The Delhi High Court after dismissing appeals by the sector lobby has ruled that telecom companies will have to face a CAG audit of their revenues. The Court said that CAG can conduct a revenue audit of the accounts of private companies.
The Delhi High Court has upheld that the Comptroller and Auditor General of India is competent to conduct a revenue audit of accounts of private telecom companies that have entered into licensing agreements to provide telecom services in the country.
The court order says, “In a very real sense the licensees are the accountant of the Central Government with respect to the complete, accurate and honest maintenance of the books as to any transaction(s) involving revenue…. under the terms of the licence agreement the licensee has undertaken the accounting responsibility for the Central Government as well as itself. Thus, the accounts of the licensees, 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.”
The court however clarified that the CAG would not conduct any enquires into aspects like faithfulness, wisdom and economy in expenditures. Remember that in 2010, in view of the fact that telecom companies have a revenue sharing agreement with the government, the CAG had sought revenue details of telcos to examine if they had under-reported their revenues.
Gopal Jain, Lawyer, Cellular Operators Association of India, however added, “we were concerned with the pure matter of legal and constitutional interpretation and obviously a constitutional authority will have to function within its limits. You cannot sidestep the real question that arises on the basis of perception when there are adequate safeguards available both under the license and with the exercise of regulatory powers of the TRAI. We will have to consider the judgment in greater detail, if there are legal errors then naturally the remedy which is available to any litigant will also be considered.”
The Delhi High Court will have far reaching implications not just for the telecom services sector but even for private companies involved in other sectors such as power and aviation where companies have entered into revenue sharing agreements with the government.
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