2014 Supreme(SC) 312

SUPREME COURT OF INDIA
K.S. Radhakrishnan, Vikramajit Sen, JJ.
Association of Unified Tele Services Providers & Others – Appellants
Versus
Union of India – Respondent
CIVIL APPEAL NO. 4591 OF 2014 (@ Special Leave Petition (Civil) No.1804 of 2014) WITH CIVIL APPEAL NO. 4592 OF 2014 (@ Special Leave Petition (Civil) No.2925 of 2014) WITH CIVIL APPEAL NO.10748 OF 2011 AND CIVIL APPEAL NO.10749 OF 2011
Decided On : 17-04-2014

IMPORTANT POINTS
Utilisation of natural resources including spectrum, and regulation of the utilization has to be public good by fair and reasonable methods.
Power of CAG under Article 149 cannot be taken away by Parliament.
Debates of Constituent Assembly are not the sole criteria to interpret Article 149.
CAG has to ascertain whether there is an unlawful gain to the Service Provider and unlawful loss to the Union of India.
Rule 5 of the TRAI Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 is not ultra vires.

Headnote:

       (a) Constitution of India – Articles 38, 39, 48, 48-A and 51-A(g) – Natural Resources – Spectrum as natural resources is owned by the State on behalf of the people – This is a scarce, finite and renewable natural resource susceptible to degradation in case of inefficient utilisation – Utilisation of this resource and regulation of the utilization has to be public good by fair and reasonable methods. (Para 3, 4)

       (2012) 3 SCC 1; (2012) 10 SCC 1; (1995) 2 SCC 161; (2010) 7 SCC 1 – Relied upon

       (b) Constitution of India – Article 149 – Powers of the CAG under Article 149 is a constitutional power in relation to accounts similar to judicial powers exercised by High Court under Article 226 or Supreme Court under Article 32 – Power of CAG under Article 149 cannot be taken away by Parliament – It is a basic structure of the Constitution. (Para 34)

       (c) Constitution of India – Article 148 r/w Section 16, Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 – CAG has to satisfy himself about observance of rules and procedures, securing effective check on the assessment, collection and proper allocation of revenue – CAG regulates accountability of the Executive to the Parliament in the field of financial administration. (Para 35, 36)

       (2013) 9 SCC 659; (2013) 1 SCC 393; (2013) 7 SCC 1 – Relied upon

       (d) Natural Resources like spectrum – The Union, the State or UAS dealing with natural resource of spectrum – Accountable to people and Parliament – Even Council of Ministers is accountable to the Parliament. (Para 37)

       (2001) 7 SCC 126; (1992) Suppl. 2 SCC 651 – Relied upon

       (e) Constitution of India – Article 149 read with Section 16, Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 and Rule 5(i)(ii), TRAI Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 – These provisions need to be given purposive interpretation while dealing with natural resource like spectrum – Constitution being a living organic thing, meaning and content of Article 149, like Fundamental Rights, has undergone change over the years – Debates of Constituent Assembly not the sole criteria to interpret Article 149. (Para 39)

       (2003) 4 SCC 399 – Relied upon

       (f) Constitution of India – Article 149 and Article 266 r/w Section 16, 1971 Act; and Rule 5, TRAI Rules 2002 – Article 266 requires all public moneys received to be credited to Consolidated Fund of India – CAG enjoined to carry out examination into the economy, efficacy and effectiveness of Union of India in using spectrum, and realizing entire licencee fee, spectrum charges – CAG has also to see whether audit has been correctly carried out under Clauses 22.5 and 22.6 of UAS Licence Agreement – Importantly, CAG has to ascertain whether there is an unlawful gain to the Service Provider and unlawful loss to the Union of India. (Para 41)

       (g) Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 – Section 13, 16 and 18 – Clause (b), section 13 – ‘Transaction’ and ‘relating to’ – Scope – UAS Licence holders agreement – Test to be applied – Is it a transaction of Union or State – Or, it relates to contingency public fund – Section 16 does not distinguish between revenue and non-revenue receipts – Audit of all transactions and receipts – Would include all transactions entered into by Union or State having nexus with Consolidated Fund and receipts having direct connection with Revenue sharing. (Para 43, 44, 45, 46)

       (h) Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 – Section 16 and 18(1)(b) – Revenue share receivable from Service providers payable into CFI – Ascertaining quantum – CAG entitled to seek record maintained in terms of rule 3, TRAI Rules 2002 and Cl. 22.1 and 22.2 of UAS Licence Agreement. (Para 48)

       (i) TRAI Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 – Rule 5 – Rule 5 obliges UAS providers to produce books of account to CAG to carry out audit as required under Article 149 of the constitution – Rule 5 therefore is consistent with Article 149 – CAG does not audit accounts of service providers but only examining all receipts to Union of India to ascertain whether the Union is getting its due share by way of licence fee and spectrum charges – Service providers bound to provide all the records and documents called for by the CAG (Para 49, 50, 51)

       (j) UAS Licence Agreement – Clauses 22.5 and 22.6 – Communication dated 16.3.2010 and 10.5.2010 – Seeking cooperation for Audit of service providers by the CAG – Neither audit by department under Clause 22.5, nor special audit under Clause 22.6 – Communication dated 16.3.2010 issued under clause 22.3 and not clause 22.5 or 22.6 – TRAI not to record any reasons. (Para 60, 62, 63, 64)

       (2007) 2 SCC 181; (2008) 14 SCC 151; 1969 (1) AER 208 – Referred

       (k) UAS Licence Agreement – Clauses 22.5 and 22.6 – Opinion to be formed under clause 22.5 – Purely subjective – Satisfaction of the licencee that its statements or accounts are inaccurate and misleading not required – Clause 22.6 an independent Clause having no relation with Clause 22.5 – Confers additional power on Licensor to conduct special audit – Audit conducted by the licensor or the licencee, has nothing to do with the audit conducted by CAG. (Para 68, 69)

       

       Facts of the case:

       The Court is called upon in these appeals to consider the scope and ambit of the powers and duties of the Comptroller and Auditor General of India (CAG), the Telecom Regulatory Authority of India (TRAI) and the Department of Telecommunications (DoT) in relation to the proper computation and quantification of Revenue in determining the licence fee and spectrum charges payable to Union of India under Unified Access Services (UAS) Licences entered into between DoT and the private service providers.

       On 28.01.2010, the TRAI issued a communication to one of the service providers for furnishing books of accounts to the Branch Audit Office of the Director General of Audit, Post and Telecommunication.

       The DoT later wrote a communication dated 16.03.2010 to one of the service providers, the subject matter of which reads “Audit and Telecom Service Providers by Comptroller & Auditor General”.

       One of the service providers objected to the DoT directive on the ground that “while DoT can call for our books of accounts, the audit of those does not fall within the purview of the C&AG”.

       The TRAI sent yet another communication on 21.05.2010 to one of the service providers with specific reference to “Furnishing of Books of Accounts to the Branch Audit Offices of the Director General of Audit, Post and Telecommunications”.

       Service providers, aggrieved by the stand of DoT and TRAI, filed Civil Writ Petition 3673 of 2010, challenging the legality of the above-mentioned notices before the Delhi High Court.

       The High Court examined the legality of the above-mentioned communications in the light of Rule 5 of the TRAI Rules, 2002, Section 16 of the CAG Act, 1971 and Article 149 of the Constitution of India read with UAS licence conditions and took the view that the CAG has the powers to conduct the revenue audit of all accounts drawn by the licensees as it was of the view that the accounts of the licensee, in relation to the revenue receipts can be said to be the accounts of the Central Government and, thus, subject to a revenue audit, as per Section 16 of the CAG (Duties, Powers and Conditions) Act, 1971. Holding so, the writ petitions were dismissed.

       The prime question arising in this case concerns the ‘competence of CAG to conduct audit of the accounts of the service providers in accordance with the provisions of Section 16 of the Act of 1971 read with Rule 5(ii) of 2002 Rules’. Power of the CAG under Section 16 of the 1971 Act has been disputed primarily on the ground that Article 149 of the Constitution confers powers on the CAG to conduct audit of accounts only of the Union and the States or any other authority or body prescribed by or under any law made by Parliament, not private entities or their underlying accounts and records maintained by them in the absence of law made by the Parliament.

       Finding of the Court;

       Tribunal misunderstood the Clauses 22.3, 22.5 and 22.6 of the Agreement.

       Result: Appeals no. 10748 and 10749 of 2011 dismissed; and appeals no. 4591-4592 of 2014 allowed.