The Delhi High Court recently dismissed a petition filed by power distribution companies BSES Rajdhani Power and BSES Yamuna Power, challenging a notice from the Delhi government calling for an audit by the Comptroller and Auditor General (CAG). Justice Tejas Karia ruled that the notice issued on June 6 was simply a show-cause notice and did not represent an adverse order that necessitated judicial intervention at this point, rendering the petition premature.
Justice Karia highlighted, “The Impugned Notice merely affords the Petitioners an opportunity to submit their representation and to appear for hearing within the timelines stipulated therein. The Impugned Notice does not record any adverse finding against the Petitioners warranting any interference on merits at this stage in exercise of writ jurisdiction. The present Petition is, therefore, premature.”
The conflict emerged after the Delhi government initiated actions under Section 20(3) of the CAG Act, seeking an audit of the two power distribution companies by the CAG. BSES argued that this move contravened previous judicial decisions and the orders of the Appellate Tribunal for Electricity (APTEL). The companies further contended that the planned audit was an effort to revisit settled tariff issues and delay the settlement of regulatory assets (RA) – unrecovered costs accumulated over the years.
BSES asserted that the Supreme Court’s 2025 decision on regulatory assets necessitated an audit of the circumstances leading to the prolonged non-recovery of RA, rather than a direct audit of the distribution companies themselves. In contrast, the Delhi government maintained that the proposed CAG audit was in the public interest, aiming to scrutinize how distribution companies accrued substantial regulatory assets without recovery. The government emphasized the importance of transparency, citing that consumers ultimately bear these costs through tariffs and raised concerns about financial transactions and potential fund diversion.
Justice Karia, after considering the arguments, concluded that the Supreme Court’s directions for a “strict and intensive audit” were broad enough and did not exclude examination of the records, conduct, accounts, or financial position of the discoms. The Court further noted that the judgment did not prevent the CAG from conducting such an audit, provided it adhered to the CAG Act’s provisions.
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The Bench dismissed the petition but clarified that the authority must still consider BSES’s objections and ensure a hearing before making any final decision on entrusting the audit to the CAG. Senior Advocate Sandeep Sethi and Buddy Ranganathan, along with advocates Amit Kapur, Alok Kumar, Anupam Varma, Gauhar Mirza, Varun Chandiok, Aditya Gupta, Aditya Ajay, Yash Srivastava, Shreya Sethi, Krishna Gambir, Adamya Ojha, and Mahima Kaur represented BSES Rajdhani and BSES Yamuna.
Additional Solicitor General (ASG) SV Raju, with advocates Annam Venkatesh, Shaurya Sarin, and Aditi Andley, represented the Delhi government. Senior Advocate Sanjeev Kumar Dubey, with advocates Anirudh and Shah Rukh Khan, represented the Delhi Electricity Regulatory Commission (DERC). Advocates Dr. SS Hooda, Aditya Hooda, and Rashmi Rawat represented the CAG.
