Important Judgements

I. Arvind Gupta Vs. Union of India
(2013) Supreme Court Cases 293
(BEFORE Hon'ble Judges R.M. LODHAAND ANIL R. DAVE, JJ

Powers of CAG to Conduct Performance Audit

In this case, decided by the Supreme Court, the Petitioner submitted that CAG of India has no power to give performance audit report and the provisions in the Regulations of audit and accounts, 2007 framed under theCAG(DPC)Act, 1971 empowering the CAG to conduct performance audit is violative of the Constitution.

The Supreme Court held that the CAG's functions to carry out an examination into the economy, efficiency and effectiveness with which the Government has used its resources, is in-built in the 1971 Act. Performance Audit Reports prepared under the Regulations have to be viewed accordingly. The Court observed no unconstitutionality in the Regulations.

Extracts of the Judgement

Writ Petition(C) No. 393 of 2012, decided on October 1, 2012

1. We have heard Mr Santosh Paul, learned counsel for the petitioner. The learned counsel for the petitioner submits that the Comptroller and Auditor General of India (CAG) has no power to give performance audit report and the Regulations on Audit and Accounts, 2007 (for short “the Regulations”) framed under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (for short “the 1971 Act”) empowering CAG to conduct performance audit are violative of the Constitution.
2. Article 149 of the Constitution of India provides that CAG shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament. In pursuance of Article 149 of the Constitution, the 1971Act has been enacted. Amongst other provisions in the 1971 Act, Section 16 provides that:
   
   “16 Audit of receipts of Union or of States – It shall be the duty of the Comptroller and Auditor General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon.”
3. CAG's function to carry out examinations into economy, efficiency and effectiveness with which the Government has used its resources are inbuilt in the 1971 Act. Performance audit reports prepared under the Regulations have to be viewed accordingly. We find no unconstitutionality in the Regulations. Moreover, Article 151 of the Constitution provides that the reports of CAG relating to the accounts of the Union shall be submitted to the President, who shall cause them to laid before each House of Parliament and the reports relating to the accounts of a State shall be submitted to the Governor of the State who shall cause them to be laid before the legislature of the State. The audit reports which are submitted byCAGare, thus, subject to scrutiny by Parliament or the legislature of the State, as the case may be.
4. The writ petition is wholly misconceived and is dismissed accordingly.