The appointment to the post of Comptroller and Auditor General (CAG) of India, CAG an oversight agency is based on an opaque and arbitrary method. Although the case Anupam Kulshreshtha vs. Union of India (2024) assailing the procedure for appointment of the CAG has been listed twice since January 2024 but is yet to come up for hearing because the government has not filed its response to the notice issued by the Court on January 25, 2024. The government seems to be delaying proceedings by not filing its response.
The petition is signed by Anupam Kulshreshtra, Arun Kumar
Singh and Sangita Chandrakant Choure who are former deputy CAGs. They are seeking interpretation of Article 148 of the Constitution by
prescribing a collegium system for appointments of the CAG, a constitutional position that enjoys the same
status as a judge of the Supreme Court. Both judges and CAG's are appointed by the President. They have retirement age fixed at 65. Their removal from the office is done by both Houses of
Parliament through impeachment procedure. The case was filed on January 5, 2024. It registered on January 13, 2024 and verified on January 22, 2024. It is pending before a 3-judge bench of Chief Justice of India and Justices J.B. Pardiwala and Satish Chandra Sharma.
The petition has challenged the vacuum in Article 148, which prescribes the appointment of CAG but lacks any specified procedure. The petitioner has cited Constituent Assembly debates. Dr. B.R. Ambedkar underlined the importance of CAG as "the most crucial officer in the Constitution". Its duties should be as independent as those of the judiciary, free from any executive or legislative influence. The collegium should comprise the speaker of Lok Sabha, Leader of the Opposition in Lok Sabha, chairman, Public Accounts Committee and the Chief Justice of India or his nominee.
Despite numerous petitions to the Court, transparency in the appointment to this constitutional post has not been ensured. A petition by Common Cause was filed in March 1996 in the Supreme Court seeking directions to evolve and follow a policy, including guidelines prescribing the requisite qualification/ experience, for the appointment but the petition was rejected.' In 2007, Public Cause Research Foundation filed a similar petition but was rejected. The issue raised with the Chairman of the PAC on November 23, 2012 in vain. A related petition was on June 3, 2013. Dr. B P Mathur, former deputy CAG and a governing council member of Common Cause, as well as Kamal Kant Jaswal, director of the society, filed a writ petition along with several former public servants. It was alleged that the CAG appointment was liable to be declared void for being arbitrary and made through a procedure unable to stand the test of constitutionality. The Court had asked the petitioner to approach the High Court. A petition was filed in Delhi High Court, which was dismissed on August 13, 2014. A special leave petition was filed in Delhi High Court in September 2014 but the same was dismissed on February 11, 2015 because Supreme Court had chosen not to entertain it.
Noted parliamentarian, Gurudas Dasgupta had written to the then Prime Minister on May 25, 2012 seeking a collegium to choose the CAG. The National Commission to Review the Working of the Constitution headed by Justice M.N. Venkatachaliah observed: “the appointment of the C&AG should not be the exclusive purview of the executive and a high level committee consisting of the Prime Minister, the Union Finance Minister, the Speaker of the Lok Sabha, the Leader of the Opposition and the Chairman of the Public Accounts Committee should be empowered to make the appointment...The Commission would, however, recommend that a healthy convention be developed to consult the Speaker of the Lok Sabha, before the Government decides on the appointment of the C&AG so that the views of the PAC are also taken into account.”
The CAG's audit reports are submitted first to the President in case of the Union and to the Governor in the case of States. The reports then make their way to the Parliament or State Assembly. Once tabled in the Parliament or the State Assembly, the reports are referred to the PAC for examination. The functioning of the An independent CAG is necessary for the credibility of reported financial information of the government. It impacts both the Parliament and the PAC. The lack of transparency and indifference towards the professional qualification of CAG has been under scanner for long.
In February 1996, Chairman of PAC took up the CAG selection issue with the President and Prime Minister. He had demanded a selection criteria for CAG. He suggested that the PM and Leader of Opposition in Lok Sabha jointly choose the right candidate. Later, at a conference of the central and state PACs, Dr. Murli Manohar Joshi, the then PAC Chairman, recommended that the control of the executive be minimised, if not eliminated altogether. It was suggested that a small collegium or screening committee could examine the candidates and recommend a panel of three to the President to make a choice out of this candidate pool. But this suggestion has not been paid any attention so far.
It has come to light that some 30% of the documents demanded by CAG officials are denied to them. A suggestion has been made to amend the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 to bring all private-public partnerships (PPPs), Panchayati Raj Institutions and societies getting government funds within the ambit of the CAG. The enhancement of CAG's powers to access information under the Audit Act was also proposed. The PPP model has become a favourite mode of executing big infrastructure projects worth millions of rupees and these projects may or may not come under the audit purview of the CAG, depending on sources of funds and the nature of revenue sharing agreements between the government and the private entities. It has been estimated that 60 percent of government spending does not come under the scrutiny of the CAG. The current system was open to "manipulation and partisanship".
History
During the period 1860 and 1950, India had 17 CAGs. The last one during this period was V. Narahari Rao who held the position from 1948 to 1950. After the adoption of the Constitution of India, he held the position for additional four years.
The Office of the Comptroller and Auditor General had its beginning in 1858—the year the British Crown took over the reigns of governing British India from the East India Company. At that time, the designation was Accountant General to Government of India. Prior to that, under the East India Company, upto the year 1857, ‘accounts of the three Presidencies of Bengal, Madras and Bombay were prepared separately’. In 1857, it was decided to constitute a combined Department called General Department of Account and appoint an Accountant General to Government of India. The arrangements were effective from 1 May 1858. In 1860, these posts were amalgamated to create the post of first Auditor General who had both accounting and auditing functions. ‘When the Department was further reorganised, in 1862, the Financial Secretary became the head of Financial Department, which included the Departments of Accounts and Audit. The Auditor and Accountant General to the Government of India became the head of those Departments, charged with the duty of bringing the accounts of the Indian Empire together and responsible to the Government of India for the correct performance of the mechanical duties of Accounts and Audit as distinguished from administrative matters coming within the province of the Finance Secretary’. ‘Broadly to this post may be traced the genesis of the present post of the Comptroller and Auditor General of India, though it had yet a long time to grow to attain its present responsibilities, independence and constitutional status and underwent several changes in its designation from time to time in that process’.
In 1866, the designation of Auditor General of India and Accountant General to the Government of India was changed to Comptroller General of Accounts. In 1884, the designation was changed to Comptroller and Auditor General of India. The Government of India Act, 1919 gave him a statutory recognition and redesignated him as Auditor General in India who was appointed by the Secretary of State in Council and held office ‘during His Majesty’s pleasure’. Subsequently, under Government of India Act, 1935, he was designated as Auditor General of India. The 1935 Act made an important change viz. the appointment of CAG was done by the King of England and not by the Secretary of State. Other two notable features of the Act were (i) he could be removed from office ‘in like manner and on the like grounds as a judge of the Federal Court’, (ii) on vacating office, Auditor General was debarred from holding any office under the Crown in India. These features were designed to ensure his independence. His responsibilities included accounting and audit of the Government of India, and eleven Provincial Governments.
The Government of India Act, 1935 laid down the provisions for appointment and service conditions of the Auditor General. Duties and functions of the Auditor General of India were de-rived mostly from Sections 166 to 169 of Government of India Act, 1935. The accounting functions of the Auditor General of India were incorporated in this Act as follows:
‘The accounts of the Federation shall be kept in such form as the Auditor General of India may, with the approval of the Governor General, prescribe and, in so far as the Auditor General of India may, with the like approval, give any directions with regard to the methods or principles in accordance with which any accounts of Provinces ought to be kept, it shall be the duty of every Provincial Government to cause accounts to be kept accordingly’.
The detailed accounting functions were, however, specified in the Audit and Accounts Order, 1936. The accounts of the Central Government were compiled by the Accountant General, Central Revenues (AGCR) and of the Provinces by the respective Accountants General. The annual accounts of each Government called Finance Accounts were prepared and submitted to the Central and Provincial Governments on prescribed due dates. The Auditor General of India was also responsible for preparation of a combined Finance and Revenue Accounts incorporating a summary of the accounts of the Union and the States for the preceding year and particulars of balances and outstanding liabilities for submission to the Government of India. This document comprised (1) General accounts and (2) Subsidiary accounts and was prefaced by an introductory note in which a brief and general description of the structure of the government accounts was given.
The auditing functions of the Auditor General of India were also detailed in Audit and Accounts Order, 1936. The Auditor General of India was required to audit all expenditure of the Federation and all Provinces, all transactions of these Governments relating to debt, deposit, sinking funds, advances, suspense accounts and remittances and trading/ manufacturing, profit and loss accounts and balance sheets of any department of Government.
The Auditor General of India was also required to audit the receipts of any department, if so required by the Governor General or the Governor of a Province for which Governor General or Governor of the Province might make regulations after consultation with the Auditor General of India. The Governor General was also empowered to appoint any independent officer to audit sanctions to expenditure accorded by Auditor General of India. The Auditor General of India was required to submit a report on his audit to the Governor General/ Governors for laying before the respective Legislatures. The Auditor General of India was also entrusted with some other miscellaneous duties. The Auditor General had a special right to compel a reference to the Secretary of State, where, in the course of his audit, ‘he found that any authority in India had usurped a power retained absolutely by the Secretary of the State’.
The Auditor General of India those days also acted as advisor to the Finance department regarding the application of financial rules and orders. He submitted his Reports in two separate volumes, Audit Report on Appropriation Accounts and Audit Report on Finance Accounts. Both these Reports were presented to Legislatures concerned. The reports were, as even today, ‘a detailed, dispassionate account and were devoid of any expression suggesting a political opinion or a bias’.
Powers of CAG to Conduct Performance Audit
In this case decided by the Supreme Court, the Petitioner submitted that CAG of India has no power to give performance audit report and the provisions in the Regulations of Audit and Accounts, 2007 framed under the CAG (DPC) Act, 1971 empowering the CAG to conduct performance audit is violative of the Constitution.
The Supreme Court held that the CAG's functions to carry out examination into economy, efficiency and effectiveness with which the Government has used its resources, is in-built in the 1971 Act. Performance Audit Reports prepared under the Regulations have to be viewed accordingly. The Court observed no unconstitutionality in the Regulations.
Extracts of the Judgement
Writ Petition(C) No. 393 of 2012, decided on October 1, 2012
We have heard Mr. Santosh Paul, learned counsel for the petitioner. The learned counsel for the petitioner submits that the Comptroller and Auditor General of India (CAG) has no power to give performance audit report and the Regulations on Audit and Accounts, 2007 (for short “the Regulations”) framed under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (for short “the 1971 Act”) empowering CAG to conduct performance audit are violative of the Constitution.
Article 149 of the Constitution of India provides that CAG shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament. In pursuance of Article 149 of the Constitution, the 1971Act has been enacted. Amongst other provisions in the 1971 Act, Section 16 provides that:
“16 Audit of receipts of Union or of States – It shall be the duty of the Comptroller and Auditor General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon.”
CAG's function to carry out examinations into economy, efficiency and effectiveness with which the Government has used its resources is inbuilt in the 1971 Act. Performance audit reports prepared under the Regulations have to be viewed accordingly. We find no unconstitutionality in the Regulations. Moreover, Article 151 of the Constitution provides that the reports of CAG relating to the accounts of the Union shall be submitted to the President, who shall cause them to laid before each House of Parliament and the reports relating to the accounts of a State shall be submitted to the Governor of the State who shall cause them to be laid before the legislature of the State. The audit reports which are submitted byCAGare, thus, subject to scrutiny by Parliament or the legislature of the State, as the case may be.
The writ petition is wholly misconceived and is dismissed accordingly.
Reghu Nath Kelkar Vrs. Union of India and others in the High Court of Bombay Public Interest Litigation No. 40 of 2008 Decided on: 24-3-2009 (Before Swatanter Kumar, CJ and D.Y. Chandrachud, J)
In this case decided by the High Court of Bombay, an allegation was made about the failure of the CAG to conduct a comprehensive audit. The Court considered scope of Section 23 of the CAG (DPC) Act. The Court observed that the time, scope and extent of audit are all matter which fall within the jurisdiction of the CAG and is not a matter on which Court ought to tread.
9. In so far as prayer Clause (b) of the Petition is concerned, an affidavit has been filed on behalf of the Comptroller and Auditor General in which it has been stated that receipts and disbursements under the Market Stabilizations Scheme are duly budgeted in the receipt and expenditure budget which is subject to parliamentary control. The account of the Ministry of Finance and appropriation account of the Government of India are audited at 'regular frequency' by the Comptroller and Auditor General. Under Section 23 of the Comptroller andAuditor General (Duties, Powers and Conditions of Service) Act, 1971 the scope and extent of audit is determined by the Comptroller and Auditor General. The Comptroller and Auditor General reports his findings to Parliament by submitting audit reports under Article 151 of the Constitution. The Reserve Bank of India has clarified that funds collected from the sterilization of liquidity by the Market Stabilization Scheme form part of the Consolidated Fund of India and are hence, deemed to be audited by the Comptroller and Auditor General.
10. The Petitioner, however, relies upon a response received to a query under the Right to Information Act in which it has been disclosed by the Comptroller and Auditor General on 19th June, 2008 that no specific audit in respect of the borrowings of the Central Government under the Market Stabilization Scheme was conducted since 2004 nor was there any specific audit of the application of funds borrowed thereunder. The Comptroller and Auditor General has also clarified that no audit has been conducted in respect of the currency and Gold Revaluation Account in the balance-sheet of the Reserve Bank of India since the accounts of the Reserve Bank of India do not fall under the audit jurisdiction of the Comptroller and Auditor General in response to the query for information that no specific audit was conducted either in respect of the borrowings or the application of funds under the Market Stabilization Scheme since 2004 does not in our view detract from what has been stated in the affidavit filed on behalf of the Comptroller and Auditor General. The affidavit discloses that under Section 23 of the Act the scope and extent of audit is determined by the Comptroller and Auditor General and that the accounts of the Ministry of Finance as well as the appropriation account of the Government of India are audited at regular frequency by the Comptroller and Auditor General. The timing, scope and extent of audit are all matters which fall within the jurisdiction of the Comptroller and Auditor General and this is certainly not matter on which the Court ought to tread. There is neither a constitutional nor statutory dereliction of duties by the Comptroller and Auditor General and it is undoubtedly for the Comptroller and Auditor General to consider whether and if
Powers of CAG to conduct audit
In this case decided by the Delhi High Court, the powers of the CAG to conduct audit under section 14, 15 and 19 of the CAG (DPC) Act was considered. The Petitioner challenged the authority of the CAG to invoke and exercise the powers under Section 14 (2) of the 1971 Act to conduct audit of accounts of the NDDB which is governed by its own Act viz. NDDB Act, 1987, and which has a provision of overriding effect to theNDDBAct over any other law. The Court laid down the following preposition:-
I. CAG Act is a Special Act as distinguished from a General Act.
II. CAG's power to audit under Section 14(1) can be curtailed, conditional or even prohibited under any law applicable to the Body orAuthority.
III. Section 14 (2) is an independent section which will apply once the conditions mentioned in the said Section are satisfied and the fact that the body or authority cannot be subject to audit under Section 14 (1) is irrelevant.
IV. Section 15 confers power to undertake scrutiny of the accounts/records of the sanctioning authority to ensure that proper procedure was followed while sanctioning any grant/loan.
V. Section 15 and Section 14 (2) are independent sections and come into operation when the pre conditions mentioned therein are satisfied. Section 15 cannot be read to override Section 14 (2) or vice-versa.
VI. The provisions of the Section 19 are clarificatory in nature. Section 19 (2) does not override the provisions of Section 14 (2) and other provisions of the CAG (DPC) Act. Section 19(2) protects the power and right given to the CAG to audit accounts of Corporations under the Law made by Parliament by which they are established. This means that CAG can conduct audit under Section 14 (1), 14 (2) or 15 of the CAG Act in respect of any corporation when under the respective legislation annual financial audit is not undertaken by the CAG.
CAG Audit Report as a basis for grant of relief or initiating action
In this case the Supreme Court considered, whether a CAG Audit Report by itself can be accepted by the Court to grant relief or as a basis for initiating action. The Court held that CAG's Report is always subject to scrutiny by the Parliament and it is for the Parliament to decide whether after receiving the report to make its comments on the CAG's report.
We have referred to the report of the CAG, the role of the PAC and the procedure followed in the House, only to indicate that the CAG report is always subject to scrutiny by the Parliament and the Government can always offer its view on the report of the CAG.
The question that is germane for consideration in this case is whether this court can grant reliefs merely placing reliance on the CAG's report. The CAG's report is always subject to parliamentary debates and it is possible that PAC can accept the ministry's objection to the CAG report or reject the report of the CAG. The CAG, indisputably is an independent constitutional functionary, however, it is for the Parliament to decide whether after receiving the report i.e. PAC to make its comments on the CAG's report.
We may, however, point out that since the report is from a Constitutional functionary, it commands respect and cannot be brushed aside as such, but it is equally important to examine the comments what respective ministries have to offer on the CAG's report. The Ministry can always point out, if there is any mistake in the CAG's report or the CAG has inappropriately appreciated the various issues.
Duty of CAG regarding examination of expenditure
In this case decided by the Supreme Court, the Petitioners prayed that CAG of India has a duty to examine expenditures even before they are deployed. The Court while considering the various issues observed that in addition to the Legislative control, the founding fathers of the Constitution have also thought it fit to keep a check on Government account and expenses through the agency outside the Legislature also. Article 148 has created a Constitutional functionary in the form of CAG of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government and exercises effective control over the Government accounts.
Extracts of the Judgement
The Comptroller and Auditor General of India is a Constitutional functionary appointed under Article 148 of the Constitution. His main role is to audit the income and expenditure of the Governments, Government bodies and State-run corporations. The extent of his duties is listed out in the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. The functioning of the Government is controlled by the Constitution, the laws of the land, the Legislature and the Comptroller andAuditor General of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government. The office of CAG exercises effective control over the government accounts and expenditure incurred on these schemes only after implementation of the same. As a result, the duty of the CAG will arise only after the expenditure has incurred.
The Comptroller and Auditor General of India is a Constitutional functionary appointed under Article 148 of the Constitution. His main role is to audit the income and expenditure of the Governments, Government bodies and State-run corporations. The extent of his duties is listed out in the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. The functioning of the Government is controlled by the Constitution, the laws of the land, the Legislature and the Comptroller andAuditor General of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government. The office of CAG exercises effective control over the government accounts and expenditure incurred on these schemes only after implementation of the same. As a result, the duty of the CAG will arise only after the expenditure has incurred.
Current Scenario
Since independence, there have been 15 incumbents to hold the post of CAG including the present CAG K. Sanjay Murthy. Independent India’s first CAG was V. Narahari Rao (1948–1954) and subsequent two incumbents who followed him, A.K. Chanda (1954–1960) and A.K. Roy (1960–66), belonged to the Indian Audit and Accounts Service (IA&AS). The fourth CAG S. Ranganathan (1966–1972), was from the Indian Civil Service (ICS) while the fifth CAG A. Baksi (1972–1978) was again from the Indian Audit and Accounts Service.
From sixth CAG Gian Prakash (1978–1984) onwards, T. N.
Chaturvedi (1984–1990), C.G. Somiah (1990–1996), V.K. Shunglu
(1996–2002), V. N. Kaul (2002–2007), Vinod Rai (2008- 2013), Shashi Kant
Sharma (2013-2017), Rajiv Mehrishi (2017-2020), Girish Chandra Murmu
(2020- 2024) and K. Sanjay Murthy (2024-2029) all incumbents have come
from the IAS.
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