Does CAG have the power to audit Delhi's discoms? Supreme Court to decide

The Supreme Court on Friday ordered status quo in the dispute over the audit of Delhi’s electricity distribution companies (discoms), holding that neither the Comptroller and Auditor General (CAG) nor a chartered accountant will conduct the audit until the Court examines the scope of its own August 2025 judgment..A Bench of Justices KV Viswanathan and Shree Chandrashekhar issued notice on appeals filed by the Delhi Electricity Regulatory Commission (DERC) against orders of the Appellate Tribunal for Electricity (APTEL), which had held that DERC could not entrust the audit to the CAG and had instead directed it to appoint an independent Chartered Accountant.Pending further orders, the Court stayed the operation of paragraph 40 of APTEL’s judgment directing DERC to appoint a chartered accountant. It also directed that the CAG shall not proceed with the audit. The matter has been listed on July 15 and will be placed before the Chief Justice of India for assignment to an appropriate Bench..The August 2025 judgment arose from a batch of cases concerning tariff orders issued by DERC between 2011 and 2014. In that matter, the Supreme Court found that regulatory assets had accumulated to over ₹1.5 lakh crore across the country, including nearly ₹27,200 crore in Delhi. It observed that allowing such liabilities to pile up indefinitely distorted tariff determination and unfairly shifted the burden onto future consumers.To address the issue, the Court directed electricity regulatory commissions across the country to ensure tariffs remained broadly cost-reflective, prescribed timelines for liquidation of regulatory assets and laid down a roadmap to prevent fresh accumulation.As part of those directions, the apex court also required regulatory commissions to undertake a strict and intensive audit into the circumstances in which distribution companies had continued without recovering regulatory assets. It further directed APTEL to monitor compliance by exercising its powers under Section 121 of the Electricity Act.However, while directing that such an audit be carried out, the Supreme Court did not specify who should conduct it.Acting on the Supreme Court’s directions, the Lieutenant Governor of Delhi approved a proposal on March 5, 2026 for the audit to be conducted by the CAG.This move was challenged before APTEL, which held that DERC’s decision to entrust the audit to the CAG was contrary to the statutory scheme. The Tribunal quashed the proposal and instead directed DERC to appoint an independent Chartered Accountant within one week to carry out the exercise. DERC’s review petitions were later dismissed, prompting the present appeals before the Supreme Court..Supreme Court directs States to clear regulatory dues to power discoms within 4 years.During today’s hearing, Solicitor General Tushar Mehta, appearing for the DERC argued that the audit contemplated by the Supreme Court’s August 2025 judgment had to be completed before any recovery of regulatory assets could be made from electricity consumers. Referring to paragraph 71 of the judgment, he submitted that the audit formed an integral part of the mechanism laid down by the Court.Senior Advocate Abhishek Manu Singhvi, appearing for the discoms disputed this interpretation. He argued that the issue of audit and the issue of recovery of regulatory assets were independent, and that the present appeals concerned only the question of who should conduct the audit..The Court said that the rival submissions require an interpretation of its own August 6 2025 judgment. Hence, it directed that the matter be placed before the Chief Justice of India for assignment to an appropriate Bench. It listed the case for hearing on July 15.Pending further orders, the Court directed that neither the CAG nor a chartered accountant shall proceed with the audit.