SC: CAG can audit pvt firms in revenue-share deals with govt Telecom Verdict May Affect Other Sectors Like Coal Mining, Gas

New Delhi: In a path-breaking judgment, the Supreme Court on Thursday ruled that the Comptroller and Auditor General (CAG) can audit account books of private companies which are doing business using national wealth or natural resources on a revenue-sharing basis with the Centre. 

    Though the judgment has a direct bearing on telecom service providers doing business using spectrum on a revenue-sharing basis, it will also have a vital impact on private firms engaged in natural gas extraction and coal mining as these sectors too operate on the basis of variants of revenue-sharing models, mostly termed as production-sharing contracts. "When nation's wealth, like spectrum, is being dealt with either by the Union, state or its instrumentalities or even the private parties, like service providers, they are accountable to the people and to Parliament. Parliamentary democracy also envisages the accountability of the council of ministers to the legislature," said a bench of Justices K S Radhakrishnan and Vikramjit Sen. 
    The verdict comes at a time when the SC is dealing with the 2G spectrum scam, coal block allocation irregularities and also hearing arguments on MP Gurudas Dasgupta's petition alleging that Reliance and the Union petroleum ministry were hand-in-glove to give RIL 'windfall profit' causing consequent loss to exchequer.SC: Govt is sometimes hand in glove with licence providers 
    The bench said such audit by CAG was important when the Executive dealt with natural resources, like spectrum, which actually belonged to the people of India.Writing a judgment that paves the way for CAG to audit private telecom companies, Justice Radhakrishnan said the Supreme Court was of the firm belief that CAG must audit the accounts of private firms because "instances are not rare where even the Executive, at times, acts hand in glove with license providers, who deal with the natural resources, hence, necessity of parliamentary control over the resources." 
    Dismissing petitions by Association of Unified Tele Services Providers and Cellular Operators Association of India, the bench said: "CAG's examination of the accounts of service providers in a revenue sharing contract is extremely important to ascertain whether there is an unlawful gain to the service provider and an unlawful loss to the Union of India, because the revenue generated out of that has to be credited to the Consolidated Fund of India." 
    "Parliament should know how the nation's wealth has been dealt with by the Executive and even by the UAS License holders and the quantum of revenue generated out of the use of the spectrum and whether the same has been properly assessed, collected and accounted for by the Union and the license holders," the bench said. 
    The court rejected the telecom service providers' argument that CAG could not be given unhindered access to the account books and could look into only those relating to revenue sharing. "We are of the view that unless the underlying records which are in the exclusive custody of the service providers are examined, it would not be possible to ascertain whether the Union of India, as per the agreement, has received its full and complete share of revenue, by way of licence fee and spectrum charges," the bench said.