SC upholds CAG’s powers to audit accounts of private telcos

17 Apr 2014

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The Supreme Court has upheld a Delhi high court order that accorded the Comptroller and Auditor General (CAG) of India the authority to audit the accounts of private companies that provide telecom services, dealing a big blow to telecom majors such as Bharti Airtel, Reliance Communications, Vodafone India and Idea Cellular.

The SC accepted the department of telecom's argument that the comptroller and auditor general of India has the powers to audit the accounts of private companies providing telecom services in the country using spectrum, which is a national resource.

The apex court held that since private companies ''utilise spectrum'', the CAG can look into their profit-and-loss accounts so as to ensure that the government receives its ''legitimate share'' of revenue.

The SC, however, modified the Delhi High Court order, stating that the audit will not be a statutory audit or a special audit but will be confined to an examination of the statements of accounts for ascertaining there was no loss to the public exchequer.

A bench comprising justices K S Radhakrishnan and Vikramajit Sen said CAG can examine the accounts of private telecom companies to ensure that they are giving the government its due share of revenue.

The SC passed the order on a batch of petitions filed by telecom companies' associations, including the Association of Unified Telecom Service Providers of India (AUTSP) and Cellular Operators Association of India (COAI)against being audited by CAG.

The telecom companies, including Bharti Airtel, Reliance Communications, Vodafone, had approached the Supreme Court challenging the Delhi High Court's verdict that had given green signal for CAG audit of the firms' accounts.

The Delhi High Court in its verdict had said that the CAG was duty bound to audit the account of these telecom companies as a part of their revenue goes to the Consolidated Fund of India.

The telecom firms, however, argued that the high court had erred in assuming that they share revenue with the government and that they only pay a licence fee to the government, which is a percentage of their revenue.

The HC had, on 6 January, set aside their arguments and said there was no doubt on CAG's constitutional powers to look into all forms of income derived by the government.

The apex court had on 3 February sought responses from the central government and the CAG on the pleas of the associations.

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

The CAG had found under-reporting of revenues by the telecom service providers, following which the DoT issued notices to recover almost Rs1,600 crore in unpaid dues fromthe five telcos in June 2012.

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