SC stays planned CAG audit of power discoms in Capital

The Supreme Court on Friday stayed a proposed audit of Delhi's three private power distribution companies by the Comptroller and Auditor General (CAG), observing that the legality of the Delhi Electricity Regulatory Commission's (DERC) decision to appoint the national auditor for the task raises an arguable question that requires examination.

- Utkarsh Anand

The interim order comes as a setback for the Rekha Gupta-led Delhi government, which had made the CAG audit a key plank of its effort to scrutinise the finances of the Capital's private discoms before allowing recovery of over ₹38,500 crore in regulatory assets (RAs) from consumers.

A bench of justices KV Viswanathan and Shree Chandrashekhar passed the order while hearing an appeal by DERC against an April ruling of the Appellate Tribunal for Electricity (APTEL), which had held that entrusting the audit to CAG was contrary to the statutory framework governing electricity distribution and had instead directed the regulator to appoint an independent chartered accountant (CA) to conduct a strict audit.

“The present civil appeal concerns directly the issue whether the action of DERC in initiating the process of audit [of the distribution companies] by CAG is legally permissible,” noted the bench.

Issuing notice on DERC’s appeal, the court stayed both the APTEL direction appointing a CA and the fresh CAG audit ordered by the Delhi government earlier this month.

“Till further orders, there shall be a stay of the APTEL direction on appointing any CA for audit. CAG shall also not proceed with audit in the meantime,” the bench directed.

The court further ordered that “status quo on all aspects” be maintained until the matter is taken up again on July 15 by the same bench which had in August 2025 settled the framework for phased liquidation of RAS till 2031, while also directing "strict and intensive audit" of the circumstances in which the discoms continued without recovery of the regulatory asset.