the CAG and the concerned government and d) gives right of access to the CAG to the books of accounts of that body or authority. Section 20, followings Sections 14 to 16 and 19, in .....

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ns 14 to 16 and 19 but the Parliament by same law i.e. the CAG Act (Section 20) has also empowered the President / Governor / Administrator to direct the CAG to perform such duties and exercise such powers, in relation to accounts of any body or authority, as may be agreed upon between the CAG and the concerned Government. 35. A question legitimately arises, whether what is required by the Constitution to be done by law made by Parliament can be so delegated to President / Governor / Administrat .....

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r 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 Const .....

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d it with duties and powers, besides in relation to the accounts of the Union and of the States, also in relation to the accounts of any other body or authority, to the extent as may be prescribed by any law made by Parliament and Parliament while making one of such laws i.e. the CAG Act supra has used the same expression body or authority , the same has to be given the same meaning under the Constitution as well as the CAG Act. B. Sections 14, 15 and 16 of the CAG Act vests the CAG with the dut .....

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n of Article 149, would axiomatically mean only that body or authority which besides satisfying the parameters of Sections 14, 15 and 16 of the CAG Act additionally also satisfies the requirement of being a State within the meaning of Article 12 can be audited under Sections 14 to 16. Axiomatically, such an interpretation would exclude from the ambit of Sections 14 to 16 a body or authority which though satisfies parameters thereof but does not satisfy the requirement of being a State , even tho .....

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not be State, there is no reason to require body or authority referred to in Section 20 to be State . C. Even otherwise, once the Constitution itself has confined the meaning of State as given in Article 12 to only that part of Constitution in which Article 12 is placed, we see no reason to read the said definition in Article 149 placed in another part of the Constitution. D. Article 149 empowers the Parliament to by law prescribe the duties / powers which CAG may perform / exercise in relation .....

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ticle 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 .....

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e akin to the provisions with respect to Judges of the Supreme Court. H. Article 148 is to be found in Chapter-V of Part-5 of the Constitution, titled the Union , Chapter-1 whereof is titled The Executive , Chapter-2 whereof is titled Parliament , Chapter-3 whereof is titled Legislative Powers of the President and Chapter-4 whereof is titled the Union Judiciary . CAG has thus been constituted as one of the four limbs of the Union under the Constitution and has been recognized so and been held to .....

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ectiveness with which the Government has used its resources is inbuilt in the 1971 Act and the Performance Audit Reports have to be viewed accordingly and hence negatived the challenge. Again, in S. Subramaniam Balaji Vs. The Government of Tamil Nadu (2013) 9 SCC 659 it was held that CAG cannot be robbed of its power to ensure that large-scale unauthorised spending of public funds does not take place. It was held that the provisions of CAG Act must be given purposive interpretation that would fu .....

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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 gov .....

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t needs and requirements; Constitution is not bound to be understood and accepted to the original understanding of the constitutional economics; parliamentary debates may not be the sole criteria to be adopted by a Court while examining the meaning and content of Article 149 since its content and significance has to vary to age to age. K. Even in Shahid Balwa supra, CAG was held to be the most important officer under the Constitution of India and his duty, being the guardian of the public purse, .....

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a living document to satisfy the needs and requirements of the changing and evolving times. Once CAG is found to be the fourth pillar of the Union of States that is India, constituted to perform duties and exercise powers in relation to the accounts of the Union and of the States and of any other authority or body, the expanse of its powers cannot be stifled and limited. Mode and manner in which the governments govern and administer the State is ever evolving. Soon after the framing of the Cons .....

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that to limit the meaning of the words authority or body under Article 149 as is contended by the petitioners, to only those which satisfy the criteria of Article 12 of the Constitution may deprive one of the four limbs of the Union from exercising powers and duties in relation to accounts of an authority or body as may be required as per exigencies from time to time. M. It is significant that Article 149 though extends the jurisdiction of CAG besides in relation to the accounts of the Union an .....

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ning 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 .....

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said is a constitutional functionary. Thus, the decision in this regard has not been left solely to the Executive. The extent of audit is again not in sole domain of the Executive in as much as under sub-section (1), the terms of reference of such audit are to be as per mutual agreement of the concerned government and the CAG. P. The power of the President / Governor / Administrator to direct so is further circumscribed by the requirement of Sub-Section (3), of the same being expedient in public .....

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atutory provision must keep pace with changing concepts and values and it must, to the extent to which its language permits or rather does not prohibit, suffer adjustments through judicial interpretation so as to accord with the requirements of the fast changing society which is undergoing rapid social and economic transformation. It was further held that law does not operate in a vacuum and is intended to serve a social purpose and it cannot be interpreted without taking into account the social .....

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pedantic manner because it is an organic statute and because it is intended to endure for ages to come. Similarly, in State of West Bengal Vs. Committee 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 .....

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iple 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 fifty years after independence, are living in changing times, where the modes of doing business are what could never even have been imagined even five or ten ye .....

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ticle 149 of the Constitution in a manner, to restrict the powers of the CAG for all times to come when the fears expressed arising from such interpretation are found to be capable of being addressed otherwise. 39. Before parting with the topic, we may also record that during the hearing we had felt that Section 20 of the CAG Act merely extends the duties and powers of CAG from that of, limited audit of bodies and authorities referred to in Sections 14 to 16 of the CAG Act, to a full audit of ac .....

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tions 14 to 16. It was further felt that the same would also take care of our doubt, of the Parliament being not entitled to delegate to the Executive to be done in exercise of executive powers what it is required by Article 149 to be done by making law. It was yet further felt that though Section 19 also places limitations on duties and powers of CAG vis-a-vis accounts of government companies and corporations but since the same was being done by law framed by Parliament, the same was exempted f .....

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o 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 Se .....

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; (ii) audit of their accounts being not expedient in the public interest; and, (iii) reasonable opportunity to make representation with regard to the proposal for such audit having not been given to them. We will now proceed to adjudicate the said challenge. 44. The challenge on the ground of the direction for audit being not by the authority competent to do so is premised on the authority to issue such a direction being the Administrator of Delhi and the direction, though under his signatures, .....

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to make law with respect to audit of accounts of Union and States is with the Parliament and not with the Legislature of State of Delhi, is misconceived. (B) The decision to be taken by the Administrator i.e. the Lt. Governor of Delhi under Section 20 is the need for directing CAG to audit the accounts of a body or authority and not a decision whether a law should be made in relation to the audit of the accounts of Union of India or of Delhi. The question, whether such decision is to be taken by .....

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s the representative of Union of India would defeat the very purpose inasmuch as Union would have no concern with the accounts of DISCOMs. It is the State Legislative Assembly which is concerned with the functioning of DISCOMs. Electricity is a concurrent subject and it is the State Government i.e. GNCTD 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 unde .....

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sters 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 word Governor in any Statute is .....

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cretion where by reason of peril to democracy or democratic principles an action may be compelled which from its nature is not amenable to Ministerial advice; such a situation may be where bias is inherent and or manifest in the advice of the Council of Ministers. (F) Certainly, a direction for audit of acts of any body or authority, under Section 20 of CAG Act, does not fall in category (iv) or (v) aforesaid. (G) The language of Section 20(1) leaves no manner of doubt that the exercise of power .....

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oposed to be audited to represent thereagainst, cannot be said to be adjudicatory. Supreme Court in Subramanian Swamy Vs. Arun Shourie (2014) 12 SCC 344 held that merely because a body is required to follow procedure of a legal character will not make its function adjudicatory. It was further held that the general rule is that an administrative authority need not even give reasons for its decision unless the rules so require, even where the decision inflicts civil consequences on the petitioner. .....

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f 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 reasonabl .....

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ht, the time of 48 hours to represent against cannot be said to be violative of the requirement of Section 20(3) of giving reasonable opportunity. (III) In this context, we also find merit in the contention of the senior counsel for GNCTD that the proposal for audit in fact had been mooted long back. A PIL in this regard was pending before this Court, in any case since long prior thereto. DERC had also asked for such an audit. (IV) Reasonableness of time has to be in the context of all the afore .....

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he contention, of the opportunity granted being not reasonable, but for the reason of being not preceded by a proposal for such audit . (VII) Sub-section (3) of Section 20 of the CAG Act prohibits entrustment of audit of accounts of any body or authority to the CAG in exercise of power under sub-section (1) except after giving a reasonable opportunity to the concerned body or authority to make representation with regard to the proposal for such audit . The words proposal for such audit in sub-se .....

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ween the concerned government and CAG. (VIII) What has emerged from a perusal of the notings on the file of GNCTD in the present case is that, (i) the consideration of the proposal for audit commenced on 26th April, 2011 i.e. soon after the filing of PIL aforesaid; (ii) on 13th May, 2011 it was observed that CAG audit was not possible in the legal framework and it was in view of the said constitutional and legal limitations / constraints that the National Tariff Policy on electricity stipulated .....

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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 cou .....

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r by DISCOMs, analysis of capital projects executed for network expansion, analysis of consumer billing, scope of cost reduction etc.; vii) accordingly, it was decided to obtain approval of Administrator for, after completion of consultation with CAG and finalization of terms and conditions of audit, request CAG to under Section 20(1) conduct audit of DISCOMs since inception; viii) the Chief Minister consented to the said decision observing that there is no reason for DISCOMs to resist audit; ix .....

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at the issue relating to unbundling of DVB would not be audited as it had already been reviewed and reported in the CAG audit report for the year ended March, 2003 and which report had been discussed in several Public Accounts Committee (PAC) meetings held in 2005 and in 2006 and the third and final report of PAC been presented to Delhi Legislative Assembly on 2nd March, 2006. (IX) GNCTD, vide letter dated 28th December, 2013 to DISCOMs, as aforesaid, informed them of the proposal for their audi .....

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s 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 .....

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ent 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 audit within the meaning of Section 20 cannot merely be the desire or intention to audit but has also to contain the terms and conditions of audit agreed upon by the CAG in the consultation to be held for such purpose as well as the reasons for which satisfaction is reached that the proposed audit is in public interest; (XVII) Th .....

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aw; thus the concerned body or authority, from such law would know what duties / powers CAG is to exercise in relation to its accounts; however Parliament, by law contained in Section 20 of the CAG Act has left it to the Executive to in consultation and agreement with CAG assign such duties / powers to CAG; when the Constitution of India has deemed it appropriate for such duties and powers of CAG to be prescribed by law and making whereof has all the implicit safeguards, even if it were permissi .....

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been agreed. (XX) CAG, as aforesaid is a independent constitutional authority and consultation with CAG and agreement with CAG of terms and conditions of audit are important restrictions on the Executive, under Section 20 of CAG Act, doing by Executive fiat what the Parliament under Article 149 is required to do by law. (XXI) The fact that while issuing the direction under Section 20 in the present case, the question of applicability thereof was left to be decided by CAG is indicative of consul .....

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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 .....

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l aspect, the mandatory statutory requirement of consultation cannot be said to even rendered effectively and meaningfully; (vii) if the process of consultation is vitiated, it would render the ultimate order vulnerable and liable to questioning; (viii) it is for the Court to determine in each case in the light of facts and circumstances, whether the action is after consultation and / or whether there was sufficient consultation; (ix) that the meaning of consultation varies from case to case dep .....

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nsultation may mean concurrence; (xi) the Court must examine the fact situation in a given case to determine, whether the process of consultation as required in a particular situation did in fact stand completed. (XXIII) The mere fact that CAG accepted the terms and conditions of audit contained in the directive issued under Section 20(1) cannot be a substitute for the legislative requirement of arriving of an agreement between the concerned government and CAG and which agreement has to be arriv .....

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duties which CAG is to perform in relation to accounts of any body or authority but the Parliament, vide Section 20 has empowered the Administrator / 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 .....

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ferent 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 entirely different. (XXV) We are strengthened in our view of the opportunity to represent being required to be given after consultation and agreement under Section 20(1 .....

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ed above of DISCOMs that to non-compliance of statutory requirement of reasonable opportunity to represent against, the reasoning of no prejudice having been suffered therefrom does not apply. We may in this context also refer to Municipal Committee, Hoshiarpur Vs. Punjab State Electricity Board (2010) 13 SCC 216 laying down that in case there is a non-compliance of a statutory requirement of law, such non-compliance may itself be prejudicial to a party and in such an eventuality it is not requi .....

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n public interest would be subject to judicial review. However having held hereinabove that DISCOMs were not given reasonable opportunity to make representation to the proposal for such audit, including on the ground that the public interest in which the same was deemed to be expedient was not disclosed to DISCOMs and having thus struck down the action and which would leave it open to the respondents to, if so desire, issue a fresh direction, we have wondered the need to go into the question, wh .....

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rts 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 .....

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report of CAG of audit thereunder is to be dealt with. However, since in Pathan Mohammed Suleman Rehmatkhan supra it was held that CAG is a key figure in the system of parliamentary control of finance and is empowered to delve into the economy, efficiency and effectiveness with which the departmental authorities or other bodies had used their resources in discharging their functions and that CAG is also the final audit authority and is a part of the machinery through which the legislature enforc .....

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e action in accordance therewith, what action will GNCTD take. 53. In our opinion, the question, whether it is possible for the concerned government to take any action against a body or authority on the basis of the report of CAG, under the laws otherwise applicable to such body or authority and / or under the agreement, if any of the concerned government with such body or authority, would be a relevant consideration, whether it is expedient in public interest to direct such audit or not. Needle .....

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the law applicable to DISCOMs or under the agreement, if any with DISCOMs. We on our own have not found any. 55. We, in this context looked into the genesis of DISCOMs and the rights, if any of GNCTD with respect thereto on the basis of the report of the audit by CAG ordered thereagainst. 56. Prior to the Electricity 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 A .....

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ndependent 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 governme .....

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ration by making purchases of equipments from their sister companies at values above the market price resulting in the tariff which DISCOMs are entitled to collect from the consumers being determined at a higher rate and DERC not having the wherewithal to catch such overpricing by DISCOMs in their balance-sheet of the purchase price and the operational cost. We highlight that the CAG refused to go into the question of unbundling of DVB, with respect whereto it had already submitted a report and .....

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t of CAG, take appropriate action thereon. 60. We first deal with the Electricity Act, 2003 i) Section 12 to 14 and 16 thereof bar any person from transmitting or distributing or undertaking trading in electricity save under a licence issued by an appropriate Commission (i.e. either the Central Electricity Regulatory Commission (CERC)) or the SERC) and on such terms and conditions as may be specified. ii) Sections 19 and 20 vest the power of revocation of such licence and of sale of utilities of .....

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e 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 stan .....

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interest while at the same time recovering the cost of electricity, rewarding the efficiency in performance and the tariff reflecting the cost of supply of electricity. ix) Section 62 inter alia empowers the appropriate Commission to in case of distribution of electricity in the same area by two or more distribution licensees, for promoting competition amongst distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity. x) Section 63 also provides for determination .....

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ution of a Central Electricity Authority with the function and duty inter alia of advising the Central Government on optimum utilization of resources to provide affordable electricity for all consumers and to carry out studies relating to cost efficiency, competitiveness and such like matters and to make public from time to time the information secured. xiii) Section 74 imposes a duty on the licensees to furnish to the Central Electricity Authority such statistics, returns or other information r .....

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ate Government after consultation with the Chief Justice of that High Court. xvi) Section 86 requires the SERC to discharge the function inter alia of determination of tariff, grant of licences including for distribution of electricity. xvii) Section 104 provides for audit of the accounts of the SERC by the CAG with the same powers as CAG has in connection with audit of government accounts. xviii) Section 110 provides for establishment of an Appellate Tribunal to hear appeals against the orders .....

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ng 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 Electri .....

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the DERC. (ii) Section 10 vests the DERC besides with the powers as of a Civil Court under the Code of Civil Procedure, 1908 for the purposes of any inquiry or proceedings and also with a power to require any person to produce before it and allow to be examined such books, accounts or other documents in the custody or under the control of the person so required as may be specified or described in the requisition being the documents relating to any matter concerning inter alia transmission, dist .....

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nter alia to distribution and supply of electricity, the connection between such person and any other person or undertaking including such other information related to the organisation, business, cost of production, conducts, etc. as may be prescribed to enable the DERC to carry out its functions; sub-section (8) of Section 10 empowers DERC to at any time call for and examine, information, details, books, accounts and other documents from any person including a licencee for the purpose of provid .....

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ctricity industry, to issue licence for distribution or supply of electricity and to determine the 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 g .....

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. 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 applicable. x) Sub-Section (6) thereof deems the provisions contained in the Schedule to the 1910 Act to be incorporated with and to form part of every supply licence and Sub-Section (9) provides for non .....

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pursuant to the terms of its licence and in designing tariffs to collect those revenues. xiv) Sub-Section (2) of Section 28 entitles the DERC to prescribe the terms and conditions for determination of the licensee s revenues and tariffs by regulations prescribed and mandates the DERC to in doing so be guided by the financial principles and their application provided in the Sixth Schedule to the Electricity (Supply) Act, 1948 and the factors which would encourage efficiency, economic use of resou .....

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s the licensee s calculation. xvi) Sub-Section (7) of Section 28 provides that the tariff implemented shall be just and reasonable so as to promote economic efficiency in the supply and consumption of electricity. xvii) Section 29 empowers the Government to inspect and verify the accounts of licensee claiming any subvention. xviii) Section 37 empowers the DERC to determine standards of overall performance, and, xix) Section 38 empowers the DERC to collect information inter alia with respect to o .....

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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 .....

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(2) ................................. (3) ................................. (4) ................................. (5) ................................. (6) The provisions contained in the Schedule to the Indian Electricity Act, 1910 (9 of 1910), shall be deemed to be incorporated with, and to form part of, every supply licence granted under this Part save in so far as they are expressly varied or excepted by the supply licence and shall, subject to any such additions, variations or exceptions wh .....

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incorporated within the supply licence. (emphasis added) 64. The Schedule to the Indian Electricity Act, 1910 referred to hereinabove is found, in Clauses II and III thereof, to contain the following condition: II. Audit of Accounts of licensee not being local authority. - Where the licensee is not a local authority, the following provisions as to the audit of accounts shall apply, namely: (a) The annual statement of accounts of the undertaking shall, before being rendered under Section 11 of t .....

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o all such books and documents relating to the undertaking as are necessary for the purposes of the audit, and shall, when required, furnish to him, and them all vouchers and information [including technical data and statements of energy generated 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 audit .....

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ng 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 their pleadings or submissions have not referred to their licences but during th .....

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s as under: 7. Accounts 7.1 The financial year of the Licensee shall run from the first of April to the following thirty-first of March. 7.2 Accounting Principles The Licensee shall, in respect of the Licensed Business and any Other Business: a. keep such accounting records as would be required to be kept in respect of each such business so that the revenues, costs, assets, liabilities, reserves and provisions of, or reasonably attributable to the Licensed Business are separately identifiable in .....

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report for each financial year stating whether in their opinion, these statements have been properly prepared in accordance with this Clause 7 and give a true and fair view of the revenues, costs, assets, liabilities, reserves and provisions of, or reasonably attributable to such businesses to which the statements relate; and iv. a copy of each interim unaudited profit and loss account not later than three months after the end of the period to which it relates, and copies of the Accounting Stat .....

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t 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 expe .....

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ions of DERA or Electricity Laws or the Rules & Regulations framed thereunder. Clause 4 requires the licencee to comply with the Regulations, Orders or directions issued by DERC from time to time. Clause 9 requires the DISCOMs as licencees to provide information to DERC as provided therein and as the DERC may require from time to time, for its own purposes or for the purposes of the Government of India, State Government, Central Commission or the Central Electricity Authority. It is thus evi .....

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d does not provide for an audit by the CAG. It may also be noticed that though the provisions of the Schedule to the Indian Electricity Act, 1910 which have been incorporated in the licences vide Section 20(6) of the Reforms Act provided for the audit of a licensee which is not a local authority by such person as the State Government may appoint or approve in this behalf, DERC in the exercise of its powers, also under Section 20(6), has modified the same to what is reproduced hereinabove. The li .....

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ee from time to time proposes to implement together with relevant details, including the estimated cost or such schemes, with requisite break-up, source of funding and proposed investment plans. The Licensee shall specifically detail, as part of the Investment Scheme, an Implementation Plan and 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. .....

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ensee 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 proposes to undertake; b. the Licensee has exa .....

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reasonable procedure as may be specified by the Commission from time to time. 10.6 For the purposes of Clause 10, the term major investment means any planned investment in or acquisition of Distribution facilities, the cost of which, when aggregated with all other investments or acquisitions (if any) forming part of the same overall transaction, equals or exceeds ₹ 2,00,00,000.00 (Rupees two crore only) or such other amount as may be notified by the Commission from time to time. 10.7 The L .....

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l schemes not requiring an approval from the Commission shall not exceed ₹ 20,00,00,000.00 (Rupees twenty crore only) in any financial year or such other amount as may be notified by the Commission from time to time: Further provided that if any unforeseen contingencies require reallocation of funds within the schemes listed in the annual investment plan, the Licensee may do so after intimating the Commission. However, such reallocation in respect of individual projects shall not exceed &# .....

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individual projects shall not exceed ₹ 1,00,00,000.00 (Rupees one crore only) and on an aggregate basis shall not exceed ₹ 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 DISC .....

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rd the same to the Government. The Government i.e. the Administrator, if dissatisfied therewith, can take appropriate action with respect thereto. 69. Supreme Court in Transmission Corporation of Andhra Pradesh Limited Vs. Sai Renewable Power Private Limited (2011) 11 SCC 34 held that fixation of tariff is, primarily, a function to be performed by the statutory authority in furtherance to the provisions of the relevant laws by the expert bodies to whom the job is assigned under the law. It was h .....

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tive of ensuring a fair deal to the consumer on the other; though the State Government has been empowered to issue policy directions on matters concerning electricity in the State including the overall planning and co-ordination but such directions have to be consistent with the objects sought to be achieved by the Act and accordingly to not adversely affect or interfere with the functions and powers of the Regulatory Commission including, but not limited to, determination of the structure of ta .....

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sion or planning which would adversely affect the functioning of the Regulatory Commission or interfere with its functions. It was yet further held that State Government has a minimum role in the matter of fixation of tariff. On an examination of the various provisions it was further held that the Regulatory Commission only is vested with the power to revise tariff and conditions in relation to licences. Accordingly, it was held that the Regulatory Commission having approved the regulated purcha .....

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t 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 .....

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city Boards into separate utilities for generation, transmission and distribution also entrusts the regulatory regime to the State Electricity Regulatory Commissions which are given wide range responsibility. It was further held that the said Act has distanced the government from all forms of regulations including tariff regulation which is now specifically assigned to the State Electricity Regulatory Commissions. Following the same, in Jharkhand State Electricity Board Vs. Laxmi Business & .....

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alleged therein, would on the basis thereof not be able to lower the tariff and with which motive the entire exercise has been undertaken. 73. Supreme Court as far back as in Ram Jawaya Kapur Vs. State of Punjab (1955) 2 SCR 225 held that though it is not necessary that there must be a law already in existence before the Executive is enabled to function and that the powers of the Executive are limited merely to the carrying out of those laws but if there is a statutory Rule or an Act on the mat .....

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eral audit was held to 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 .....

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gher 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, we fail to see as to how the CAG can be allowed to arrive at any different conclusion. The said conclusion would in our view be of no avail. Once by law a regulatory body has been constituted with powers inter alia have the accounts of the DISCOMs audited, there can be no other .....

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nciple of issue preclusion as recently applied by the United States Supreme court in judgment dated 24th March, 2015 in B&B Hardware, Inc. Vs. Hargis Industries, Inc. would also be attracted. It was held that when the Trademark Trial and Appeal Board refuses federal registration of a trademark because it is likely to be confused with an already registered mark this determination will preclude the same parties in a later District Court infringement suit involving the same marks from re-litiga .....

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h the same issue is before two Courts because the issue preclusion is so well established at common law that when an administrative agency is acting in a judicial capacity and resolving disputed issues of fact by it which the parties have had an adequate opportunity to adjudicate the Courts have to apply res judicata to enforce repose. It was further held that an agency s determination has preclusive effect. On further examination, it was held that there was no reason why determination of the sa .....

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ticular 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 consu .....

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rce, no one can be permitted to challenge the same on the ground of inconvenience and difficulty in its implementation. Reference in this regard can be made to the judgments of the Division Benches of this Court in Parmanand Katara Vs. Union of India AIR 1998 Delhi 2000, Amit Bhagat Vs. Govt. of NCT of Delhi (2014) SCC Online Delhi 7020 and to the judgment of the Supreme Court in Avishek Goenka Vs. Union of India (2012) 5 SCC 321. CAG though undoubtedly an important pillar of our Constitution is .....

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a useless exercise. It is also not as if DERC is not capable of equipping itself with the wherewithal for digging into the accounts, particularly expenses of DISCOMs which the DISCOMs are accused of inflating. We find DERC to have, in exercise of its Regulation making power, framed the DERC (Appointment of Consultants) Regulations, 2001. DERC thus, if does not have an internal mechanism in this regard, though is required to have, can appoint appropriate accountants as consultants to investigate .....

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eference was made to Section 22 of the NDDB Act providing for audit by an auditor appointed by the NDDB Act. It was held that Section 28 of the NDDB Act is not in conflict with Section 14(2) or Section 15 of 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 conformit .....

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s 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 / regulatory body to perform its statutory duties cannot set in motion the regime prevalent prior to the co .....

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years have elapsed in the process, when what is sought to be achieved could have very well been achieved by invoking the powers of DERC under the Reforms Act and the Regulations framed thereunder and the terms and conditions of the licence issued to the DISCOMs. Such populist measures, without considering the ultimate advantage thereof, not only end up being contrary to public interest but also put unnecessary burden on the Courts. 82. Once it is found that audit of accounts of DISCOMs by CAG, e .....

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that we have not considered the matter from the perspective of Sections 13 to 16 of the CAG Act. Though the Supreme Court in Association of Unified Tele Services Providers supra after noticing the provisions of the TRAI Act, the rules / regulations framed thereunder and the terms of licences issued to the Tele Services Providers found therein also a power in TRAI to seek all information relating to the accounts as may be required and a provision as to the manner in which the accounts would be ma .....

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ction 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 .....

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