In a judgement with far-reaching consequences across various business sectors, the Supreme Court(SC) on Thursday ruled that the Comptroller and Auditor General (CAG) was empowered to examine the accounts of private telecom companies.

The court held that such a scrutiny was imperative to ensure that the government, which has accorded the private companies licenses of the valuable natural resources, was receiving its “legitimate share.”

The court modified the Delhi High Court order that had granted a right of statutory audit to the CAG. The SC said that the audit will not be a statutory audit or a special audit but will confine to examining the statements of account for ascertaining there was no loss to public exchequer.

A bench of Justices K S Radhakrishnan and Vikramjit Sen asserted that since telecom companies exploited natural resources, it had to be make sure the government received its due under the revenue sharing agreement.

CONTEXT

The case goes back to 2009 when DoT hired CAG-empanelled auditors to look into the books of Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd and Reliance Communications Ltd for the years 2006-07 and 2007-08.

DoT then issued notices to recover almost Rs 1,600 crore in unpaid dues from the five telcos in June 2012 after it was found that they had allegedly under-reported revenuesThe CAG had initiated an audit after TRAI found that some telecom operators were allegedly under-reporting income to avoid paying revenue share to the Government. The telecom companies approached the High Court seeking a stay on the CAG’s decision.

Setting aside their plea, the court, on January 6,2014, had said there are no doubts on CAG’s constitutional powers to look into all forms of income derived by the Government. The high court had upheld the validity of laws empowering CAG to conduct revenue audits of private telecom firms. It, however, added that in relation to accounts of telecom companies, audit has to pertain to revenues and not into aspects such as “wisdom and economy in expenditures”.

The January 6 court ruling has been viewed with apprehension by private firms as it is possible to interpret the directive to say all companies that contribute to the consolidated fund of India can be audited by CAG.

REFRENCE

COMPTROLLER AND AUDITOR GENERAL: provisions regarding the CAG are given under Articles 148-151. He is appointed by the President for a full term of 6 years or 65 years of age whichever is earlier. The CAG audits the accounts of the Union and the States and submit the report to the President or the Governor, as the case may be.

The organisations subject to the audit of the Comptroller and Auditor General of India are:- All the Union and State Government departments and offices including the Indian Railways and Posts and Telecommunications. public commercial enterprises controlled by the Union and State governments, i.e. government companies and corporations. non-commercial autonomous bodies and authorities owned or controlled by the Union or the States. authorities and bodies substantially financed from Union or State revenues. The CAG is concerned only at the stage of audit after the expenditure has already taken place. The report of the CAG shall be submitted to the President of India, who shall cause it to lay before the Parliament. This report is immediately refereed to the Public Accounts Committee of the Parliament which, after a detailed study prepare another report which is placed before the Parliament. M.C Setalvad was the first CAG of India. The current CAG of India is Shashi Kant Sharma.

TELECOME REGULATORY AUTHORITY OF INDIA: The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.
TRAI’s mission is to create and nurture conditions for growth of telecommunications in the country in a manner and at a pace which will enable India to play a leading role in emerging global information society.
One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition.

Supreme Court: Supreme Court of India came into existence on 26th January, 1950. The original Constitution of 1950 envisaged a Supreme Court with a Chief Justice and 7 puisne Judges – leaving it to Parliament to increase this number. The Supreme Court of India, today, comprises the Chief Justice and 30 other Judges appointed by the President of India. Supreme Court Judges retire upon attaining the age of 65 years. In order to be appointed as a Judge of the Supreme Court, a person must be a citizen of India and must have been, for at least five years, a Judge of a High Court or of two or more such Courts in succession, or an Advocate of a High Court or of two or more such Courts in succession for at least 10 years or he must be, in the opinion of the President, a distinguished jurist. Provisions exist for the appointment of a Judge of a High Court as an Ad-hoc Judge of the Supreme Court and for retired Judges of the Supreme Court or High Courts to sit and act as Judges of that Court. The constitution consists provisions related to the union Judiciary in Art. 124-147.Mr. Justice Harilal Jekisundas Kania was the first chief justice of Supreme Court. Justice Rajendra Mal Lodha has been appointed as the next Chief Justice of India and he will assume charge on April 27, 2014.