In a setback to the Delhi Government, the Supreme Court on Friday stayed the CAG audit of three private power distribution companies (discoms) against the backdrop of a staggering Rs 38,500 crore accumulated over the years as regulatory assets (RAs) to be recovered from consumers in the national capital.
A Bench of Justice KV Viswanathan and Justice Shree Chandrashekhar ordered a status quo on the CAG audit, saying the legality of the power regulator Delhi Electricity Regulatory Commission’s (DERC) decision to appoint the CAG gave rise to questions that needed a judicial determination. “Till further orders, there shall be a stay of the Appellate Tribunal for Electricity (APTEL) direction on appointing any chartered accountant for audit. The CAG shall also not proceed with the audit in the meantime,” it ordered.
Issuing notice to the discoms, the Bench posted the matter for hearing on July 15, when the Commission’s petition will be taken up for hearing.
The order came on a petition filed by the Commission challenging an order of the APTEL, which held in April that the CAG audit of discoms was contrary to the statutory framework. The APTEL had directed the Commission to appoint an independent chartered accountant for the audit.
This was the first time the Delhi Government ordered an audit of private discoms by the Comptroller and Auditor General (CAG) since the privatisation of electricity distribution in the national capital in 2002.
Earlier, a Bench led by Justice PS Narasimha had directed that the regulatory assets, worth Rs 27,200 crore, be paid within three years to Delhi’s three private discoms. The regulatory assets (RAs) have risen sharply, reaching Rs 12,993 crore for BSES Rajdhani Power Ltd (BRPL), Rs 8,419 crore for BSES Yamuna Power Ltd (BYPL) and Rs 5,787 crore for Tata Power Delhi Distribution Ltd (TPDDL) as on March 31, 2024, totalling Rs 27,200 crore, it had said.
The 2025 verdict came on the petitions filed by three power distribution companies against the Commission’s tariff orders that led to the ballooning of regulatory assets.
On Friday, Solicitor General Tushar Mehta submitted on behalf of the Commission that the L-G had approved the CAG audit in compliance with the procedural requirements identified by APTEL. The government’s concern was to prevent consumers from being burdened with recovery of the regulatory assets before an audit established how such liabilities had accumulated, he said.
“The direction was to liquidate. Liquidation has been prohibited by the L-G yesterday. They want recovery without the audit. Consumers should not be saddled with the cost they will have to pay if they go ahead with the liquidation,” Mehta said. The Bench sought to know how the issue of liquidation of regulatory assets arose in an appeal confined to the legality of appointing the CAG as auditor.
On behalf of one of the discoms, senior counsel Abhishek Singhvi submitted that the issues of audit and recovery of regulatory assets were two different things. Referring to the 2025 judgment, Singhvi said the roadmap for liquidation of RAs had already been settled till 2031, and that the current proceedings were limited to the legality of the CAG’s appointment for audit.
Interim order procedural: Minister Sood
The Delhi Government on Friday said the Supreme Court’s interim order on the proposed CAG audit of private power distribution companies is only a procedural measure to maintain the status quo and should not be seen as a verdict in favour of the companies. Delhi Power Minister Ashish Sood said the Supreme Court has fixed the matter for hearing on July 15 when it will examine the legal framework governing the proposed audit. He added that the court has not declared the CAG audit illegal or accepted the discoms’ arguments. “The interim order passed by the SC is a procedural measure intended to preserve the status quo until the legal issues are examined in detail. It is neither a final verdict on the merits of the case nor a clean chit to the private power distribution companies.”
