SC halts CAG audit of Delhi power discoms

THe sublime margaret court on fri stayed the Comptroller and Auditor superior general (CAG)-led scrutinise of Delhi’s three private power distribution companies and ordered maintenance of status quo, observing that the legality of the Delhi Electricity Regulatory Commission’s (DERC) decision to appoint the national auditor raises an arguable question requiring examination.The stay order is a setback for the Rekha Gupta-led Delhi government, which had made the CAG audit a key plank of its effort to scrutinise the finances of the capital’s private discoms before allowing recovery of over ₹38,500 crore in regulatory assets from consumers.A bench of justices KV Viswanathan and Shree Chandrashekhar passed the interim order while hearing DERC’s appeal against an April ruling of the Appellate Tribunal for Electricity (APTEL), which had held that entrusting the audit to the CAG was contrary to the statutory framework and instead directed the regulator to appoint an independent chartered accountant to undertake a strict audit.“The present civil appeal concerns directly the issue whether the action of the DERC in initiating the process of audit of the distribution companies by CAG is legally permissible,” the bench observed.Issuing notice on DERC’s appeal, the court stayed both the APTEL’s direction appointing a chartered accountant and the fresh CAG audit ordered by the Delhi government earlier this month.“Till further orders, there shall be a stay of the APTEL direction on appointing any chartered accountant for audit. The CAG shall also not proceed with audit in the meantime,” it directed.Also Read: Delhi govt orders CAG audit into private electricity discomsThe court further ordered that status quo be maintained until the matter is heard on July 15 by the same bench that delivered the August 6, 2025 judgment settling the framework for phased liquidation of Delhi’s regulatory assets till 2031 while directing a “strict and intensive audit” into the circumstances leading to their accumulation.The dispute centres on regulatory assets (RAs) of nearly ₹38,552 crore accumulated by Delhi’s three distribution companies -- BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd and Tata Power Delhi Distribution Ltd. These represent deferred costs arising largely because electricity tariffs have remained unchanged for over a decade despite rising supply costs and are eventually recoverable from consumers through future tariff revisions.Solicitor General Tushar Mehta, appearing for DERC, argued that the Lieutenant Governor had recently approved the CAG audit after complying with the procedural requirements identified by APTEL. He submitted 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 LG 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 argued.The bench, however, questioned how the issue of liquidation of regulatory assets arose in an appeal confined to the legality of appointing the CAG as auditor.Appearing for the discoms, senior advocates AM Singhvi and Buddy Ranganathan argued that the issues of audit and recovery of regulatory assets were distinct. Referring to the Supreme Court’s August 2025 judgment, Singhvi contended that the roadmap for liquidation of the regulatory assets had already been settled till 2031 and the present proceedings were limited to the legality of the CAG’s appointment.Observing that interpretation of the August 2025 judgment would be necessary, the bench directed that the matter be heard by the same bench, subject to the Chief Justice’s approval.The litigation is the latest chapter in the dispute over Delhi’s mounting regulatory assets. After APTEL struck down DERC’s decision to appoint the CAG, the CM gupta-led Delhi government initiated a fresh process, obtained approvals from the Cabinet and the Lieutenant Governor, and again entrusted the CAG with a “strict and intensive” audit.