The Supreme Court on Friday stayed the Comptroller and Auditor General (CAG) audit of three private power distribution companies (discoms) in Delhi, dealing a setback to the Delhi Government. The order came against the backdrop of a staggering Rs 38,500 crore in accumulated regulatory assets (RAs) that are to be recovered from consumers in the national capital.
Supreme Court Orders Status Quo on CAG Audit
A Bench of Justice KV Viswanathan and Justice Shree Chandrashekhar directed a status quo on the CAG audit, stating that the legality of the Delhi Electricity Regulatory Commission's (DERC) decision to appoint the CAG raised questions requiring judicial determination. The court ordered: “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.”
The Bench issued notice to the discoms and posted the matter for hearing on July 15, when DERC's petition will be taken up. The order came on a petition by DERC challenging an April APTEL ruling that the CAG audit of discoms was contrary to the statutory framework. APTEL had directed DERC to appoint an independent chartered accountant for the audit instead.
First CAG Audit Since 2002 Privatisation
This was the first time the Delhi Government ordered a CAG audit of private discoms since electricity distribution was privatised in the capital in 2002. The regulatory assets, which represent costs not yet recovered from consumers, have ballooned over the years.
Earlier, a Bench led by Justice PS Narasimha had directed that regulatory assets worth Rs 27,200 crore be paid within three years to Delhi's three private discoms. As of March 31, 2024, the RAs stood at 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), totalling Rs 27,200 crore. The 2025 verdict came on petitions by the discoms against DERC's tariff orders that led to the ballooning of RAs.
Government's Concern Over Consumer Burden
On Friday, Solicitor General Tushar Mehta submitted on behalf of DERC that the Lieutenant Governor had approved the CAG audit in compliance with procedural requirements identified by APTEL. He argued that 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. “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 understand how the issue of liquidation of regulatory assets arose in an appeal confined to the legality of appointing the CAG as auditor. Senior counsel Abhishek Singhvi, representing one of the discoms, submitted that the issues of audit and recovery of regulatory assets were separate. Referring to the 2025 judgment, Singhvi said the roadmap for liquidation of RAs had already been settled until 2031, and the current proceedings were limited to the legality of the CAG's appointment for audit.
Delhi Minister Calls Interim Order Procedural
Delhi Power Minister Ashish Sood stated that the Supreme Court's interim order is only a procedural measure to maintain the status quo and should not be seen as a verdict in favour of the companies. “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,” he said.
The matter is now scheduled for further hearing on July 15, when the court will examine the legal framework governing the proposed audit.
