Issue: Whether or not, CAG can audit the accounts of DISCOMS created under PPP?

The petitioner humb! submits that, as per the Art"#$% of the Constitution of India that defines
the duties and po&ers of the CAG, 'the CAG shall perform such duties and exercise such powers
in relation to the accounts of the Union and of the States and of any other authority or body as
may be prescribed by or under any law made by Parliament and, until provision in that behalf is
so made, shall perform such duties and exercise such powers in relation to the accounts of the
Union and of the States as were conferred on or exercisable by the Auditor-general of ndia
immediately before the commencement of this Constitution in relation to the accounts of the
!ominion of ndia and of the Provinces respectively"(
Therefore, the )i*en statute ao&s for the CAG to ha*e +urisdiction o*er the audit of accounts of
an! authorit! that is part of an! estabishment under the ,nion of India"
-urther, it is submitted that the present case has an ambi)uit! concernin) the structure of these
DISCOMS, as the! ha*e been setup under an e.i)ent need to curb the hu)e po&er crisis faced in
the #%%/s0 as a resut of &hich the con)ress )o*t" then too1 measures to iberaise the po&er
industr! and therefore introduced a PPP mode for production and distribution of therma
eectricit!"
Since, the PPP mode pertains to a partnership bet&een the )o*ernment and the pri*ate
enterprises, it sha be du! noted that these discoms are not compete! fu! a pubic enterprise"
Gi*en that, ,nder Sub2section 3#4 to Section #$, CAG has po&er to audit a receipts and
e.penditure of an! bod! or authorit! &hich is substantia! financed b! )rants or oans from the
Consoidated -und of India 3hereinafter referred to as the C-I, for short4, b! a State or a ,nion
Territor! ha*in) a 5e)isati*e Assemb!" The term substantia! financed has been defined in the
6.panation" Section 3#$43#4 of the CAG Act, ho&e*er, is sub+ect to pro*isions of an! other a& for
the time bein) in force appicabe to the bod! or authorit!" Section 3#$43#4 therefore accepts that
po&er of the CAG under the said Sub2section can be curtaied, conditiona or e*en prohibited
under an! a& for the time bein) in force as appicabe to the said bod! or authorit!" 7i)ht of CAG
under Section 3#$43#4 is *unerabe and amenabe to restrictions or bar under another a&"
Therefore, the 8uestion of a& is &hether the )i*en DISCOMS are substantia! financed b! the
)o*t" or not in the $%9 sharehodin) of the partnership, )i*en that :#9 shares sti ie &ith the
pri*ate entities"
In the case of National Dairy Development Board v. Union of India (UOI) and the Comptroller and
Auditor General, it &as ar)ued that Section 3#$43;4 of the CAG Act stipuates that not&ithstandin)
an!thin) contained in Section 3#$43#4, CAG ma! &ith a prior pre*ious appro*a of the President,
Go*ernor or the Administrator of an ,nion Territor! audit a receipts and e.penditure of an! bod!
or authorit! &hich has been )i*en )rant<oan from the C-I or the State or ,nion Territor! ha*in) a
5e)isati*e Assemb! in a financia !ear of not ess than 7s" # crore" Section 3#$43;4 of the CAG
Act is a non obstante Sub2section &hich appies e*en if a bod! or authorit! cannot be sub+ected to
audit of receipts and e.penditure under Sub2section 3#4" Irrespecti*e of the prohibition or bar
under Sub2section 3#4 to Section 3#$4 of the CAG Act, CAG has po&er and authorit! to conduct
audit under Section 3#$43;4" Thus, Section 3#$43;4 of the CAG Act is an independent Section &hich
&i app! once the conditions mentioned in the said Section are satisfied" -urther if the conditions
mentioned in Sub2section 3;4 of Section 3#$4 of the CAG Act are satisfied the fact that the
authorit! or the bod! cannot be sub+ected to audit under Sub2section 3#4 of Section #$ is
irree*ant"
,nder Section ;/ of the CAG Act, on re8uest made b! the President, Go*ernor of a State or
Administrator of a ,nion territor! ha*in) 5e)isati*e Assemb!, CAG can conduct audit of accounts
of a bod! or authorit! e*en &hen he is not entrusted and re8uired under Section #% of the CAG
Act to conduct audit" The re8uest for conductin) audit in such cases can be made after
consutation &ith CAG" ,nder Section 3;/43;4 of the CAG Act, the CAG can aso submit a proposa
to the President, Go*ernor of a State or the Administrator of a ,nion territor! ha*in) a 5e)isati*e
Assemb! that the! ma! be authori=ed to underta1e the audit of accounts of an! bod! or
authorit!, the audit of the account of &hich has not been entrusted to them b! a&, if CAG is of
the opinion that substantial amount has been in*ested in, or ad*anced to, such bod! or authorit!"
Thus, under Section 3;/4 of the CAG Act, CAG can conduct audit e*en if under Section #%, CAG
does not ha*e authorit! to conduct statutor! audit"