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The Delhi High Court, on Monday, has given permission to the Comptroller and Auditor General of India (CAG) to audit the accounts private telecom companies.
The order was given by a bench of justices — Pradeep Nandrajog and V Kameswar Rao, on Monday, under the Telecom regulatory Authority of India (Trai) Act.
The decision may lead to more earning for the Government if the audit finds under-reporting of revenues by telcos. Private telecom operators, such as Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications, Uninor, pay between 1-8% of their revenue as spectrum usage charge to the Government, apart from the annual licence fee. If the CAG finds that private telcos earn more than what they report, companies will have to shell out more to the Government.
The decision of the Delhi High Court comes soon after CAG has received the mandate to audit power distribution companies from the Arvind Kejriwal-led Delhi Government.
The Delhi High Court has rejected separate petitions filed by industry bodies — Association of Unified Telecom Service Providers (AUSPI) and Cellular Operators Association of India (COAI) against the decision of the Telecom Disputes Settlement and Appellate Tribunal on the issue in 2010, arguing that CAG can’t audit private telecom companies.
Industry sources have said that the telecom operators may explore appealing before the Supreme Court against the order of the Delhi High Court. However, both COAI and Auspi did not respond to calls from Business Standard seeking comments on the issue.
“A small caveat by way of reminder to the Comptroller and Auditor General. In relation to the accounts of the Telecom Service Providers, the audit has to be only an audit pertaining to the receipts and no more. The Comptroller and Auditor General would not confuse himself with his wide all embracing power under Section 14(2) of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 which includes inquiries into aspects like faithfulness, wisdom and economy in expenditures,” the Delhi High Court bench said in its order dated 6 January.
The operators have earlier said that they have already put in place mechanism of special audit as envisaged in the license agreement between department of telecom and the companies. The two associations representing the telecom operators had also claimed they maintain accounts in line with the Trai rules and can’t be forced to furnish financials to CAG.
CAG had, in its written submissions, has cited the Constitution of India and the CAG Act 1971 to contend that it is duty bound to audit accounts of the Union and those “in relation to accounts of the Union.” It had also said that it has full power to audit accounts of the telecom firms to ensure that claims to receipts have been “pursued with due diligence by Union and no loss occurred due to fraud and efficiency and effectiveness of the transactions has been maintained.”
Earlier in June 2010, in an interim order, the Delhi High Court had asked the private telecom operators to submit their account books to CAG national auditor to determine any possible under-reporting of licence fees. But, the Delhi High Court had restrained CAG from demanding any additional documents except revenue-sharing details.
The order was later modified by SC which directed the firms to furnish their financials to CAG, but stopped the auditor from vetting the papers till HC decides the case.
