HC upholds laws empowering CAG to conduct audit of pvt telcos

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New Delhi: .The Delhi High Court on Monday upheld the constitutional validity of laws empowering the Comptroller and Auditor General of India (CAG) to conduct revenue audits of private telecom firms

The court said, as per the terms of license agreements, the private telecom companies had undertaken the accounting responsibility on behalf of Centre also and their accounts, in relation to revenue receipts, can be termed as the accounts of the Central Government also and hence, they would be the subject matter of CAG’s audit.

“We conclude by holding that neither Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules is ultra vires Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 nor is Section 16 ultra vires Article 149 (power of CAG) of the Constitution of India,” a bench of justices Pradeep Nandrajog and V Kameswar Rao said.

“We have already held …under the terms of the license agreement the licensee has undertaken the accounting responsibility for the Central Government as well as itself.

“Thus, the accounts of the licensees, in relation to the revenue receipts can be said to be the accounts of the Central Government and thus subject to a revenue audit as per Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act,” it said.

Dismissing the pleas of Association of Unified Telecom Service Providers and Cellular Operators Association of India (COAI), which represent private telecom firms, the bench, however, reminded the CAG to confine its auditing to “receipts” of telecom firms only.

“A small caveat by way of reminder to CAG. In relation to the accounts of the Telecom Service Providers, the audit has to be only an audit pertaining to the receipts and no more.

“The CAG would not confuse himself with his wide all embracing power under Section 14(2) of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act which includes inquiries into aspects like faithfulness, wisdom and economy in expenditures,” it said.

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