The Telegraph
Monday , February 3 , 2014
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Supreme Court seeks responses from govt, CAG on pleas against audit of pvt telephony firms

New Delhi, Feb 3 (PTI): The Supreme Court has ought the responses of the Union government and the Comptroller & Auditor General of India (CAG) on two separate pleas of private telecom majors against a Delhi High Court verdict holding that the top auditor was empowered to conduct revenue audits of the firms.

A bench of justices K S Radhakrishnan and Vikramajit Sen, which also issued a notice to the Telecom Regulatory Authority of India (TRAI), said “the issue relates to the important question of law and requires hearing. Fix it for hearing on February 11.”

Senior advocate Harish Salve, appearing for telecom firms, said “the (HC) judgement is erroneous. The accounts of private firms cannot be audited by CAG under section of 16 of the CAG Act.”

He also said that “meanwhile, no coercive action be taken against the petitioners (telecom companies).”

The counsel appearing for the government opposed the plea of telecom operators, saying that, in private-public partnership ventures, the revenue generated by the licensees are required to be shared with the Union government in line with the licences agreements and the High Court had rightly held that their revenue audits can be done by CAG.

He also told the court that no coercive action would be taken against the telecom firms till the next date of hearing.

Salve referred to the CAG provision and said that, by the logic given by the high court, every individual income tax assessee who contributes to the consolidated fund of the Union can be subjected to CAG audit.

“This is a wrong interpretation,” he said.

The Association of Unified Telecom Service Providers (AUTSP) and Cellular Operators Association of India (COAI), in their pleas, have sought setting aside of the High Court verdict.

They have also sought an interim stay on the operation of the order of their CAG audit.

The High Court had upheld the validity of laws empowering CAG to conduct revenue audits of private telecom firms.

The court had said that, according to the terms of license agreements, the telecom firms had undertaken the accounting responsibility on behalf of the government also and their accounts, in relation to revenue receipts, can be termed as the accounts of the Union government and hence, they would be the subject matter of CAG's audit.

The AUTSP, in its plea, said “the only reason given by the High Court --- that the petitioners were the accountants of the central government -- is untenable.”

“It is evident that CAG has not been assigned the job of auditing the accounts of the private companies either under the constitutional provisions or under the CAG Act and thus the High Court, while rendering the impugned judgement, overlooked the provisions,” it said.

“On a plain reading of section 16 of the CAG Act, the jurisdiction of CAG is limited to auditing the accounts of 'all the receipts which are payable into the Consolidated Fund of India and each state and each union territory ..,” the petition said, adding the legal provisions cannot be extended to the audit of the accounts of private firms.

The High Court had said that, according to Article 149 of the Constitution (which deals with CAG), section 16 of the CAG Act and Rule 5 (b) of the TRAI, Service Providers (Maintenance of Books of Accounts and Other Documents) Rules 2002, the revenue receipts of private telecom companies can be audited by the top auditor.

“We conclude by holding that neither Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules 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 (power of CAG) of the Constitution of India,” the High Court had said.

Under the terms of the license agreement, the licensee telecom firms have undertaken the accounting responsibility for the central government as well as themselves and thus their accounts, in relation to the revenue receipts, can be said to be the accounts of the central government and thus subject to a revenue audit as per Section 16 of the CAG Act, it had said.

The High Court had asked CAG to confine its audit ”pertaining to the receipts (of telecom firms) and no more.”