Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
Appellate Tribunal for Electricity (Aptel): In a suo motu proceeding under Section 121, Electricity Act, 2003, (EA) the Division Bench of Seema Gupta, Officiating Chairperson and Virender Bhat, Judicial Member, set aside the approval for entrustment of audit of Delhi DISCOMs to the Comptroller and Auditor General (CAG) of India, holding that the same was in violation of statutory requirements under Section 20, Comptroller and Auditor-General’s (Duties, Powers and Conditions of Service) Act, 1971 (CAG Act). The Tribunal further rejected the request of the Delhi Electricity Regulatory Commission (DERC) for extension of time to commence liquidation of regulatory assets and directed initiation of recovery within a fixed timeline.
Background
The Tribunal, in exercise of its suo motu jurisdiction, examined the validity of DERC’s action in initiation of audit of Delhi DISCOMs by CAG against the backdrop of the Supreme Court’s directions in its judgment dated 6 August 2025 (RA judgment). The RA judgment directed existing regulatory assets to be liquidated in a maximum period of four years starting from 1 April 2024, which later on was increased to seven years and also directed the Regulatory Commissions to undertake strict and intensive audit into circumstances of the accumulation of such assets by distribution companies.
In compliance, DERC initiated steps to entrust the audit of DISCOMs to CAG and obtained approval from the Lt. Governor of Delhi. The DISCOMs objected to such entrustment as being contrary to law. The Tribunal then directed DERC not to proceed with the audit, and it is in this backdrop that the present issue has arisen. DERC also sought extension of time for commencement of liquidation of regulatory assets on account of pendency of true-up exercise.
Analysis
It was observed by the Tribunal that the Supreme Court, while directing audit, had not specified that such audit must be conducted by CAG and therefore the contention that CAG audit flowed directly from the said judgment was untenable.
Powers and Duties of CAG
The Tribunal first examined powers and duties of CAG set out in Article 149, Constitution of India and observed the words “body or authority” in the provision to be of wide amplitude and extend to “private body and authority also” and accordingly these would cover the DISCOMs also. Tribunal then examined the circumstances and extent to which CAG can audit a private body or authority for which it analysed Section 20, CAG Act, and found that CAG is not competent to audit every private body or authority and such audit is permissible only where —
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the President/Governor/Administrator directs the audit under Section 20(1);
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such direction is issued in consultation with CAG; and
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the terms of audit are settled by mutual agreement between the State/Central Government and the CAG.
Mandatory Preconditions under Section 20(3), CAG Act
The Tribunal noted that Section 20(3) is very material, as it specifies two mandatory conditions to be satisfied, namely, that the audit must be expedient in public interest and can be directed only after giving an opportunity of hearing to the concerned body or authority, therefore, for entrustment of audit of the DISCOMs, these twin requirements must be examined.
The Tribunal found that no material was placed to show that the Lt. Governor had recorded satisfaction regarding public interest before granting approval. It further held that DERC had proceeded in a routine manner merely citing the Supreme Court judgment, without complying with requirement under Section 20(3), CAG Act. The Tribunal observed that the Supreme Court intended the audit to examine only the circumstances behind non-recovery of regulatory assets and not a comprehensive enquiry into the entire accounts and financial affairs of the DISCOMs.
Tribunal’s Supervisory Jurisdiction under Section 121, Electricity Act, 2003
The Tribunal rejected the contention that Section 121 does not empower the Tribunal to examine DERC’s action holding that under Section 121 the Tribunal has supervisory jurisdiction to ensure compliance with statutory provisions while monitoring Supreme Court directions. Since DERC’s action was contrary to Section 20, CAG Act, it was held unsustainable, and the approval dated 5 March 2026 was quashed.
Referring to the RA judgement, the Court noted that the Supreme Court had observed that by engrafting Section 121 in the statute, the Parliament has empowered the Tribunal with an important jurisdiction and powers which are intended to ensure that in the functioning of the Regulatory Commissions, there is efficiency in administration, expertise through human resource, integrity through transparency and accountability and responsibility through review audit and assessment. Further, for enforcing these values, Section 121 empowers the Tribunal to issue such orders, instructions and directions as is deemed fit to the Regulatory Commissions for performance of their statutory functions under the Act. Furthermore, under Section 121, the Tribunal has the power and duty to issue directions to Regulatory Commissions when they fail to comply with the Act, Rules or Regulations, fail to perform their statutory functions and duties, or perform the same negligently, improperly or poorly. Such directions are intended to secure compliance in letter and spirit, with the provisions of the Electricity Act.
Broad Nature of the Proposed Audit
The Tribunal observed that though DERC submitted the broad scope and objectives of the proposed audit, it is unclear whether CAG agreed to them, moreover, no opportunity of hearing was given to the DISCOMs, nor was any “public interest” disclosed to them, thereby denying them a chance to represent against the audit. Hence, it is held that the DISCOMs were not afforded an opportunity to make representations regarding the proposed CAG audit.
No Link Between Audit and Liquidation of Regulatory Assets
The Tribunal noted, in RA judgment the Supreme Court fixed a timeline of seven years for liquidation of regulatory assets, which are already known to DERC and that the extent of such liquidation is not dependant by the intensive audit, and the Court did not envisage any linkage between audit outcomes and liquidation or tariff increase and thus, did not found it expedient to entrust CAG for the audit.
On the application seeking extension of time for commencement of liquidation of regulatory assets, the Tribunal found no plausible reason was there to begin the process even without final true-up orders. It noted that the Commission had repeatedly delayed the process despite earlier undertakings and found the request for extension unreasonable.
Decision
The Tribunal directed DERC to appoint a chartered accountant within one week and complete the audit within three months thereafter and for the extension of time, the Tribunal rejected the prayer for extension and directed DERC to commence liquidation of regulatory assets within three weeks, while granting time till 30 June 2026 only for issuance of true-up order for FY 2023-2024.
[In Suo-Moto action under Section 121 of the EA v. Central Electricity Regulatory Commission, O.P. 1 of 2025, decided on 20-4-2026]
Advocates who appeared in this case:
For the petitioner: Anushree Bardhan Shikha Ohri
For the respondent: Shri Venkatesh, Ashutosh K. Srivastava, Nihal Bhardwaj, Counsel, and Aashwyn Singh, Senior Associate.
