Supreme Court Halts CAG Audit of Delhi Power Discoms, Orders Status Quo Till July 15
Apex Court to Decide Whether the Comptroller and Auditor General Can Legally Audit Delhi’s Private Electricity Distribution Companies
In a significant interim order with far-reaching implications for India’s power sector, the Supreme Court on Friday stayed the Comptroller and Auditor General (CAG)-led audit of Delhi’s three private electricity distribution companies (discoms) and directed that the status quo be maintained until the next hearing on July 15. The case centres on a key constitutional and statutory question—whether the CAG has the legal authority to audit privately owned power distribution companies operating under a regulatory framework.
A Bench of Justices K.V. Viswanathan and Shree Chandrashekhar passed the interim order while hearing an appeal filed by the Delhi Electricity Regulatory Commission (DERC) against an April 2026 judgment of the Appellate Tribunal for Electricity (APTEL). The Tribunal had ruled that appointing the CAG as auditor was contrary to the statutory framework and instead directed DERC to appoint an independent chartered accountant for the audit.
The Supreme Court observed that the appeal raises an important legal issue regarding whether DERC’s decision to initiate a CAG audit of private discoms is legally permissible. Pending a detailed examination of this question, the Court ordered that neither the audit by the CAG nor the appointment of an alternative chartered accountant should proceed.
The dispute arises against the backdrop of nearly ₹38,500 crore in “Regulatory Assets” accumulated by Delhi’s three private discoms—amounts that may eventually be recovered from electricity consumers through future tariffs. The Delhi government recently ordered a “strict and intensive” CAG audit to examine how these liabilities accumulated and whether consumers should bear the financial burden.
Appearing for DERC, Solicitor General Tushar Mehta argued that the audit was necessary before consumers could be asked to pay the accumulated regulatory assets. He informed the Court that the Lieutenant Governor had approved the CAG audit after following the procedural requirements identified by APTEL and contended that transparency demanded an independent examination of the financial records.
On the other hand, senior advocate Abhishek Singhvi, representing the private discoms, argued that the issue before the Court was confined to the legality of appointing the CAG as auditor and not the broader question of liquidation of regulatory assets. He submitted that the statutory framework does not authorize such an audit by the national auditor in the present circumstances.
The controversy also revives a long-standing legal debate over the scope of the CAG’s constitutional powers. While the CAG is the constitutional authority responsible for auditing government accounts and entities covered under the Constitution and the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, the extent to which it can audit privately owned utilities operating under government regulation has remained contentious and has been the subject of previous litigation.
The Delhi government had approved the audit only a day before the Supreme Court’s interim order, making it the first proposed CAG audit of Delhi’s private power distribution companies since electricity distribution was privatized in 2002. The government maintains that the audit is necessary to ensure transparency and accountability in a sector that directly affects millions of consumers.
Legal experts believe the Supreme Court’s eventual ruling could become a landmark precedent on the limits of the CAG’s jurisdiction over private entities performing public functions. The judgment may also clarify the relationship between constitutional audit powers, sectoral regulators and private utility companies operating in regulated industries.
For now, the Supreme Court has frozen all audit-related proceedings until July 15, when it is expected to examine the legal validity of DERC’s decision and determine whether the CAG can lawfully audit Delhi’s private electricity distribution companies. The outcome is likely to have significant implications for regulatory oversight, electricity tariffs and public accountability in India’s power sector.
