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AS INTRODUCED IN LOK SABHA

Bill No. 251 of 2016

THE COMPTROLLER AND AUDITOR GENERAL'S (DUTIES,

POWERS AND CONDITIONS OF SERVICE)
AMENDMENT BILL, 2016
By
SHRI BAIJAYANT PANDA, M.P.
A

BILL

further to amend the Comptroller and Auditor General's (Duties, Powers and
Conditions of Service) Act, 1971.
BE it enacted by Parliament in the Sixty-seventh Year of the Republic of India as
follows:—
1. (1) This Act may be called the Comptroller and Auditor General's (Duties, Powers Short title and
and Conditions of Service) Amendment Act, 2016. commencement.

5 (2) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
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Amendment 2. In section 2 of the Comptroller and Auditor General's (Duties, Powers and Conditions
of section2.
of Service) Act, 1971 (hereinafter referred to as the principal Act),— 56 of 1971

(i) after clause (b), the following clause shall be inserted, namely:—
"(ba) ‘audit’ means examination of accounts, transactions and records by
the Comptroller and Auditor General in performance of its duties and exercise 5
of powers under the Constitution of India and includes examination of the
economy, efficiency and effectiveness in the application of funds;";
(ii) after clause (c), the following clause shall be inserted, namely:—
"(ca) ‘prima facie’ means sufficient to establish a fact or raise a
presumption unless disproved;". 10
Amendment 3. In section 13 of the principal Act,—
of section 13.
(i) after clause (a), the following clause shall be inserted, namely:—
"(aa) to audit all receipts which are payable into the Consolidated Fund of
India or of a State or of a Union territory having a Legislative Assembly and to
satisfy himself that the rules and procedures in that behalf are designed to 15
secure an effective check on the assessment, collection and proper allocation
of revenue and are being duly observed;";
(ii) for the words "and in each case to report on the expenditure, transactions or
accounts so audited by him", the words "and in each case to report on the audit
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conducted by him" shall be substituted.
Amendment 4. In section 14 of the principal Act, in the Explanation to sub-section (1), for the
of section 14. words "seventy-five per cent", the words "fifty-one per cent" shall be substituted.
Amendment 5. In section 15 of the principal Act, for sub-section (1), the following sub-section shall
of section 15.
be substituted, namely:—
"(1) Where any grant or loan is given for any specific purpose from the Consolidated 25
Fund of India or of any State or of any Union territory having a Legislative Assembly to any
body or authority, not being a foreign State or international organisation, the Comptroller
and Auditor General shall—
(a) scrutinise the effectiveness of the selection criteria or the conditions
prescribed by the concerned Government or Governments for selecting appropriate 30
bodies or authorities to carry out the specific purpose;
(b) scrutinise the procedures by which the sanctioning authority satisfies itself
as to the fulfilment of the selection criteria or the conditions subject to which such
grants or loans were given;
(c) audit the expenditure of the grant or loan given to the body or authority to 35
ascertain whether it was utilised for the specific purpose for which it was sanctioned;
Explanation.— For the purposes of clauses (b) and (c), the Comptroller and Auditor
General shall have the right to access, after giving reasonable previous notice, the books and
accounts of that body or authority:
Provided that the President, the Governor of a State or the Administrator of a Union 40
territory having a Legislative Assembly, as the case may be, may, where he is of opinion that
it is necessary so to do in the public interest, by order, relieve the Comptroller and Auditor
General, after consultation with him, from making any such scrutiny in respect of any body
or authority receiving such grant or loan.".
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6. For section 16 of the principal Act, the following section shall be substituted, Substitution
namely:— of new
section for
section 16.
"16. (1) Where the Union Government or a State Government enters, directly or indirectly, Functions
through an entity auditable under section 14 or 19, into any contractual agreement or any with respect
to other
5 other arrangement with any body or authority for any specific purpose, and the contractual bodies or
agreement or arrangement involve— authorities
entering into
(a) the transfer of any asset or property controlled by the Government; or contractual
agreements
(b) the right to use or modify or develop any asset or property controlled by the
with the
Government; or Union or the
States.
10 (c) the right to levy charges on the users of any asset or property controlled by
the Government; or
(d) the sharing of revenue or profit incurred or accrued, as the case may be, from
the modification or development or use of any asset or property,
the Comptroller and Auditor-General shall—
15 (i) scrutinise the effectiveness of the selection criteria or the conditions prescribed
by the concerned Government or Governments for selecting appropriate bodies or
authorities to carry out the specific purpose;
(ii) scrutinise the terms and conditions of the contractual agreement or
arrangement, especially with regard to accountability, sharing of information and
20 allocation of risks between the Government or Governments and the body or authority;
(iii) for the purpose of clause (d), audit such accounts, receipts, expenditure and
transactions of the body or authority as are prima facie related to the contractual
agreement or arrangement to ensure that the interest of the concerned Government or
Governments by way of sharing of cost, revenue or profit is protected.
25 Explanation.—For the purposes of scrutiny and audit under items (ii) and (iii),
the Comptroller and Auditor General shall have the right to access, after giving
reasonable previous notice, to the books and accounts of that body or authority.
(2) The Comptroller and Auditor General may, in accordance with regulations framed
under this Act, dispense with the scrutiny or audit under sub-section (1) for certain classes
30 of contractual agreements or arrangements keeping in view the value of the asset or property
transferred or the amount of investment involved.".
7. For section 18 of the principal Act, the following sections shall be substituted, Substitution of
namely:— new sections
for section 18.

"18. (1) The Comptroller and Auditor General shall, in connection with the performance Powers of
35 of his duties under this Act, have authority— Comptroller
and Auditor-
(a) to require that any accounts, books, papers and other documents which deal General in
with or form the basis of or are otherwise relevant to the audit or scrutiny to be connection
conducted by him, be sent to such place as he may appoint for his inspection; with audit of
accounts.
(b) to put such questions or make such observations as he may consider
40 necessary to the person in charge of the office or establishment, by whatever name
called, and to call for such information as he may require for the preparation of any
account or report which it is his duty to prepare;
(c) to enter into and remain, at all reasonable times, on any premises occupied
by—
45 (i) any entity to be audited under section 13, 14, 17 or 19, including treasuries
and such offices, as are responsible for the keeping of initial or subsidiary
accounts;
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(ii) any entity to be audited or scrutinised under section 15 or 16, if so
authorised by a warrant issued by the appropriate court under the provisions of
the Code of Criminal Procedure, 1973; 2 of 1974.

(d) to examine or make copies of any document or record made available or

obtained by him; 5

(e) to require any officer or employee of the entity being audited or scrutinised
to—
(i) present himself at a specified date, time and venue;
(ii) give evidence or furnish any clarification, on oath or affirmation, either
orally or in writing, that, in the opinion of the Comptroller and Auditor General it 10
is expedient for carrying out the duties assigned to him under this Act.
(2) The Comptroller and Auditor General may reimburse such reasonable costs and
expenses as may have been incurred by the officer or employee in complying with the
directions under clause (e) of sub-section (1), after recovering such costs and expenses from
the entity to which the evidence relates. 15
(3) The person in charge of any office or establishment, by whatever name called, the
accounts of which have to be audited or scrutinised by the Comptroller and Auditor General,
shall afford all facilities and comply with requests for information in as complete a form as
possible and with all reasonable expedition within a period of not exceeding seven days.
Penalties for 18A. (1) Any refusal, without reasonable cause, by a person who is required to provide 20
refusal of
records or documents or to give evidence or to furnish information or to comply with the
information
by public directions of the Comptroller and Auditor General within a reasonable period specified by the
authorities. Comptroller and Auditor General or such extended period as allowed by him, shall be treated
as refusal of information.
(2) Notwithstanding anything in the Right to Information Act, 2005, the Comptroller 25 22 of 2005.
and Auditor General, on refusal of information under sub-section (1), may make a reference
to the Central Information Commission or the State Information Commission, as the case may
be, if the entity being audited or scrutinised is a public authority as defined under the Right
to Information Act, 2005. 22 of 2005.

(3) The Central Information Commission or the State Information Commission, as the 30
case may be, shall have the power to consider such cases of refusal of information and
impose penalties under the Right to Information Act, 2005.". 22 of 2005.

Substitution of 8. For section 19A of the principal Act, the following section shall be substituted,
new section namely:—
for section
19A.

Laying of "19A. (1) The reports of the Comptroller and Auditor General shall be submitted to the 35
reports before Government or the Governments concerned.
Parliament or
the Legislature (2) The Central Government shall cause every report received by it under sub-section
of the State.
(1) to be laid before each House of Parliament within seven days if Parliament is in session,
and if Parliament is not in session, within seven days of the first sitting of the next session.
(3) The State Government shall cause every report received by it under sub-section (1) 40
to be laid before the Legislature of the State, within seven days if the Legislature of the State
is in session, and if the Legislature of the State is not in session, within seven days of the first
sitting of the next session.".
 STATEMENT OF OBJECTS AND REASONS
The Comptroller and Auditor General of India (CAG) is one of the key pillars in the
system of checks and balances envisaged under our Constitution. Since its institution in
1850, the reports of the CAG have highlighted several cases of misappropriation of public
funds that were rightfully meant for the development of the nation.
Presently, the Comptroller and Auditor General's (Duties, Powers and Conditions of
Service) Act, 1971, better known as the Audit Act, governs the working of the CAG. However,
the Act has not been amended to keep pace with changing times and is unable to address
some of the key challenges being faced by the CAG today. This Bill aims to strengthen the
office of the CAG and remove the impediments that hinder the performance of his duties.
The Bill essentially makes the following six provisions—
(1) Gives statutory backing to 'performance audits'
Performance audit, which is concerned with an evaluation of the efficiency and
effectiveness of the application of funds, is the primary tool used by auditors to check if
there has been any waste in the use of public money. This form of audit allows the auditor to
question Government policy and decisions that led to inefficiency.
Performance audits were used by the CAG in his reports on the XIXth Commonwealth
Games and the reports on the allocation of 2G spectrum and coal blocks, among others. Each
report proved to be exceedingly incriminating. A mere accounting exercise would not have
been able to unearth the issues highlighted by the CAG in these reports.
Presently, performance audits are not explicitly recognised under the existing Act. As
a result, some parties have questioned the power of the CAG to pass judgement on the
efficacy of Government policy. It is therefore critical that the power to conduct performance
audits be explicitly codified in law.
(2) Brings contractual agreements and other partnership arrangements such as
Public Private Partnership within the ambit of the CAG
Over the past few decades, especially after 1991, the role of the Government in India
has been considerably redefined. The Government is now increasingly participating in newer
ways with the private sector for better delivery of services. Several infrastructure projects
are now undertaken in the Public Private Partnership (PPP) mode that involves transfer of
valuable public assets (such as mines and oilfields), investment and/or revenue sharing
between the Government and the private sector. Many of these newer structures are presently
outside the ambit of the CAG. This reduces oversight and creates avenues for corruption.
Therefore, the scope of the CAG's powers must be expanded to include such arrangements.
However, we must be careful of overreach. The expanded remit of the CAG should not
deter participation of the private sector. Private enterprises are likely to be wary of excessive
intrusiveness in their decision making processes, and rightly so. Moreover, the CAG may
not have the required sectoral insight to question the commercial decisions taken by the
management.
In this Bill, a balance has been sought. The power of the CAG has been restricted to
the audit of transactions that are "prima facie related to the contractual agreement or
arrangement to ensure that the interest of the concerned Government or Governments by
way of sharing of cost, revenue or profit is protected."
(3) Gives additional powers to the CAG to seek accounts and information
The current Act does not prescribe any time limits for responding to CAG's requests
for information. It does not prescribe any penalties either. Often, this is misused to avoid

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scrutiny. Countries such as Australia and New Zealand pre-empt this by specifically
empowering the CAG in this respect.
This Bill seeks to confer additional powers on the CAG to call for information, access
premises, examine employees under oath and use penal provisions under the RTI Act for
public entities. For private entities, the Bill also empowers CAG but requires it to go through
existing legal channels such as seeking a warrant from the Courts before conducting any
search and seizure operations. In this way, the rights of the private entities are also protected.
(4) Re-defines 'substantially financed' to bring more bodies within the ambit of the
CAG
The current Act empowers the CAG to audit all expenditure of bodies that are
'substantially financed' from Government resources. A body is considered 'substantially
financed' if seventy-five per cent. of its total expenditure is received from the Government
and the amount received is greater than rupees twenty-five lakh. This Bill lowers the
requirement to fifty-one per cent.
(5) Allows more scrutiny in cases where organisations receive loans or grants from
the Government
To bring in more accountability and to limit the siphoning of public money, this Bill
also empowers the CAG to (a) scrutinise the 'effectiveness' of the criteria used for selecting
organisations; and (b) conduct limited audits to ascertain whether the money was spent on
the tasks for which it was sanctioned.
(6) Prescribes time limits for laying reports of the CAG in the Legislature
Currently, Government often delay the tabling of reports which are politically
inconvenient. The report of the CAG on the Delhi Metro Rail Corporation in 2008 was not
tabled for a year. This Bill makes it mandatory for the Government to lay the reports of the
CAG before Parliament or the State Legislature within seven days of the first sitting on
commencement of the session.
Empowering the CAG is the first step in containing the menace of corruption that is
increasingly becoming entrenched in our system. This Bill is a step in that direction.

NEW DELHI; BAIJAYANT PANDA

November 12, 2014.

PRESIDENT'S RECOMMENDATION UNDER ARTICLE 117 (1)

OF THE CONSTITUTION

————

[Copy of letter No. 8(5)/B(R)/2015 dated 28 July, 2016 from Shri Arjun Ram Meghwal,
Minister of State in the Ministry of Finance and Corporate Affairs to the Secretary General,
Lok Sabha].
The President, having been informed of the subject-matter of the Comptroller and
Auditor General's (Duties, Powers and Conditions of Service) Amendment Bill, 2016
(Amendment of section 13, etc.) by Shri Baijayant Panda, M.P., has recommended the
introduction of the Bill in Lok Sabha under article 117(1) of the Constitution.
 ANNEXURE
EXTRACT FROM THE COMPTROLLER AND AUDITOR GENERAL'S (DUTIES, POWERS AND
CONDITIONS OF SERVICE) ACT, 1971
(56 OF 1971)
* * * * * * *
2. In this Act, unless the context otherwise requires,— Definitions.

(a) * * * * *
(b) "appropriation accounts" means accounts which relate the expenditure brought to
account during a financial year, to the several items specified in the law made in accordance
with the provisions of the Constitution or of the Government of Union Territories Act, 1963,
for the appropriation of moneys out of the Consolidated Fund of India or of State, or of a
Union territory having a Legislative Assembly, as the case may be;
(c) "Comptroller and Auditor General" means the Comptroller and Auditor General of
India appointed under article 148 of the Constitution;
* * * * * * *
13. It shall be the duty of the Comptroller and Auditor General— General
provisions
(a) * * * * *; relating to
audit.
(b) to audit all transactions of the Union and of the States relating to Contingency
Funds and Public Accounts;
(c) * * * * *.
14. (1) * * * * * Audit of
receipts and
Explanation.—Where the grant or loan to a body or authority from the Consolidated expenditure of
Fund of India or of any State or of any Union territory having a Legislative Assembly in a bodies or
authorities
financial year is not less than rupees twenty-five lakhs and the amount of such grant or loan substantially
is not less than seventy-five per cent. of the total expenditure of that body or authority, such financed from
body or authority shall be deemed, for the purposes of this sub-section, to be substantially Union or State
financed by such grants or loans, as the case may be. Revenues.

(2) Notwithstanding anything contained in sub-section (1), the Comptroller and Auditor
General may, with the previous approval of the President or the Governor of a State or the
Administrator of a Union territory having a Legislative Assembly, as the case may be, audit
all receipts and expenditure of any body or authority where the grant or loan to such body or
authority from the Consolidated Fund of India or of any State or of any Union territory
having a Legislative Assembly, as the case may be, in a financial year is not less than rupees
one crore.
(3) Where the receipts and expenditure of any body or authority are, by virtue of the
fulfilment of the conditions specified in sub-section (1) or sub-section (2), audited by the
Comptroller and Auditor General in a financial year, he shall continue to audit the receipts
and expenditure of that body or authority for a further period of two years notwithstanding
that the conditions specified in sub-section (1) or sub-section (2) are not fulfilled during any
of the two subsequent years.

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Functions of 15. (1) Where any grant or loan is given for any specific purpose from the Consolidated
Comptroller
Fund of India or of any State or of any Union territory having a Legislative Assembly to any
and Auditor
General in the authority or body, not being a foreign State or international Organisation, the Comptroller
case of grants and Auditor General shall scrutinise the procedures by which the sanctioning authority
or loans given satisfies itself as to the fulfilment of the conditions subject to which such grants or loans
to other
were given and shall for this purpose have right of access, after giving reasonable previous
authorities or
bodies. notice, to the books and accounts of that authority or body:
Provided that the President, the Governor of a State or the Administrator of a Union
territory having a Legislative Assembly, as the case may be, may, where he is of opinion that
it is necessary so to do in the public interest, by order, relieve the Comptroller and
Auditor General, after consultation with him, from making any such scrutiny in respect of
any body or authority receiving such grant or loan.
* * * * * * *
Audit of 16. It shall be the duty of the Comptroller and Auditor General to audit all receipts
receipts of which are payable into the Consolidated Fund of India and of each State and of each Union
Union or of
States.
territory having a Legislative Assembly and to satisfy himself that the rules and procedures
in that behalf are designed to secure an effective check on the assessment, collection and
proper allocation of revenue and are being duly observed and to make for this purpose such
examination of the accounts as he thinks fit and report thereon.
* * * * * * *
Powers of 18. (1) The Comptroller and Auditor General shall in connection with the performance
Comptroller of his duties under this Act, have authority—
and Auditor
General in (a) to inspect any office of accounts under the control of the Union or of a State,
connection including treasuries and such offices responsible for the keeping of initial or subsidiary
with audit of
accounts.
accounts, as submit accounts to him;
(b) to require that, any accounts, books, papers and other documents which deal
with or from the basis of or are otherwise relevant to the transactions to which his
duties in respect of audit extend, shall be sent to such place as he may appoint for his
inspection;
(c) to put such questions or make such observations as he may consider
necessary, to the person in charge of the office and to call for such information as he
may require for the preparation of any account or report which it is his duty to prepare.
(2) The person in charge of any office or department, the accounts of which have
to be inspected and audited by the Comptroller and Auditor General, shall afford all facilities
for such inspection and, comply with requests for information in as complete a form as
possible and with all reasonable expedition.
* * * * * * *
Laying of 19A. (1) The reports of the Comptroller and Auditor General, in relation to the accounts
reports in of a Government company or a corporation referred to in section 19, shall be submitted to the
relation to
accounts of Government or Governments concerned.
Government
(2) The Central Government shall cause every report received by it under sub-section
companies and
corporations. (1) to be laid, as soon as may be after it is received, before each House of Parliament.
(3) The State Government shall cause every report received by it under, sub-section (1)
to be laid as soon as may be after it is received, before the Legislature of the State.
Explanation.—For the purposes of this section, "Government" or "State Government",
in relation to a Union territory having a Legislative Assembly, means the Administrator of the
Union territory.
* * * * * * *
 LOK SABHA

————

BILL
further to amend the Comptroller and Auditor General's (Duties, Powers and Conditions of
Service) Act, 1971.

————

(Shri Baijayant Panda, M.P.)

GMGIPMRND—2485LS(S3)—03.11.2016.