In a major setback to telecom companies, the Delhi High Court on Monday held that the Comptroller and Auditor General (CAG) can audit the revenue-sharing details of private firms like Reliance Communications Ltd, Bharti Airtel, Tata Teleservices, Idea Cellular Ltd and others to check under-reporting of revenue for calculating the licence fee - judgment strengthens Arvind Kejriwal's AAP (Aam Aadmi Party) stance of CAG audit of power companies.
A bench comprising justices Pradeep Nandrajog and V Kameswar Rao allowed “the CAG to conduct revenue audit” of the telecom service providers.
Not only telecos were resisting the CAG audit into their account books, even the government has been reluctant to let CAG be its auditor of private companies in the telecom sector.
Vacating the interim stay that directed CAG not disclose the information to the public or to any third party, the HC said that “neither Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 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 of the Constitution of India. The Rule and the Section fits perfectly into the constitutional scheme of every rupee flowing into the Consolidated Fund of India, by way of revenue, to be audited by the CAG.”
According to HC, the Constitution (Article 149) mandates the CAG to perform such duties and exercise such powers in relation to the accounts of the Union which include a record of money received and spent by the Union.
“We see no scope for an argument to urge any conflict between Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 and Section 16 of the 1971 Act for the reason, interpreting the contract, we have already held … that in a very real sense the licensees are the accountant of the Central government with respect to the complete, accurate and honest maintenance of the books as to any transaction(s) involving revenue... under the terms of the licence 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