CAG can audit accounts of pvt telecom cos: Delhi HC

January 06, 2014 11:16

In a landmark judgment, the Delhi high court has given the Comptroller and Auditor General the jurisdiction/powers to audit accounts of private telecom companies.

A division bench of Justice Pradeep Nandrajog and Justice V K Rao gave its order after conducting marathon hearings on the issue where it took on record submissions of the Centre, the CAG and the petitioners -- Cellular Operators Association of India and Association of Unified Telecom Service Providers.

Both associations had approached the high court after losing before TDSAT and argued in essence that CAG can't audit private companies. To achieve the purpose of audit, the operators have pointed out, they already put in place mechanism of special audit as envisaged in the license agreement between department of telecom and the companies. The firms claim they maintain accounts in line with the TRAI rules and can't be forced to furnish financials to CAG.

The CAG has vigorously staked its claim to audit the accounts and sought revenue sharing details from the telecom companies. In lengthy written submissions CAG has cited the Constitution of India and the CAG Act 1971 to contend that it is duty bound to audit accounts of the Union and those "in relation to accounts of the Union."

CAG has said it has full powers to audit accounts of the telecom firms to ensure that claims to receipts have been "pursued with due diligence by Union and no loss occurred due to fraud and efficiency and effectiveness of the transactions has been maintained."

In June 2010, in an interim order, the HC had directed private telecom operators to submit their account books to CAG national auditor so as to enable it to determine if there was any underreporting of licence fees by the companies. But HC restrained CAG from demanding any additional documents except revenue-sharing details and had further directed it to not disclose the same information to the public or to any third party.

The order was later modified by SC which directed the firms to furnish their financials to CAG, but stopped the auditor from vetting the papers till HC decides the case

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