The Delhi High Court has refused to interfere with a notice issued by the Delhi government proposing an audit of power distribution companies BSES Rajdhani Power Limited and BSES Yamuna Power Limited by the Comptroller and Auditor General (CAG), holding that the challenge was premature since no final decision had yet been taken.
Justice Tejas Karia observed that the communication issued on June 6 was only a show-cause notice seeking responses from the companies and did not contain any adverse findings. Since the notice merely invited objections and offered an opportunity of hearing, the Court found no reason to invoke its writ jurisdiction at this stage.
The controversy stems from the Delhi government’s move to initiate proceedings under Section 20(3) of the CAG Act for a possible audit of the two discoms. The companies argued that such an exercise would run contrary to previous judicial rulings and orders passed by the Appellate Tribunal for Electricity (APTEL).
According to BSES, the proposed audit was effectively an attempt to revisit tariff-related issues that had already been settled. The companies maintained that the focus should instead be on examining the reasons behind the long-standing accumulation of regulatory assets—costs that remain unrecovered over time. They relied on a 2025 Supreme Court ruling, contending that the apex court had called for scrutiny of the circumstances leading to the non-recovery of these assets rather than a direct audit of the distribution companies themselves.
The Delhi government defended its decision, asserting that a CAG audit was necessary in the public interest. It argued that regulatory assets ultimately translate into financial burdens borne by electricity consumers through tariffs, making transparency and accountability crucial. The government also pointed to concerns regarding financial dealings and the possible diversion of funds.
After considering the rival submissions, the High Court held that the Supreme Court’s direction for a “strict and intensive audit” was broad in scope and could extend to examining the records, accounts, conduct and financial affairs of the distribution companies. The Court noted that nothing in the apex court’s judgment barred the CAG from undertaking such an exercise, provided the statutory framework under the CAG Act was followed.
While dismissing the petitions, the Court clarified that the authorities must still evaluate the objections raised by BSES and grant the companies a proper hearing before arriving at any final decision on whether the audit should be entrusted to the CAG.
The ruling leaves the proposed audit process alive, but ensures that the discoms will have an opportunity to present their case before any final order is passed.
