Can Cag Audit Privately Run Discoms The Question Before Supreme Court In Delhi Dispute

The Supreme Court on Friday stayed a plan to have the national auditor examine the accounts of Delhi’s three private electricity distributors. The order pauses, at least for now, a dispute that decides who checks the books before consumers are asked to pay for more than ₹38,500 crore in accumulated power costs.

A bench of Justices KV Viswanathan and Shree Chandrashekhar issued the stay while hearing an appeal filed by the Delhi Electricity Regulatory Commission, or DERC. The matter returns to court on 15 July.

Delhi's three discoms — BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd and Tata Power Delhi Distribution Ltd — have not had a tariff revision since 2014-15. Over that period, the gap between what it costs to supply electricity and what customers pay has widened into what is called a regulatory asset, or RA. This is a deferred cost that utilities are permitted to recover later, through future tariff hikes.

Delhi’s RAs have grown to nearly ₹38,552 crore.

The Delhi government, led by chief minister Rekha Gupta, wants a thorough audit of how that figure became so large before any of it is passed on to consumers. To do that, the Delhi government sought to bring in the Comptroller and Auditor General, or CAG, India's constitutional auditor of public accounts, to scrutinise the discoms’ finances.

The Delhi government first tried to appoint the CAG for this audit, but, in April, the Appellate Tribunal for Electricity, or APTEL, ruled that using the national auditor was not permitted under the law governing electricity distribution, since the discoms are privately run companies.

It then directed the Delhi government to instead appoint an independent chartered accountant to carry out a strict audit. At the same time, APTEL told DERC to begin liquidating the RAs, in keeping with an earlier Supreme Court order.

The Delhi government started the process again, issuing notices to the three discoms, considering their objections, and securing approval from the Delhi Cabinet and the lieutenant governor. Earlier this month, it ordered a fresh CAG audit, describing it as “strict and intensive”.

DERC then challenged APTEL’s April ruling before the Supreme Court, arguing that the tribunal was wrong to rule out the CAG. That appeal is what the bench heard on Friday.

The bench stayed both competing audit paths: APTEL’s direction to appoint a CA, and DERC's fresh order bringing in the CAG. Neither audit can proceed until the court decides the underlying legal question.

The judges also ordered “status quo on all aspects” until the next hearing.

The central issue, the bench noted, was whether DERC’s move to have CAG audit the discoms is legally permissible. It questioned why the separate issue of liquidating the RAs — releasing the accumulated costs for recovery from consumers — had entered an appeal that was meant only to settle who gets to audit.

Solicitor general Tushar Mehta, appearing for DERC, had told the court that the lieutenant governor had approved the CAG audit after meeting the procedural conditions APTEL had set. He said DERC’s real objection was not the audit alone but the prospect of consumers being made to pay before any audit was complete. The LG, he said, had already deferred liquidation of the RAs, and no recovery would happen until the audit was finished.

Senior advocate AM Singhvi, appearing for the discoms along with Buddy Ranganathan, pushed back. He argued that the audit question and the recovery question were separate matters. The framework for recovering RAs, he said, had already been fixed by the Supreme Court in a judgment dated August 6, 2025, and it runs until 2031. The present appeal, he said, was confined to whether the CAG could serve as auditor.

The top court bench on Friday concluded that resolving the recovery dispute would require interpreting its own August 2025 judgment, which had set out a phased schedule for liquidating Delhi’s RAs and had ordered a “strict and intensive audit” of how the discoms went without recovering them for so long.

Because of that overlap, the court decided this case should go before the same bench that delivered the August 2025 ruling, subject to the Chief Justice of India’s approval. The papers have been sent to the CJI for orders on this and the case is listed for 15 July.

Until the next hearing, no audit can go ahead. The question of who is authorised to examine the discoms' accounts, and by extension, how the ₹38,500 crore in regulatory assets will be scrutinised before recovery, remains open.