Delhi High Court Refuses To Quash Show Cause Notice Proposing CAG Audit Of BSES Discoms

The Delhi High Court has refused to quash a show cause notice issued by the Delhi government proposing CAG audit of power distribution companies BSES Rajdhani Power Limited (BRPL) and BSES Yamuna Power Limited (BYPL).

Justice Tejas Karia held that a writ petition challenging a show cause notice is ordinarily not maintainable.

The judge further observed that the impugned notice merely called upon the distribution companies to submit their response regarding the proposed CAG audit under Section 20(3) of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971, and did not determine any rights or liabilities.

"The Impugned Notice does not record any adverse finding against the Petitioners, nor does it determine any right or liability. It only affords the Petitioners an opportunity to respond to the proposed entrustment of audit to the CAG," the Court held.

BRPL and BYPL had challenged the June 6, 2026 show cause notice proposing to entrust their audit to the CAG, contending that the move was contrary to the Supreme Court's judgment on Regulatory Assets (RA), the Delhi High Court's earlier decision in the URJA case, and subsequent orders passed by the Appellate Tribunal for Electricity (APTEL).

The discoms argued that the Supreme Court, while directing a "strict and intensive audit" in its August 2025 Regulatory Assets judgment, had not contemplated a CAG audit of distribution licensees.

They further contended that APTEL had already directed the Delhi Electricity Regulatory Commission (DERC) to appoint a Chartered Accountant for conducting the audit, and therefore the proposed CAG audit amounted to indirectly reviving a course of action that had earlier been rejected.

Rejecting these submissions, the High Court held that the Supreme Court's directions envisaged a broad audit into the circumstances leading to the accumulation of regulatory assets and did not exclude examination of the distribution companies' records, accounts or financial position.

"The scope of the audit is, therefore, sufficiently broad to include all relevant circumstances that may explain the accumulation of RA over a prolonged period and the continued functioning of the Distribution Companies without recovery of RA," the Court observed.

The Court also noted that the Supreme Court had not specified the agency which must conduct the audit or prohibited the CAG from undertaking it.

"Subject to strict compliance with the provisions of the CAG Act, including the requirements of Section 20 thereof, the conduct of audit by the CAG cannot be excluded merely on the ground that the RA Judgment does not expressly identify the CAG as the auditing agency," it held.

Accordingly, it declined to interfere with the impugned notice, leaving it open to the petitioners to submit their response before the competent authority in accordance with law.

Appearance: For the Petitioner : Mr. Sandeep Sethi & Mr. Buddy Ranganathan, Sr. Advs. with Mr. Amit Kapur, Mr. Alok Kumar, Mr. Anupam Varma, Mr. Gauhar Mirza, Mr. Varun Chandiok, Mr. Aditya Gupta, Mr. Aditya Ajay, Mr. Yash Srivastava, Ms. Shreya Sethi, Mr. Krishna Gambir, Mr. Adamya Ojha & Ms. Mahima Kaur, Advs. For the Respondents : Mr. S.V. Raju, ASG with Mr. Annam Venkatesh, Mr. Shaurya Sarin & Ms. Aditi Andley, Advs. for GNCTD. Mr. Sameer Vashisht & Ms. Harshita Nathrani, Advs. for GNCTD. Mr. Sanjeev Kumar Dubey, Sr. Adv. with Mr. Anirudh & Mr. Shah Rukh Khan, Advs. For R-2/DERC. Dr. S.S. Hooda, Mr. Aditya Hooda & Ms. Rashmi Rawat, Advs. for R-3 / CAG.

Case title: BSES Rajdhani Power Limited & Anr v. GNCTD

Case no.: W.P.(C) 8283/2026

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