In a setback to the Arvind Kejriwal government, the Delhi High Court on Friday quashed the executive decision to get the accounts of the capital's three private power distribution companies (discoms) scrutinised by the CAG.
Chief Minister Kejriwal, however, said the setback was "temporary" and that the Supreme Court will be moved in appeal.
A division bench of Chief Justice G. Rohini and Justice R.S. Endlaw said: "There can be no other audit at the instance of state government" as there is already a watchdog, the Delhi Electricity Regulatory Commission (DERC), with powers to audit the accounts of discoms.
"All the power of state government relating to electricity now stand vested in DERC," it said, slamming Kejriwal's decision to audit the discoms as a "misguided exercise".
The high court order upheld the plea of the three discoms -- Tata Power Delhi Distribution, BSES Rajdhani Power and BSES Yamuna Power -- contesting the Delhi government's January 7, 2014 order to get their accounts scrutinised by the Comptroller and Auditor General of India.
They are private companies, and not government entities, and as such they do not come within the purview of the CAG, they maintained.
"The Delhi government, instead of strengthening the DERC, we are constrained to observe, has undertaken a misguided exercise by issuing a direction to the CAG to audit the accounts of the discoms when the report of such audit would not have any sanctity in law for achieving the desired result," the high court verdict reads.
"We are unable to decipher anything which DERC cannot and which CAG can unearth. DERC is neither found to be helpless nor dependent on the balance sheet filed by the discoms," it added.
Audit of the discoms under the prevalent legal regime cannot serve the object of bringing down power tariff, "even if were it to find that the allegations (of inflating their previous losses) against the discoms to be true", the high court said.
It said after re-enactment of law relating to the power sector and having substituted the powers of the state government with that of the regulator, it was unable to find any purpose which a report of the official auditor would serve under direction of the NCR government.
"Once the discoms, before incurring any expenditure above a limit, are required to obtain the prior approval of the DERC, and therefore, once the DERC approves the said expenditure, we fail to see how the CAG can be allowed to arrive at a different conclusion," the bench said in its 139-page judgment.
The discoms, which supply power to consumers in the capital, argued that they were private companies and hence not in the ambit of such an audit by the CAG. They alleged that the Delhi government's order was a "political ploy" and was passed with "malice in law" without giving them an opportunity to be heard.
A draft report in August after the CAG's audit into their books had reportedly said they inflated their previous losses.
The three private firms had come into being in 2002 when the then Delhi government decided to privatise power distribution. Delhi discoms are a 51:49 percent joint venture between the private companies and the Delhi government.
The Kejriwal government had argued that a CAG audit of private discoms was necessary to clarify alleged anomalies in their accounts and that it was not aimed at interfering with their functioning.
Reacting to Friday's decision, Kejriwal said: "The "Delhi High Court order is a temporary setback for the people of Delhi. Delhi government will soon file an appeal in SC." In a series of tweets, he added: "I am committed to providing cheap electricity to people of Delhi. Our fight will continue."
His party colleague and legislator Saurabh Bhardwaj said the official auditor had already probed the books of these three companies and had found discrepancies. "I think all of you know that CAG audit is already over and it came to be known that the power discoms duped the people of Delhi of around Rs.8,000 crore."
Welcoming the court order, a spokesperson for the two BSES companies said power distribution was a regulated business with in-built checks and balances.
"The entire process is transparent and scrutinized by DERC on a regular basis," the spokesperson said in a statement, adding they would work with all stakeholders to ensure reliable power and services to consumers.
In a similarly-worded statement, the Tatas power distribution arm said the company has maintained a strong track record of ethical practices and followed all stipulated norms and best practices, keeping the consumer interest at the focus. In the process, it added, the highest level of transparency had been maintained in compliance with the law of the land.
