The Delhi High Court has declined to halt a proposal by the Delhi government to conduct a federal audit of two major power distribution utilities, ruling that the legal challenge brought by the companies is premature.
A vacation bench of Justice Tejas Karia dismissed a petition filed by BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd on Monday. The court determined that the government’s June 6 notice, which proposes a Comptroller and Auditor General of India audit of the private utilities, does not contain any adverse findings and therefore does not warrant judicial intervention at this stage.
No Adverse Findings at Current Stage
The court observed that the government’s notice simply initiates a statutory consultation process, giving the power distribution companies an opportunity to submit their representations and appear for a formal hearing.
According to the ruling, the proceedings initiated under Section 20(3) of the CAG Act must be decided by the competent authority after giving the petitioners a fair hearing. The court noted that the authority should evaluate all submissions on their merits without being influenced by any observations made during this dismissal.
The private power distributors had challenged the notice, claiming it was invalid, illegal, and contrary to established judicial precedents. They argued that previous rulings, including an existing Supreme Court judgment, legally barred such an audit.
Legal Ground for Federal Audit
The High Court rejected those arguments, stating that the notice is a standard step to fulfill the statutory requirement of offering the utilities a hearing before the Lieutenant Governor can formally entrust an audit to the CAG.
Furthermore, the court ruled that there was no mischaracterization of prior judicial decisions and no legal barrier preventing either the Delhi government or the Delhi Electricity Regulatory Commission from initiating a CAG audit. The judge clarified that the Supreme Court does not prohibit an audit of these companies, provided it is executed in accordance with the provisions of the CAG Act.
Public Interest and Financial Scrutiny
The Delhi government opposed the utilities’ petition, arguing that it was premature and that an independent audit of the companies is necessary to protect the public interest.
According to government representatives, the audit aligns with directions from the Supreme Court that call for an intensive examination of the circumstances surrounding the utilities’ continued operations without recovering their regulatory assets. The administration maintained that an independent financial review is essential to verify the true financial health of the companies and to address potential risks of related-party transactions or the unauthorized diversion of funds.
