Supreme Court Orders Status Quo on Delhi Discoms Audit
The Supreme Court of India has temporarily halted the audit of Delhi’s electricity distribution companies (discoms) by the Comptroller and Auditor General (CAG), as well as by any chartered accountants, pending a review of its own prior judgment. On Friday, a bench comprising Justices KV Viswanathan and Shree Chandrashekhar issued this directive while examining appeals by the Delhi Electricity Regulatory Commission (DERC) against the Appellate Tribunal for Electricity (APTEL) orders.
The controversy stems from APTEL’s decision, which stated that DERC could not delegate the audit to the CAG and should instead appoint an independent chartered accountant. The Supreme Court has put a hold on paragraph 40 of APTEL’s judgment, which directed the DERC to appoint a chartered accountant. It further instructed that the CAG should not advance with the audit.
The Background of the Dispute
This legal challenge is connected to an August 2025 Supreme Court judgment concerning tariff orders issued by DERC between 2011 and 2014. The Court had noted that regulatory assets had accumulated to a staggering ₹1.5 lakh crore nationwide, with Delhi accounting for nearly ₹27,200 crore. This situation, according to the Court, distorted tariff determination and unfairly burdened future consumers.
To address this, the Supreme Court mandated electricity regulatory commissions to ensure tariffs were largely cost-reflective and to set timelines for clearing regulatory assets while preventing future accumulation. Importantly, the Court insisted on a comprehensive audit to understand why distribution companies failed to recover regulatory assets, tasking APTEL with overseeing compliance under Section 121 of the Electricity Act.
Legal Challenges and Directions
Following these directives, the Lieutenant Governor of Delhi approved a proposal on March 5, 2026, for the CAG to conduct the audit. However, APTEL ruled this decision as inconsistent with the statutory framework, quashed the proposal, and instructed the DERC to appoint an independent chartered accountant within a week. DERC’s subsequent review petitions were rejected, prompting the current appeals to the Supreme Court.
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During the hearing, Solicitor General Tushar Mehta, representing DERC, argued that the audit was crucial before any recovery of regulatory assets from consumers, as per the Supreme Court’s August 2025 judgment. He emphasized that the audit was integral to the Court’s mechanism. On the other side, Senior Advocate Abhishek Manu Singhvi, representing the discoms, contended that the audit and recovery issues were distinct, focusing the appeal solely on the audit’s conduct.
Next Steps
The Supreme Court acknowledged the need to interpret its August 2025 judgment, thus referring the matter to the Chief Justice of India for assignment to an appropriate bench. The case is scheduled for hearing on July 15, with interim orders directing that neither the CAG nor a chartered accountant proceed with the audit.
