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Sunday, April 20, 2014

Scope and ambit of the powers and duties of Comptroller and Auditor General of India (CAG), the Telecom Regulatory Authority of India (TRAI) and the Department of Telecommunications (DoT) in relation to the proper computation and quantification of Revenue in determining the licence fee and spectrum charges payable to Union of India under Unified Access Services (UAS) Licences entered into between DoT and the private service providers - Apex court held that First, audit is to be conducted by the Licencee under Clause 20.4 through an auditor appointed under Section 224 of the Companies Act. Clause 22.5 empowers the licensor to conduct an audit, if it is found that statements or accounts submitted are inaccurate and misleading. In our view, the opinion to be formed is purely subjective, it need not establish to the satisfaction of the licencee that the statements or accounts are inaccurate and misleading. Further, Clause 22.6 is an independent Clause which has no relationship with Clause 22.5. This is an additional power conferred on the Licensor to conduct special audit. In other words, audit conducted by the licensor or the licencee, has nothing to do with the audit conducted by CAG. If the reasoning of the Tribunal is accepted, then the DOT can always stall an Audit sought to be conducted not only by CAG in exercise of powers conferred under Article 149 of the Constitution read with the 1971 Act and TRAI Rules 2002, but also an audit under clause 22.5 as well as special audit under clause 22.6.Consequently, an audit to be conducted by CAG would not depend upon the “formation of opinion” by the DoT that the statements or accounts submitted to it were inaccurate or misleading, which, in our view, would deprive the statutory and constitutional powers conferred on the CAG to conduct the audit or enquiry or inspection. Tribunal’s order, in our view, is an encroachment upon the constitutional and statutory power conferred on CAG under Articles 148, 149 of the Constitution as well as Section 16 of the 1971 Act read with Rule 5 of the TRAI Rules 2002 and the licensing provisions.Clauses 22.5 and 22.6 are not meant for an audit to be conducted by CAG or TRAI, but meant for an audit by the DoT. The Tribunal also committed an error in holding that the “formation of opinion” under clause 22.5, that the statements or accounts submitted by the Licensee are inaccurate or misleading, is jurisdictional fact, referring to the jurisdiction of DoT/CAG to conduct audit under clause 22.5 or a special audit under clause 22.6. ‘Formation of opinion’ under clause 22.5 is a subjective opinion of Licensor or else the power to conduct any form of audit under clause 22.5 and 22.6 would be lost and Licensor has to go on convincing the licensee that the statements or accounts submitted by the Licensee are inaccurate and misleading. We, therefore, find no merit in the appeals filed by the Service Providers and hence those appeals are dismissed, as above. The appeals filed by the DoT and others are, however, allowed, setting aside the judgment of the Tribunal. In the facts and circumstances of the case,there will be no order as to costs. = Association of Unified Tele Services Providers & Others …. Appellants Versus Union of India …. Respondent= 2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41429

 Scope and ambit  of  the powers and duties of Comptroller and Auditor  General  of  India  (CAG), the Telecom Regulatory Authority of  India  (TRAI)  and  the  Department  of Telecommunications  (DoT)  in  relation  to  the  proper   computation   and quantification of Revenue  in  determining  the  licence  fee  and  spectrum charges payable to Union  of  India  under  Unified  Access  Services  (UAS) Licences entered into between DoT and the private service providers  - Apex court held that  First, audit is to be conducted by  the  Licencee  under Clause 20.4 through an auditor appointed under Section 224 of the Companies Act.  Clause 22.5 empowers the licensor to conduct an audit, if it is found that statements or accounts submitted are inaccurate  and  misleading.   In our view, the opinion to be  formed  is  purely  subjective,  it  need  not establish to the satisfaction  of  the  licencee  that  the  statements  or accounts are  inaccurate  and  misleading.   Further,  Clause  22.6  is  an independent Clause which has no relationship with Clause 22.5.  This is  an additional power conferred on the Licensor to conduct  special  audit.   In other words, audit conducted by the licensor or the licencee,  has  nothing to do with the audit conducted by CAG. If the reasoning of the Tribunal  is
accepted, then the DOT can always stall an Audit sought to be conducted not only by CAG in exercise of  powers  conferred  under  Article  149  of  the Constitution read with the 1971 Act and TRAI Rules 2002, but also an  audit under  clause  22.5  as  well  as  special   audit   under   clause   22.6.Consequently, an audit to be conducted by CAG would  not  depend  upon  the
“formation of opinion” by the DoT that the statements or accounts submitted to it were inaccurate or misleading, which, in our view, would deprive  the statutory and constitutional powers conferred on the  CAG  to  conduct  the audit or enquiry or inspection.  Tribunal’s  order,  in  our  view,  is  an encroachment upon the constitutional and statutory power conferred  on  CAG under Articles 148, 149 of the Constitution as well as Section  16  of  the 1971 Act read with Rule  5  of  the  TRAI  Rules  2002  and  the  licensing provisions.Clauses 22.5 and 22.6 are not meant for an audit to be  conducted  by CAG or TRAI, but meant for an audit by the DoT. The Tribunal also committed an error in holding that the “formation of opinion” under clause 22.5, that the statements or accounts submitted by  the  Licensee  are  inaccurate  or misleading, is  jurisdictional  fact,  referring  to  the  jurisdiction  of DoT/CAG to conduct audit under clause 22.5 or a special audit under  clause 22.6.  ‘Formation of opinion’ under clause 22.5 is a subjective opinion  of Licensor or else the power to conduct any form of audit under  clause  22.5 and 22.6 would be lost and Licensor has to go on  convincing  the  licensee that the statements or accounts submitted by the  Licensee  are  inaccurate and misleading. We, therefore, find no merit in the  appeals  filed  by  the  Service Providers and hence those appeals are dismissed, as  above.    
The  appeals filed by the DoT and  others  are,  however,  allowed,  setting  aside  the judgment of the Tribunal.  In the facts  and  circumstances  of  the  case,there will be no order as to costs.   =


the  scope  and  ambit  of  the
powers and duties of the Comptroller and Auditor  General  of  India  (CAG),
the Telecom Regulatory Authority of  India  (TRAI)  and  the  Department  of
Telecommunications  (DoT)  in  relation  to  the  proper   computation   and
quantification of Revenue  in  determining  the  licence  fee  and  spectrum
charges payable to Union  of  India  under  Unified  Access  Services  (UAS)
Licences entered into between DoT and the private service providers.=

On
28.01.2010, the TRAI issued a communication to one of the service  providers
for furnishing books of accounts to the Branch Audit Office of the  Director
General of Audit, Post and Telecommunication, operative portion of the  said
communication reads as follows:
         “In terms of Rule 5 of the Telecom Regulatory Authority of  India,
      Service  Providers  (Maintenance  of  Books  of  Accounts  and   other
      Documents) Rule, 2002, every service provider shall produce  all  such
      books of accounts and documents referred to in sub rule (1) of rule  3
      thereof that has a bearing on the  verification  of  the  Revenue,  to
      Telecom Regulatory Authority of India (the authority);

      (ii)  to furnish to the Comptroller and Auditor General of  India  the
           statement  or   information,   relating   thereto,   which   the
           Comptroller and Auditor General  of  India  may  require  to  be
           produced before him and the Comptroller and Auditor  General  of
           India may audit the same in accordance with  the  provisions  of
           Section 16 of the Comptroller  and  Auditor  General’s  (Duties,
           Powers and Conditions of Service) Act, 1971.

      2.    The Comptroller and Auditor General of India  (through  Director
           General of Audit, Post  &  Telecommunications)  has  decided  to
           audit the books of accounts of your company for  the  period  of
           three years commencing from  2006-2007  onwards  to  assess  the
           government share out of the revenues carried by your company  in
           terms of the licence agreement with DoT.

      3.    Therefore in terms of the rule 5 of the TRAI, Service  Providers
           (Maintenance of Books of Accounts and  other  Documents)  Rules,
           2002, it  is  requested  that  all  necessary  records/books  of
           accounts  circle/area-wise,  on  the  Maintenance  of  Books  of
           Accounts and other relevant matters  during  the  last  week  of
           January, 2010 in the office of DO Audit, P&T, New  Delhi,  which
           would facilitate the audit work.

      4.   It is, therefore, requested that all necessary co-operation  may
           be extended to the Branch Audit Officers and Delhi office of  DG
           Audit P&T  for  completion  of  the  above  audit  work  besides
           providing all necessary records/information/ documents  required
           in connection with this audit work.

      This issues with the approval of the Authority.”=

 One of the service providers replied to the above-mentioned letter  on
15.04.2010, the operative portion of the same reads as under:
      “We appreciate that DoT in terms of Clause 22.3 of UASL can  call  for
      Licensee’s books of accounts or go further and direct  for  a  special
      audit by independent auditor in terms of Clause 22.6 and we have  been
      complying and are committed to complying with direction/s that may  be
      issued by DoT in this regard.  However, we should like to mention here
      that we are currently undergoing the extensive special  audit  of  our
      books of accounts by an independent auditor  M/s  S.K.  Mittal  &  Co.
      appointed by DoT for the same period i.e. FY 2006-07 and 2007-08.


      In the light of the above, the recent communication of DoT  asking  us
      to provide our accounting records for period of three  years  starting
      from 2006-07 for an audit by the C&AG is  a  matter  of  surprise  and
      concern for us.   We submit that a fresh audit so closely on the heels
      of  the  special  audit  by  DoT  appointed  independent  auditor   is
      unwarranted and will result in duplication of efforts, time and  waste
      of resources.  However, as a good corporate citizen, we have  provided
      to DoT the total cost and breakup of original and current  cost,  cost
      and breakup of operational expenses, service wise revenue, and  income
      from other sources for the year 2006-07, 2007-08 and 2008-09 vide  our
      letters dated  1st  April,  2010  and  12th  April  2010  though  this
      information provided to DoT is very sensitive from  competitive  point
      of view.


      We would also like to submit that the  provisions  of  the  C&AG  Act,
      1971, which set out the duties and powers of the C&AG pertain only  to
      the audit of accounts  of  the  Union  or  the  States  or  Government
      Companies or Corporations.  The audit of accounts of private companies
      such as ours is not a part of duties and powers of the C&AG.


      It is, therefore, requested that while DoT can call for our  books  of
      accounts, the audit of those does not fall within the purview  of  the
      C&AG.


      We  submit  that  the  information  sought  through  the  letter  like
      operational expenses, total cost and break up of original and  current
      cost etc. is not only sensitive from competitive point of view but has
      no direct linkages to the revenues  of  the  company  and  thus  falls
      beyond our licence obligations.


      We submit once again that we have already provided to DoT the  desired
      information and are ready  and  be  willing  to  provide  any  further
      specific information or data which is required by  DoT  in  accordance
      with the provisions of the UAs licence.
   We look forward to your kind consideration and support on the matter.”=

The TRAI also apprised the Service Providers that the  audit  sought  to
be conducted by CAG was separate and independent of  the  audit  or  special
audit conducted by DoT, and therefore, directed  the  Service  Providers  to
make available all the records for audit by CAG or else  appropriate  action
would be taken  against  them  under  the  TRAI  Act.    Service  providers,
aggrieved by the stand of DoT and TRAI, filed Civil Writ  Petition  3673  of
2010, challenging the legality of the  above-mentioned  notices  before  the
Delhi High Court, seeking following reliefs:


     “i.    Pass a writ, order or direction to hold and declare that Rule  5
           of the Telecom Regulatory Authority of India, Service  Providers
           (Maintenance of Books of Accounts and  other  Documents)  Rules,
           2002 for being ultra vires of Section 16 of  the  C&AG  Act  and
           Article 149 of the Constitution of India;


     ii.    Set aside/quash all actions taken/purported to be taken  by  the
           Respondent No.1 and/or Respondent No.2;


     iii.   Set aside/quash Respondent No.2’s letters  dated  10.5.2010  and
           21.5.2010 and the directions contained therein;


     iv.    Set aside/quash Respondent No.3’s letter dated 28.1.2010 and the
           directions contained therein;


     v.     pass any order(s) as the Court may deem fit in the  interest  of
           justice, equity and good conscience.”




14. The Division Bench of the Delhi High Court examined the legality of  the
above-mentioned communications in the light of Rule 5  of  the  TRAI  Rules,
2002, Section 16 of the CAG Act, 1971 and Article 149  of  the  Constitution
of India read with UAS licence conditions and took the  view  that  the  CAG
has the powers to conduct the revenue audit of all  accounts  drawn  by  the
licensees and expressed the view that  the  accounts  of  the  licensee,  in
relation to the revenue receipts can be said  to  be  the  accounts  of  the
Central Government and, thus, subject to a revenue audit, as per Section  16
of the CAG (Duties, Powers and Conditions) Act, 1971.  Holding so, the  writ
petitions were  dismissed  against  which  these  civil  appeals  have  been
preferred by way of special leave.=


The Tribunal, in our view,  has  committed  a  fundamental  error  in
taking the view that the above mentioned communications were issued by  the
DoT in exercise of the powers conferred under  Clauses  22.3  to  22.6,  in
fact, the communications specifically refer to only Clause 22.3, and not to
any other clauses.  
On the other hand, the Tribunal made specific reference
to Clause 22.5 which, in our view, is inapplicable  in  a  case  where  the
audit is sought to be conducted by CAG.  
The Tribunal has also not properly
appreciated the scope of clauses 20.4, 22.5  and  22.6.   
There  are  three stages of audit.   
First, audit is to be conducted by  the  Licencee  under
Clause 20.4 through an auditor appointed under Section 224 of the Companies
Act.  
Clause 22.5 empowers the licensor to conduct an audit, if it is found
that statements or accounts submitted are inaccurate  and  misleading.   
In
our view, the opinion to be  formed  is  purely  subjective,  it  need  not
establish to the satisfaction  of  the  licencee  that  the  statements  or
accounts are  inaccurate  and  misleading.   
Further,  Clause  22.6  is  an
independent Clause which has no relationship with Clause 22.5.  
This is  an
additional power conferred on the Licensor to conduct  special  audit.   
In
other words, audit conducted by the licensor or the licencee,  has  nothing
to do with the audit conducted by CAG. 
If the reasoning of the Tribunal  is
accepted, then the DOT can always stall an Audit sought to be conducted not
only by CAG in exercise of  powers  conferred  under  Article  149  of  the
Constitution read with the 1971 Act and TRAI Rules 2002, but also an  audit
under  clause  22.5  as  well  as  special   audit   under   clause   22.6.
Consequently, an audit to be conducted by CAG would  not  depend  upon  the
“formation of opinion” by the DoT that the statements or accounts submitted
to it were inaccurate or misleading, which, in our view, would deprive  the
statutory and constitutional powers conferred on the  CAG  to  conduct  the
audit or enquiry or inspection.  Tribunal’s  order,  in  our  view,  is  an
encroachment upon the constitutional and statutory power conferred  on  CAG
under Articles 148, 149 of the Constitution as well as Section  16  of  the
1971 Act read with Rule  5  of  the  TRAI  Rules  2002  and  the  licensing
provisions.


68.   We may, in this connection, refer to Clauses 22.5  and  22.6  for  an
easy reference:
      “22.5 The LICENSOR may, on forming an opinion that the  statements  or
      accounts submitted are inaccurate or misleading, order  Audit  of  the
      accounts of the LICENSEE by appointing auditor  at  the  cost  of  the
      LICENSEE and such auditor(s) shall have  the  same  powers  which  the
      statutory auditors of the company  enjoy  under  Section  227  of  the
      Companies Act, 1956.  The remuneration of the Auditors,  as  fixed  by
      the LICENSOR, shall be borne by the LICENSEE.


      22.6        The LICENSOR may also get conducted a ‘Special  Audit’  of
      the LICENSEE company’s accounts/records  by  “Special  Auditors”,  the
      payment for which at a rate as fixed by the LICENSOR, shall  be  borne
      by the LICENSEE.  This will be in the nature  of  auditing  the  audit
      described in para 22.5 above.  The  Special  Auditors  shall  also  be
      provided the same  facility  and  have  the  same  powers  as  of  the
      companies’ auditors as envisaged in the Companies Act, 1956.”


69.   Clauses 22.5 and 22.6 are not meant for an audit to be  conducted  by
CAG or TRAI, but meant for an audit by the DoT. The Tribunal also committed
an error in holding that the “formation of opinion” under clause 22.5, that
the statements or accounts submitted by  the  Licensee  are  inaccurate  or
misleading, is  jurisdictional  fact,  referring  to  the  jurisdiction  of
DoT/CAG to conduct audit under clause 22.5 or a special audit under  clause
22.6.  ‘Formation of opinion’ under clause 22.5 is a subjective opinion  of
Licensor or else the power to conduct any form of audit under  clause  22.5
and 22.6 would be lost and Licensor has to go on  convincing  the  licensee
that the statements or accounts submitted by the  Licensee  are  inaccurate
and misleading.


70.   We, therefore, find no merit in the  appeals  filed  by  the  Service
Providers and hence those appeals are dismissed, as  above.    
The  appeals
filed by the DoT and  others  are,  however,  allowed,  setting  aside  the
judgment of the Tribunal.  In the facts  and  circumstances  of  the  case,
there will be no order as to costs.   

2014 (April.Part ) http://judis.nic.in/supremecourt/filename=41429
K.S. RADHAKRISHNAN, VIKRAMAJIT SEN

                                                        REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 4591  OF 2014
              (@ Special Leave Petition (Civil) No.1804 of 2014)

Association of Unified Tele Services
Providers & Others                               …. Appellants

                             Versus

Union of India                                   …. Respondent

                                    WITH

                        CIVIL APPEAL NO. 4592 OF 2014
             (@ Special Leave Petition (Civil) No.2925 of 2014)

                                    WITH
                        CIVIL APPEAL NO.10748 OF 2011
                                     AND
                        CIVIL APPEAL NO.10749 OF 2011

                               J U D G M E N T

K.S. Radhakrishnan, J.

                        CIVIL APPEAL NO. 4591 OF 2014
                  [Arising out of SLP (C) No. 1804 of 2014]
                                     AND
                        CIVIL APPEAL NO. 4592 OF 2014
                  [Arising out of SLP (C) No. 2925 of 2014]


1.    Leave granted.

2.    We are in these appeals concerned with the  scope  and  ambit  of  the
powers and duties of the Comptroller and Auditor  General  of  India  (CAG),
the Telecom Regulatory Authority of  India  (TRAI)  and  the  Department  of
Telecommunications  (DoT)  in  relation  to  the  proper   computation   and
quantification of Revenue  in  determining  the  licence  fee  and  spectrum
charges payable to Union  of  India  under  Unified  Access  Services  (UAS)
Licences entered into between DoT and the private service providers.

3.    We have to examine the above-mentioned  issue  in  the  light  of  the
various constitutional, statutory and licensing provisions, bearing in  mind
the fact that we are dealing with  “spectrum”, which is universally  treated
as a scarce finite and renewable natural resource, the intrinsic utility  of
that natural resource has been  elaborately  considered  by  this  Court  in
Centre for Public Interest Litigation and  others  v.  Union  of  India  and
others (2012) 3 SCC 1 and in the  Presidential  Reference,  the  opinion  of
which has been expressed in Natural Resources  Allocation,  in  Re:  Special
Reference No.1 of 2012 decided on September 27, 2012, reported in (2012)  10
SCC 1.  This Court reiterated  that  the  spectrum  as  a  natural  resource
belongs to the people, though State legally owns it on behalf of its  people
because State benefits immensely from its value.  This Court in  Centre  for
Public Interest Litigation and others (supra)  referring  to  the  intrinsic
worth of spectrum stated as follows:
      “75. The State is empowered to distribute natural resources.  However,
      as they constitute public property/national asset, while  distributing
      natural resources the State is bound to act  in  consonance  with  the
      principles of equality and public trust and ensure that no  action  is
      taken which may be detrimental to  public  interest.  Like  any  other
      State action, constitutionalism must be reflected at  every  stage  of
      the distribution  of  natural  resources.  In  Article  39(b)  of  the
      Constitution it has been provided that the ownership  and  control  of
      the material resources of the community should be so distributed so as
      to best subserve the common good, but no comprehensive legislation has
      been enacted to generally define natural resources and a framework for
      their protection. Of course, environment laws  enacted  by  Parliament
      and State Legislatures  deal  with  specific  natural  resources  i.e.
      forest, air, water, coastal zones, etc.


      76. …………… The ownership regime relating to natural resources can  also
      be  ascertained   from   international   conventions   and   customary
      international  law,  common  law  and   national   constitutions.   In
      international law, it rests upon the concept of sovereignty and  seeks
      to respect the principle of  permanent  sovereignty  (of  peoples  and
      nations) over (their)  natural  resources  as  asserted  in  the  17th
      Session of the United Nations General Assembly and then affirmed as  a
      customary international norm by the International Court of Justice  in
      the case of Democratic Republic of Congo v. Uganda.………..


      77. Spectrum has been internationally accepted as a scarce, finite and
      renewable natural resource which is susceptible to degradation in case
      of inefficient utilisation. It has a high economic value in the  light
      of the demand for it on  account  of  the  tremendous  growth  in  the
      telecom sector. Although it does not belong  to  a  particular  State,
      right of use has been granted  to  the  States  as  per  international
      norms.


      78. In India, the courts have given an expansive interpretation to the
      concept of natural  resources  and  have  from  time  to  time  issued
      directions, by relying upon the provisions contained in  Articles  38,
      39,   48,   48-A   and   51-A(g)    for    protection    and    proper
      allocation/distribution  of  natural  resources  and  have  repeatedly
      insisted on compliance  with  the  constitutional  principles  in  the
      process of distribution, transfer and alienation to private persons.


      85. As natural resources are public goods, the doctrine  of  equality,
      which emerges from the concepts of justice and  fairness,  must  guide
      the State in determining the  actual  mechanism  for  distribution  of
      natural resources. In this regard, the doctrine of  equality  has  two
      aspects: first, it regulates the rights and obligations of  the  State
      vis-à-vis its people and demands that the people be granted  equitable
      access to natural resources and/or its  products  and  that  they  are
      adequately compensated for the transfer of the resource to the private
      domain; and second, it regulates the rights  and  obligations  of  the
      State vis-à-vis private parties seeking to  acquire/use  the  resource
      and demands that the procedure adopted for distribution is just,  non-
      arbitrary and transparent and that it does  not  discriminate  between
      similarly placed private parties.”


4.    We have indicated, the worth of spectrum  to  impress  upon  the  fact
that      the      State      actions      and      actions      of      its
agencies/instrumentalities/licensees must be for the public good to  achieve
the object for which it exits, the object being  to  serve  public  good  by
resorting to fair and reasonable methods.  State is also  bound  to  protect
the resources for the enjoyment of general public rather than  permit  their
use for purely commercial purposes.   Public  trust  doctrine,  it  is  well
established, puts an implicit embargo on the right of the State to  transfer
public  properties  to  private  party  if  such  transfer  affects   public
interest.  Further  it  mandates  affirmative  State  action  for  effective
management of natural  resources  and  empowers  the  citizens  to  question
ineffective management.

5.    UAS license holders have an obligation to  use  such  resources  in  a
manner as not to impair or diminish the people’s  right  and  people’s  long
term interest in that property  or  resource.   In  Secretary,  Ministry  of
Information and Broadcasting, Government of  India  and  others  v.  Cricket
Association of Bengal and others 1995 (2) SCC 161, this  Court  held  “there
is no doubt since air waive frequencies are public  property  and  are  also
limited, they have to be used in the best interest of the society  and  this
can be done  either  by  the  Central  Authority  by  establishing  its  own
broadcasting network or regulating the grant of licenses to other  agencies,
including the private agencies.”  In Reliance Natural Resources  Limited  v.
Reliance Industries Limited (2010)  7  SCC  1,  this  Court  held  that  the
constitutional mandate is that the natural resources belong  to  the  people
of this country.  This Court in several decisions took  the  view  that  the
natural resources are vested with the Government as a  matter  of  trust  to
the people of India and it is the solemn duty of the State  to  protect  the
national interest and natural resources must always be used in the  interest
of the country and not in private interest.  In short, State  is  the  legal
owner of spectrum as  a  trustee  of  the  people  and  even  though  it  is
empowered to distribute the  same,  the  process  of  distribution  must  be
guided by constitutional provisions, including the doctrine of equality  and
larger public good.  Bearing in mind the  above  constitutional  principles,
we may proceed further.

6.    We have the Indian Telegraph Act,  1885  in  force,  which  gives  the
“exclusive  privilege”  to   the   Central   Government   of   establishing,
maintaining and working of telegraph  to  the  Central  Government  and  the
Government  is  empowered  to  give  licences  on  such  conditions  and  in
consideration  of  such  payment,  as  it  thinks  fit,  to  any  person  to
establish, maintain or work a telegraph in any part of  India.   The  Indian
Wireless  Telegraphy  Act,  1933,  regulates  the  possession  of   wireless
telegraph apparatus. The National Policy of 1994 was the  first  major  step
towards deregularisation, liberalization and  private  sector  participation
for providing certain basic telecom services on  affordable  and  reasonable
prices to all people covering all  villages  and  also  to  achieve  various
other objectives.  Following the New Telecom Policy of 1999 (NTP),  licenses
were granted to various  cellular  mobile  telephone  service  operators  in
various cities and  circles  to  make  available  affordable  and  effective
communication  for  citizens,  considering   the   fact   that   access   to
telecommunication was of utmost importance to achieve the  country’s  social
and economic growth.  NTP also attempted to  provide  universal  service  to
all uncovered areas, including the rural areas and also provided high  level
services capable of meeting the needs of the country’s economy  by  striking
a balance between the two. The NTP of 1999 specifically refers  to  spectrum
management which highlights the following aspects:


      “10. The policy on spectrum management as enumerated in NTP, 1999  was
      as under:


      (i) Proliferation of new  technologies  and  the  growing  demand  for
      telecommunication services has led to manifold increase in demand  for
      spectrum and  consequently  it  is  essential  that  the  spectrum  is
      utilised efficiently, economically, rationally and optimally.


      (ii) There is a need  for  a  transparent  process  of  allocation  of
      frequency spectrum for  use  by  a  service  provider  and  making  it
      available to various users under specific conditions.


      (iii) With the proliferation of new technologies it  is  essential  to
      revise the National Frequency Allocation Plan (NFAP) in  its  entirety
      so that it  becomes  the  basis  for  development,  manufacturing  and
      spectrum utilisation activities in the country amongst all users. NFAP
      was under review and the revised NFAP was to be made public by the end
      of 1999 detailing information regarding allocation of frequency  bands
      for various services, without including security information.


      (iv) NFAP would be reviewed no later than every two years and would be
      in  line   with   the   Radio   Regulations   of   the   International
      Telecommunication Union (ITU).


      (v) Adequate spectrum is to be made available to meet the growing need
      of telecommunication services. Efforts would be  made  for  relocating
      frequency bands assigned earlier to defence and  others.  Compensation
      for relocation may be provided out of spectrum fee and revenue share.


      (vi) There is a need to review the spectrum allocation  in  a  planned
      manner so that required frequency bands are available to  the  service
      providers.


      (vii) There is a need to have a transparent process of  allocation  of
      frequency spectrum which is effective and efficient and the same would
      be further examined in the light of ITU guidelines. In this regard the
      following course of action shall be adopted viz.:


        (a) spectrum usage fee shall be charged;
        (b) an Inter-Ministerial Group to be called the  Wireless  Planning
            Coordination  Committee,  as  a  part   of   the   Ministry   of
            Communications for periodical review  of  spectrum  availability
            and broad allocation policy, should be set up; and
        (c) massive computerisation in WPC wing would  be  started  in  the
            next three months so as to achieve the objective of  making  all
            operations completely computerised by the end of the year 2000.”



7.     Parliament,  in  the  year  1997,  enacted  the  Telecom   Regulatory
Authority of India (TRAI) Act to provide for the establishment of  TRAI  and
the Authority has  been  entrusted  with  various  regulatory  functions  on
unified licensing.  The Act and the recommendations made by TRAI  emphasized
on efficient utilization of  spectrum  to  all  the  service  providers  and
indicated  that  it  would  make  further   recommendations   on   efficient
utilization  of  spectrum,  spectrum  pricing,  availability  and   spectrum
allocation procedure, and DoT has  to  issue  spectrum  related  guidelines,
based on its recommendations.

8.    Let us now examine the facts which gave rise  to  these  appeals.   On
28.01.2010, the TRAI issued a communication to one of the service  providers
for furnishing books of accounts to the Branch Audit Office of the  Director
General of Audit, Post and Telecommunication, operative portion of the  said
communication reads as follows:
         “In terms of Rule 5 of the Telecom Regulatory Authority of  India,
      Service  Providers  (Maintenance  of  Books  of  Accounts  and   other
      Documents) Rule, 2002, every service provider shall produce  all  such
      books of accounts and documents referred to in sub rule (1) of rule  3
      thereof that has a bearing on the  verification  of  the  Revenue,  to
      Telecom Regulatory Authority of India (the authority);

      (ii)  to furnish to the Comptroller and Auditor General of  India  the
           statement  or   information,   relating   thereto,   which   the
           Comptroller and Auditor General  of  India  may  require  to  be
           produced before him and the Comptroller and Auditor  General  of
           India may audit the same in accordance with  the  provisions  of
           Section 16 of the Comptroller  and  Auditor  General’s  (Duties,
           Powers and Conditions of Service) Act, 1971.

      2.    The Comptroller and Auditor General of India  (through  Director
           General of Audit, Post  &  Telecommunications)  has  decided  to
           audit the books of accounts of your company for  the  period  of
           three years commencing from  2006-2007  onwards  to  assess  the
           government share out of the revenues carried by your company  in
           terms of the licence agreement with DoT.

      3.    Therefore in terms of the rule 5 of the TRAI, Service  Providers
           (Maintenance of Books of Accounts and  other  Documents)  Rules,
           2002, it  is  requested  that  all  necessary  records/books  of
           accounts  circle/area-wise,  on  the  Maintenance  of  Books  of
           Accounts and other relevant matters  during  the  last  week  of
           January, 2010 in the office of DO Audit, P&T, New  Delhi,  which
           would facilitate the audit work.

      4.   It is, therefore, requested that all necessary co-operation  may
           be extended to the Branch Audit Officers and Delhi office of  DG
           Audit P&T  for  completion  of  the  above  audit  work  besides
           providing all necessary records/information/ documents  required
           in connection with this audit work.

      This issues with the approval of the Authority.”



9.    The DoT later wrote a communication dated 16.03.2010  to  one  of  the
service providers, the subject matter of  which  reads  “Audit  and  Telecom
Service Providers by Comptroller & Auditor General”, the  operative  portion
of the said communication reads as under:


      “In exercise of power conferred on the Licensor under clause  22.3  of
      Unified Access Service (UAS) Licence, it is requested to  provide  the
      following accounting records, for three years commencing from 2006-07,
      consisting of books of  accounts  and  other  documents  for  all  the
      services offered under the  above  referred  UAs  licences  issued  to
      reflect :


        i) Total cost and breakup of original and current  cost  i.e.  cost
           after depreciation under separate heads for  different  category
           of fixed assets;


       ii) Cost and breakup of operational expenses;


      iii) Service wise revenue;


       iv) Income from other sources;


        v) Supporting books of accounts other documents


           a) Fixed assets register
           b) Stores and spares/Inventory register
           c) Register showing service-wise particulars of subscribers
           d) Register showing deposits from customers
           e) Cash books
           f) Journals
           g) Ledger
           h) Copies of bills and counterfoils of all receipts.


      2.    The above mentioned information should be sent directly  to  DDG
      (Accounts), Department of  Telecommunications,  Room  No.701,  Sanchar
      Bhavan, 20, Ashoka Road, New Delhi – 110001 within 15 days  from  date
      of issue of this letter.


                                                            Sd/- (16.3.2010)
                                                              (Shashi Mohan)
                                                            Director (AS-IV)
                                                 Tele:23372063/Fax-23372404”


10.   One of the service providers replied to the above-mentioned letter  on
15.04.2010, the operative portion of the same reads as under:
      “We appreciate that DoT in terms of Clause 22.3 of UASL can  call  for
      Licensee’s books of accounts or go further and direct  for  a  special
      audit by independent auditor in terms of Clause 22.6 and we have  been
      complying and are committed to complying with direction/s that may  be
      issued by DoT in this regard.  However, we should like to mention here
      that we are currently undergoing the extensive special  audit  of  our
      books of accounts by an independent auditor  M/s  S.K.  Mittal  &  Co.
      appointed by DoT for the same period i.e. FY 2006-07 and 2007-08.


      In the light of the above, the recent communication of DoT  asking  us
      to provide our accounting records for period of three  years  starting
      from 2006-07 for an audit by the C&AG is  a  matter  of  surprise  and
      concern for us.   We submit that a fresh audit so closely on the heels
      of  the  special  audit  by  DoT  appointed  independent  auditor   is
      unwarranted and will result in duplication of efforts, time and  waste
      of resources.  However, as a good corporate citizen, we have  provided
      to DoT the total cost and breakup of original and current  cost,  cost
      and breakup of operational expenses, service wise revenue, and  income
      from other sources for the year 2006-07, 2007-08 and 2008-09 vide  our
      letters dated  1st  April,  2010  and  12th  April  2010  though  this
      information provided to DoT is very sensitive from  competitive  point
      of view.


      We would also like to submit that the  provisions  of  the  C&AG  Act,
      1971, which set out the duties and powers of the C&AG pertain only  to
      the audit of accounts  of  the  Union  or  the  States  or  Government
      Companies or Corporations.  The audit of accounts of private companies
      such as ours is not a part of duties and powers of the C&AG.


      It is, therefore, requested that while DoT can call for our  books  of
      accounts, the audit of those does not fall within the purview  of  the
      C&AG.


      We  submit  that  the  information  sought  through  the  letter  like
      operational expenses, total cost and break up of original and  current
      cost etc. is not only sensitive from competitive point of view but has
      no direct linkages to the revenues  of  the  company  and  thus  falls
      beyond our licence obligations.


      We submit once again that we have already provided to DoT the  desired
      information and are ready  and  be  willing  to  provide  any  further
      specific information or data which is required by  DoT  in  accordance
      with the provisions of the UAs licence.


      We look forward to your kind consideration and support on the matter.”




11. The Director General of Audit, Post and Telecommunications, later,  with
specific reference to “Audit of Telecom Service Providers by  C&AG”  sent  a
communication  dated  10.05.2010  to  one  of  the  service  providers,  the
operative portion of the same reads as under:
                               “OFFICE OF THE
            DIRECTOR GENERAL OF AUDIT, POST & TELECOMMUNICATIONS


                SHAM NATH MARG (NEAR OLD SECRETARIAT), DELHI
      R.P. Singh
      Director General             Dated : 10.5.2010


      Sub: Audit of Telecom Service Providers by
              C&AG-Reg.


      Ref : 1) DoT Letter No.842-1086/2010-AS-IV
                  dt. 16.03.2010.
             2) Your office letter No.RTL/09-10/4433
                  Dt. 31.3.2010.


      Dear Shri Singh,


      Kindly refer  to  your  office  letter  cited  on  the  above  subject
      extending cooperation in conduct of the  audit  of  revenue  share  by
      C&AG.  Certain difficulty  has  been  expressed  by  your  Company  in
      providing the books of accounts in physical form  as  they  are  being
      maintained in electronic form in SAP R3.  Further, it has been stated,
      the same could be viewed in the concerned IT Systems  which  would  be
      made available at your headquarters at DAKC,  Navi  Mumbai.   In  this
      connection, it is requested that on 20th May, 2010, a presentation may
      be given  covering  your  business  activities,  accounting  policies,
      Accounting,  billing  and  financial  systems  and  all  other  issues
      relating to revenue share, followed by brief interface meeting with my
      Audit team which would start the process of audit.  The time and venue
      of the presentation is given in Annexure-I.   Shri  Subu  R.  Director
      (Report) of my office has been nominated as Nodal Officer who would be
      overseeing and coordinating the Audit.


      Regards,
                                                            Yours sincerely,
                                                                 R.P. Singh”




12. The TRAI on 21.05.2010 sent yet another  communication  to  one  of  the
service providers  with  specific  reference  to  “Furnishing  of  Books  of
Accounts to the Branch Audit Offices of the Director General of Audit,  Post
and Telecommunications”, the operative portion of the same reads as under:
                   “Telecom Regulatory Authority of India
                        Mahanagar Doorsanchar Bhawan,
                   Jawahar Lal Nehru Marg, Old Minto Road
                             New Delhi – 110 002


      F.No.14-21/2009-FA              Dated 21st May, 2010


      Mr. Anand Dalal
      Addl. Vice President (Regulatory Affairs)
      M/s Tata Group of Companies
      Indicom Building
      2A, Old Ishwar Nagar
      Main Mathura Road
      New Delhi – 110 065






      Subject : Furnishing of Books of Accounts to
                   the  Branch  Audit  Offices  of   the
                   Director  General  of  Audit, Post &
                   Telecommunication.


      Kindly refer to TRAI’s letter  No.14-21/2009-FA  dated  28th  January,
      2010, in which your company has been asked to make available for audit
      all necessary  records/books  of  accounts  circle/area-wise,  to  the
      corresponding Branch Audit Offices (as indicated in the list)  and  to
      submit consolidated accounts to the Delhi office of the DG Audit, P&T.
       Your company was  also  requested  to  make  a  presentation  on  the
      maintenance of books of accounts and other  relevant  matters  in  the
      office of DG Audit P&T, New Delhi.


      2.    We have been informed by the C&AG  that  your  company  has  not
      responded to these instructions so far.


      3.    In this connection, TRAI had received representations  from  the
      industry associates indicating that the scope of the C&AG’s  audit  is
      similar to the scope of the exercise that is being done by the special
      auditor appointed by the  DoT  and  that  this  exercise  would  be  a
      duplication  of  work.   The  concerns  expressed  by   the   industry
      associations were brought to the notice of  the  C&AG.   However,  the
      C&AG (through Director General Audit (P&T) has informed  us  that  the
      audit by the C&AG of India under Section 16 of the C&A (DPC) Act is in
      exercise of the provisions of TRAI Rules, 2002  and  has  no  relation
      with the special audit undertaken by the CAs appointed by DoT.


      4.    In view of the above, you are requested to  make  available  all
      necessary  records/books  of  accounts  circle/area   wise,   to   the
      corresponding Branch Audit Offices (as indicated in the  letter  dated
      28th January, 2010) and to submit consolidated accounts to  the  Delhi
      Office of the DG Audit, P&T within 15 days  of  the  receipt  of  this
      letter.  You are also informed that non-compliance of this letter  may
      attract appropriate action under the TRAI Act.


      This issues with the approval of the Authority.


                                                           Yours faithfully,
                                                                        Sd/-
                                                            (Anuradha Mitra)
                                                           Pr. Advisor (FA)”




13. The TRAI also apprised the Service Providers that the  audit  sought  to
be conducted by CAG was separate and independent of  the  audit  or  special
audit conducted by DoT, and therefore, directed  the  Service  Providers  to
make available all the records for audit by CAG or else  appropriate  action
would be taken  against  them  under  the  TRAI  Act.    Service  providers,
aggrieved by the stand of DoT and TRAI, filed Civil Writ  Petition  3673  of
2010, challenging the legality of the  above-mentioned  notices  before  the
Delhi High Court, seeking following reliefs:


     “i.    Pass a writ, order or direction to hold and declare that Rule  5
           of the Telecom Regulatory Authority of India, Service  Providers
           (Maintenance of Books of Accounts and  other  Documents)  Rules,
           2002 for being ultra vires of Section 16 of  the  C&AG  Act  and
           Article 149 of the Constitution of India;


     ii.    Set aside/quash all actions taken/purported to be taken  by  the
           Respondent No.1 and/or Respondent No.2;


     iii.   Set aside/quash Respondent No.2’s letters  dated  10.5.2010  and
           21.5.2010 and the directions contained therein;


     iv.    Set aside/quash Respondent No.3’s letter dated 28.1.2010 and the
           directions contained therein;


     v.     pass any order(s) as the Court may deem fit in the  interest  of
           justice, equity and good conscience.”




14. The Division Bench of the Delhi High Court examined the legality of  the
above-mentioned communications in the light of Rule 5  of  the  TRAI  Rules,
2002, Section 16 of the CAG Act, 1971 and Article 149  of  the  Constitution
of India read with UAS licence conditions and took the  view  that  the  CAG
has the powers to conduct the revenue audit of all  accounts  drawn  by  the
licensees and expressed the view that  the  accounts  of  the  licensee,  in
relation to the revenue receipts can be said  to  be  the  accounts  of  the
Central Government and, thus, subject to a revenue audit, as per Section  16
of the CAG (Duties, Powers and Conditions) Act, 1971.  Holding so, the  writ
petitions were  dismissed  against  which  these  civil  appeals  have  been
preferred by way of special leave.


15.   Shri Harish  N.  Salve,  learned  senior  counsel  appearing  for  the
appellants, submitted that the High Court has not properly  appreciated  the
scope of Article 149 of the Constitution of India, particularly  the  phrase
“accounts of the  Union  and  States  and  any  other  authority  or  body”.
Learned senior counsel  submitted  that  a  composite  interpretation  would
reveal that the term  ‘body’  is  to  be  construed  in  the  light  of  the
continuing term “Union”, “States” and “authority” all of which connote  some
form of State control.  Learned senior counsel also made  reference  to  the
principle of “nocitar a cociis.”   Learned senior counsel made reference  to
the Judgment of this Court in  M.K.  Ranganathan  v.  Government  of  Madras
(1955) 2 SCR 374,  Rohit Pulp  and  Paper  Mills  v.  Collector  of  Central
Excise,  Baroda  (1990)  3  SCC  447,  Ahmedabad  Pvt.   Primary   Teachers’
Association  v.  Administrative  Officer  and  others   (2004)  1  SCC  755.
Learned senior counsel also referred to  the  Constituent  Assembly  Debates
and Article 149 of the Constitution of India and  submitted  that  the  term
“any other authority or body” was only meant  to  cover  the  entities  that
perform State functions/or entities financed or controlled by the State,  as
opposed  to  local  bodies  and   other   miscellaneous   corporations   and
organizations.


16.   Learned senior counsel submitted that Section 16 of the  Act  of  1971
does not apply to audit of private telecom licensees and submitted that  the
mere fact that licence fee payable under the licence  agreement  has  to  be
credited into the Consolidated Fund of India in the form  of  receipts  does
not mean that a proprietary audit in respect of such receipts extends  to  a
statutory audit of private telecom licensee.  Learned  senior  counsel  also
submitted that for audit of  telecom  licensees  the  correct  legal  regime
would be clause 22 of the Licence Agreement which specifically provides  for
audit and special audit.  Shri Salve also pointed out that  the  DoT,  under
the agreement, can appoint an outside auditor of its choice or even the  CAG
can conduct an audit in terms of clause 22 of UAS.  Learned  senior  counsel
also pointed out that the mere fact that Rule 5 of 2002  Rules  states  that
the CAG may carry out an audit of the accounts  of  telecom  licensee  under
Section 16 of the 1971 Act does not make  such  audit  legally  permissible.
Rule 5, according to learned senior counsel, ought  to  be  struck  down  as
ultra vires and in contravention of Section 16 of 1971 Act.


17.   Shri Gopal  Jain,  learned  senior  counsel  also  appearing  for  the
appellants, submitted that the reasoning  of  the  High  Court  is  patently
erroneous in law and pointed out that  the  licence  agreement  obliges  the
licensee to maintain accounts as prescribed  in  the  agreement  to  produce
those accounts as and when demanded, and  if  the  Government  is  satisfied
that the accounts are  not  maintained  as  per  the  prescribed  manner,  a
provision for special audit is there, which the service providers  are  also
subjected to.  So far as the audit referred to  under  Article  149  of  the
Constitution is concerned, learned senior counsel  pointed  out  that  there
must be an element  of  government  control  of  finance  and  the  same  is
completely lacking in the case of the  service  providers.   Learned  senior
counsel also referred to the meaning and  content  of  Article  266  of  the
Constitution and stated that the same deals with receipts which are  payable
into the Consolidated Fund of India and the receipts are only  that  of  the
Union and the States, as the case  may  be,  and  not  the  private  telecom
companies.


18.   Shri Paras Kuhad,  learned  Additional  Solicitor  General  of  India,
appearing for the respondent-Union of India, fully supported  the  reasoning
of  the  High  Court  and  submitted  that  the  High  Court  has  correctly
appreciated and understood the scope of  Article  149  of  the  Constitution
which has clearly defined the powers of the CAG.  Learned  ASG  pointed  out
that the conferment of powers upon  Parliament  under  Article  149  is  not
limited to the accounts of the Union and the States  and  other  bodies  and
authorities, but  also  extends  to  inclusion  therein  of  the  powers  to
legislate on all matters concerning or pertaining to  the  accounts  of  the
Union.  Learned ASG placed  considerable  emphasis  on  the  expression  “in
relation to” which takes in the underlying accounts and  records  maintained
by the service providers.  Learned  ASG  pointed  out  that  the  object  of
Article 149  of  the  Constitution  and  Act  of  1971  is  to  provide  for
Parliamentary control of executive on public funds, consequently,  ambit  of
audit by CAG has to cover all issues that are required  to  be  examined  by
the Parliament.   Referring  to  the  essence  of  Parliamentary  Democracy,
learned ASG placed reliance on the decision of this Court in S.R.  Chaudhuri
v. State of Punjab and others  (2001) 7  SCC  126  and  Kihoto  Hollohan  v.
Zachillhu and others (1992) Suppl. 2 SCC 651.


19.   Learned ASG also submitted “receipts  payable  into  the  Consolidated
Fund of India” under Article 266 of the Constitution of India take  in  “all
revenue receipts received by the Government of India” and submitted  that  a
combined reading of Sections 13,  16  and  18  would  indicate  that  it  is
obligatory on the part of the CAG to audit all transactions entered into  by
the Union and the States pertaining to the Consolidated Fund.   Learned  ASG
referring to Rule 3 submitted that the Rule prescribes the records  required
to be maintained enabling TRAI to carry out its obligation under Section  11
and Rule 5 provides for furnishing the said record  to  TRAI  for  the  said
purpose and for its audit by CAG.  Learned ASG,  therefore,  submitted  that
the High Court has correctly interpreted the various provisions of  the  Act
and the constitutional provisions and hence calls for no interference.


20.   We will, before  examining  the  various  contentions  raised  by  the
learned senior counsel for the appellant and ASG on  the  scope  of  Article
149 of the Constitution, Section 16 of Act of 1971, Rule  5  of  2002  Rules
etc., examine the  various  clauses  in  the  UAS  Licence  Agreement.    As
already indicated, the Licence Agreement specifically refers  to  Section  4
of the Indian Telegraph Act,  1885,  which  highlights  the  fact  that  the
Central Government enjoys an “exclusive privilege” so far as  “spectrum”  is
concerned, which is a scarce, finite and renewable  natural  resource  which
has got intrinsic utility to mankind.  Spectrum, as already indicated, is  a
natural  resource  which  belongs  to  the  people,  and  the   State,   its
instrumentalities or the licensee, as the case may be,  who  deal  with  the
same, hold it on behalf of the people and are accountable to the people.


21.   The DoT had entered  into  various  UAS  licence  agreements  and,  in
certain cases, for few decades.  Agreement confers powers on DoT to  suspend
the operation of the licence at any time if it is necessary or expedient  to
do so in the public interest or in the  interest  of  the  security  of  the
State  and  also  reserves  the  right  to  take  over  the  entire  service
equipments and network  of  the  licensee  or  revoke/terminate/suspend  the
licence in the interest of public or national security or  in  the  interest
of national emergency/war etc.   Licensor also reserves the  right  to  keep
any area out of the operation zone of service if  implications  of  security
so require. Few of the clauses, which are relevant for  our  purposes,  need
reference and hence are  extracted  hereunder.   Clause  9.1  indicates  the
requirement of furnishing of information which reads as under:


      “9. Requirement to furnish information:
      9.1 The LICENSEE shall furnish to the       Licensor/TRAI,  on  demand
           in the manner  and  as  per  the  time  frames  such  documents,
           accounts, estimates, returns, reports or  other  information  in
           accordance with the rules/ orders as may be prescribed from time
           to time. The LICENSEE shall also submit information to  TRAI  as
           per any order or direction or regulation  issued  from  time  to
           time under the provisions of TRAI Act, 1997  or  an  amended  or
           modified statute.”


22.   Clause 16 is general in nature and is extracted hereunder:
     “16. General:


     16.1 The LICENSEE shall be bound by the terms and  conditions  of  this
           Licence  Agreement  as  well  as   by   such   orders/directions/
           regulations of TRAI as per provisions of the TRAI  Act,  1997  as
           amended from time to time and instructions as are issued  by  the
           Licensor/TRAI.


     16.3 The Statutory provisions and the rules made under Indian Telegraph
           Act 1885 or Indian Wireless Telegraphy  Act,  1933  shall  govern
           this Licence agreement. Any order  passed  under  these  statutes
           shall be binding on the LICENSEE.”




23.  Part 2 of the licence conditions refers to  commercial  conditions  and
clause 17 deals with performance, which reads as under:
      “17. Tariffs:


      17.1 The LICENSEE will charge the tariffs for the SERVICE as  per  the
           Tariff orders/ regulations / directions issued by TRAI from time
           to time. The LICENSEE shall also fulfill requirements  regarding
           publication  of  tariffs,   notifications   and   provision   of
           information    as    directed    by     TRAI     through     its
           orders/regulations/directions issued from time to  time  as  per
           the provisions of TRAI Act, 1997 as amended from time to time.”


24.   Part 3 of the licence conditions deals with  the  finance  conditions,
fee payable, etc. which reads as under:
      “18.1 Entry Fee:


           One Time non-refundable Entry Fee of Rs.2 crore has been paid by
           the Licensee prior to signing of this Licence Agreement.


      18.2 Licence Fees:


            In addition to the Entry Fee described above, the Licensee shall
           also pay Licence Fee annually  @  6  (six)%  of  Adjusted  Gross
           Revenue (AGR), excluding spectrum charges.


            Annual Licence fee w.e.f. 1.4.2004 shall be @ 6 (six)%  of  AGR.
           The Licensor reserves the right to modify  the  above  mentioned
           Licence Fee any time during the currency of this agreement.


    18.3    Radio Spectrum Charges:


    18.3.1 The LICENSEE shall  pay  spectrum  charges  in  addition  to  the
           Licence Fee on revenue share basis as notified  separately  from
           time to time by the WPC Wing.  However, while calculating  ‘AGR’
           for limited purpose of levying spectrum charges based on revenue
           share, revenue from wireline subscribers shall not be taken into
           account.


   18.3.2 Further royalty for the use of spectrum for point to  point  links
           and other access links shall be separately payable  as  per  the
           details and prescription of  Wireless  Planning  &  Coordination
           Wing. The fee/ royalty for the use of  spectrum  /possession  of
           wireless telegraphy equipment depends upon various factors  such
           as frequency, hop and link length, area of operation  and  other
           related aspects etc. Authorization of frequencies for setting up
           Microwave links by Licensed  Operators  and  issue  of  Licenses
           shall be separately dealt with  by  WPC  Wing  as  per  existing
           rules.”


25.   Clause 19 deals with definition of Adjusted Gross Revenue (AGR)  which
reads as under:
    “19. Definition of ‘Adjusted Gross Revenue’:

     19.1 Gross Revenue:

           The Gross Revenue shall be inclusive  of  installation  charges,
           late fees, sale proceeds of  handsets  (or  any  other  terminal
           equipment etc.), revenue on account of interest, dividend, value
           added    services,    supplementary    services,    access    or
           interconnection   charges,   roaming   charges,   revenue   from
           permissible   sharing   of   infrastructure   and   any    other
           miscellaneous revenue, without any set-off for related  item  of
           expense, etc.

     19.2 For the purpose of arriving at the “Adjusted Gross Revenue (AGR)”
           the following shall be excluded from the Gross Revenue to arrive
           at the AGR:

           I. PSTN related call charges (Access Charges) actually  paid  to
              other eligible/entitled telecommunication  service  providers
              within India;

           II.     Roaming   revenues   actually   passed   on   to   other
              eligible/entitled telecommunication service providers and;

           III.   Service  Tax  on  provision  of  service  and  Sales  Tax
              actually paid to the Government if gross revenue had included
              as component of Sales Tax and Service Tax.”




26.   Clause 20 deals with the schedule of payments of  annual  licence  fee
and other dues.  Relevant clauses being  20.4,  20.6,  20.7  and  20.11  are
extracted hereunder:
    “20.4 The quarterly payment shall be made  together with a STATEMENT  in
           the prescribed form as annexure-II, showing the  computation  of
           revenue  and  Licence  fee  payable.  The  aforesaid   quarterly
           STATEMENTS of each year shall be required to be audited  by  the
           Auditors  (hereinafter  called  LICENSEE’S  Auditors)   of   the
           LICENSEE appointed under Section  224  of  the  Companies’  Act,
           1956. The report of the Auditor should be in prescribed form  as
           annexure-II.


    20.6  Final adjustment of the Licence fee for the year  shall  be  made
           based on  the  gross  revenue  figures  duly  certified  by  the
           AUDITORS of the LICENSEE in accordance  with  the  provision  of
           Companies’ Act, 1956.


    20.7 A reconciliation between the figures appearing  in  the  quarterly
           statements  submitted  in  terms  of  the  clause  20.4  of  the
           agreement with those  appearing  in  annual  accounts  shall  be
           submitted along with a copy of  the  published  annual  accounts
           audit report and duly audited  quarterly  statements,  within  7
           (seven) Calendar days of  the  date  of  signing  of  the  audit
           report. The  annual  financial  account  and  the  statement  as
           prescribed above  shall  be  prepared  following  the  norms  as
           prescribed in Annexure.


    20.11 The LICENSOR,  to  ensure  proper  and  correct  verification  of
            revenue share paid, can, if  deemed  necessary,  modify,  alter,
            substitute and amend whatever stated in Conditions  20.4,  20.7,
            22.5 and 22.6 hereinbefore and hereinafter written.”




27.   Clause 22 deals with the preparation of  accounts.   Relevant  clauses
are extracted hereunder:
      “22. Preparation of Accounts.


      22.1  The LICENSEE will draw, keep and  furnish  independent  accounts
             for the SERVICE and shall fully comply  orders,  directions  or
             regulations as may be issued from time to time by the  LICENSOR
             or TRAI as the case may be.


      22.2 The LICENSEE shall be obliged to:


      a)   Compile and maintain accounting records, sufficient to  show  and
           explain its transactions in respect of each completed quarter of
           the Licence period or of such lesser periods as the LICENSOR may
           specify, fairly presenting the costs (including capital  costs),
           revenue and financial position of the LICENSEE’s business  under
           the LICENCE including a  reasonable  assessment  of  the  assets
           employed in and the liabilities attributable to  the  LICENSEE’s
           business, as well as, for the quantification of Revenue  or  any
           other purpose.


      (b)  Procure  in  respect  of  each  of  those  accounting  statements
           prepared in respect of a completed financial year, a  report  by
           the LICENSEE’s Auditor in the format prescribed by the LICENSOR,
           stating inter-alia whether  in  his  opinion  the  statement  is
           adequate for  the  purpose  of  this  condition  and  thereafter
           deliver to the  LICENSOR  a  copy  of  each  of  the  accounting
           statements not later  than  three  months  at  the  end  of  the
           accounting period to which they relate.


      c)     Send  to  the  LICENSOR  a  certified  statement  sworn  on  an
           affidavit,  by  authorized  representative   of   the   company,
           containing full account of Revenue as defined  in  condition  19
           for each quarter separately  along  with  the  payment  for  the
           quarter.


      22.3 (a) The LICENSOR or the TRAI, as the case may be,  shall  have  a
             right to call for and the LICENSEE shall be obliged  to  supply
             and provide for examination any  books  of  accounts  that  the
             LICENSEE may maintain in respect of the business carried on  to
             provide the service(s) under this Licence at any  time  without
             recording any reasons thereof.


      22.3 (b) LICENSEE shall invariably preserve all billing and all  other
             accounting records (electronic as well  as  hard  copy)  for  a
             period of THREE years from  the  date  of  publishing  of  duly
             audited & approved Accounts of the company and any  dereliction
             thereof shall be treated as a material  breach  independent  of
             any other breach, sufficient to give a cause  for  cancellation
             of the LICENCE.


      22.5  The LICENSOR may, on forming an opinion that the  statements  or
             accounts submitted are inaccurate or misleading, order Audit of
             the accounts of the LICENSEE by appointing auditor at the  cost
             of the LICENSEE and such auditor(s) shall have the same  powers
             which the statutory auditors of the company enjoy under Section
             227 of  the  Companies  Act,  1956.  The  remuneration  of  the
             Auditors, as fixed by the  LICENSOR,  shall  be  borne  by  the
             LICENSEE.


      22.6 The LICENSOR may also get conducted  a  ‘Special  Audit’  of  the
           LICENSEE company’s accounts/records by “Special  Auditors”,  the
           payment for which at a rate as fixed by the LICENSOR,  shall  be
           borne by the LICENSEE. This will be in the  nature  of  auditing
           the audit described in para 22.5  above.  The  Special  Auditors
           shall also be provided the  same  facility  and  have  the  same
           powers as  of  the  companies’  auditors  as  envisaged  in  the
           Companies Act, 1956.


      22.7 The LICENSEE shall be liable to prepare and furnish the company’s
           annual financial accounts according to the accounting principles
           prescribed and the directions given by the LICENSOR or the TRAI,
           as the case may be, from time to time.”


28.   Clause 32 deals with the obligations imposed upon the licensee,  which
read as under:
      “32. Obligations imposed on the LICENSEE.


      32.1 The provisions of the  Indian  Telegraph  Act  1885,  the  Indian
           Wireless  Telegraphy  Act  1933,  and  the  Telecom   Regulatory
           Authority of India Act, 1997 as modified from time  to  time  or
           any  other  statute  on  their  replacement  shall  govern  this
           LICENCE.


      32.2 The LICENSEE shall furnish all necessary means and facilities  as
            required for the application of provisions of  Section  5(2)  of
            the Indian Telegraph Act, 1885, whenever  occasion  so  demands.
            Nothing  provided  and  contained  anywhere  in   this   Licence
            Agreement shall be deemed to affect adversely anything  provided
            or laid under the provisions of Indian Telegraph  Act,  1885  or
            any other law on the subject in force.”




29.   We have earlier referred to the  clauses  of  the  licence  agreement,
which indicate the pattern of “revenue sharing” between the Union  of  India
and the licensee.  Licence  fee  envisages,  apart  from  the  one-time  non
refundable Entry Fee,  the  licence  fee  annually  be  paid  @  6%  of  AGR
excluding spectrum charges.  Right is  also  reserved  on  the  licensor  to
modify the licence fee during  the  currency  of  the  agreement.   Spectrum
charges have to be paid in addition to the licence fee on  “Revenue  Sharing
Basis”.  While levying spectrum charges based on AGR, the  components  which
form the AGR have also been given in clause 19.1, which is  wide  enough  to
embrace other source of revenue inflow.  Licensee is, therefore, obliged  to
maintain the accounts relating to licence  agreement  and  particularly  the
revenue received by it because it has to share the revenue with  the  Union,
which has to be calculated with reference to the Gross Revenue Receipts.

30.   TRAI Service Providers (Maintenance of Books  of  Accounts  and  other
Documents) Rules, 2002  have  been  framed  by  the  Central  Government  in
exercise of the powers conferred under sub-section (1) read with clause  (d)
of sub-section (2) of Section 35 of the TRAI Act, 1997.  Rule 3  deals  with
the maintenance of books of accounts and other  documents,  which  reads  as
under:
    “3.    Maintenance of Books of  Accounts  and  other  Documents  –  (1)
    Every service provider shall keep and maintain the following  books  of
    accounts and other documents in the manner as specified by the  Central
    Government from time to time, namely:-

       i) books of accounts to reflect the itemized  original  and  current
          cost  service-wise  of  fixed  assets  and  separate  heads   for
          different category of assets may be maintained;


      ii) books of accounts and other  documents  to  reflect  service-wise
          itemised operational expenses;


     iii) books of accounts to reflect service-wise revenue;


      iv) books of accounts to reflect income from other sources;


       v) supporting books of accounts and other documents as –


          a)    fixed assets register;


          b)    stores and spares register


          c) register showing particulars, service-wise, of subscribers;


          d)    register showing deposits from customers;


          e)    cash book;


          f)    journal;


          g)    ledger; and


          h) copies of bills and copies of counter foils of all receipts.


    Explanation – For the purpose of this rule –


    a) “itemized” means the requirement for both the total  cost  and  also
       its break-up;


    b) “current cost” means cost after depreciation; and


    c) “fixed assets”  includes  sub-heads  such  as  building,  plant  and
       machinery, etc.


    (2)   Every service provider shall intimate to the Authority the  place
    where the books of accounts and other documents are maintained.”




31.   Rule 5 of 2002 Rules, the validity of which is under challenge,  reads
as under:
    “5.    Audit

    Every service provider shall produce all such  books  of  accounts  and
    documents, referred to in sub-rule (1) of  rule 3, that has  a  bearing
    on the verification of the Revenue, to the Authority –

    (i)    for the purpose of calculating license fee; and

    (ii)   to furnish to the Comptroller and Auditor General of  India  the
           statement  or   information,   relating   thereto,   which   the
           Comptroller and Auditor General  of  India  may  require  to  be
           produced before him and the Comptroller and Auditor  General  of
           India may audit the same in accordance with  the  provisions  of
           Section 16 of the Comptroller  and  Auditor  General’s  (Duties,
           Powers and Conditions of Service) Act, 1971 (56 of 1971).”




32.   UAS Licence holders  do  not  dispute  the  fact  that  they  have  to
maintain books of accounts and other documents referred  to  in  Rule  3  of
2002 Rules and they also do not question the right of the DoT  under  Clause
22.5 to appoint an auditor, nor do they question the DoT’s power to  appoint
a Special Auditor under Clause 22.6 or even the  audit  being  conducted  by
DoT through  CAG.   UAS  Licence  holders  also  do  not  dispute  that  the
transactions between them  and  the  Union  of  India  form  the  basis  for
ascertaining the amounts payable to the Union of India, by  way  of  Revenue
Share, which has to be credited to the Consolidated Fund of  India.     What
they dispute is the competence of CAG to conduct audit of  the  accounts  of
the service providers in accordance with the provisions  of  Section  16  of
the Act of 1971 read with Rule 5(ii) of 2002 Rules.  Power of the CAG  under
Section 16 of the 1971 Act has been disputed primarily on  the  ground  that
Article 149 of the Constitution confers powers on the CAG to  conduct  audit
of accounts only of the Union and the States or any other authority or  body
prescribed by or under any law made by Parliament, not private  entities  or
their underlying accounts and records maintained by them in the  absence  of
law made by the Parliament.  We  may  point  out  that  this  is  the  prime
question that arises for consideration in these appeals.

CAG

33.   We may first examine the powers of the CAG  under  our  constitutional
scheme. Article 148 of  the  Constitution  states  that  there  shall  be  a
Comptroller and Auditor General, who shall be appointed by the President  by
warrant under his hand and shall only be removed in like manner and on  like
grounds as of Judge of the Supreme Court of India.  The CAG  is,  therefore,
an important functionary under the Constitution and, it is  often  said,  he
is the guardian of the purse and that he should see that not farthing of  it
is spent without the authority of the Parliament.  Article  149  deals  with
the duties and powers of the CAG which reads as under:
      “149. Duties and powers of the Comptroller and Auditor  General.   The
      Comptroller and Auditor General 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 and, until provision in that behalf  is  so
      made, shall perform such duties and exercise such powers  in  relation
      to the accounts of the Union and of the States as were conferred on or
      exercisable by the Auditor General of  India  immediately  before  the
      commencement of this Constitution in relation to the accounts  of  the
      Dominion of India and of the Provinces respectively.”



34.   Article 149 does confer the power on the CAG to discharge  duties  and
powers in relation to the accounts of the Union and the States or any  other
authority or  body,  as  may  be  prescribed  under  the  law  made  by  the
Parliament.  CAG, therefore, is exercising constitutional powers and  duties
in relation to the accounts, while the High Court under Article 226  of  the
Constitution,  so  also  the  Supreme  Court  under  Article   32   of   the
Constitution, is exercising judicial powers.  Duties  and  powers  conferred
by the Constitution on the CAG under Article 149 cannot  be  taken  away  by
the  Parliament,  being  the  basic  structure  of  our  Constitution,  like
Parliamentary democracy, independence of judiciary, rule  of  law,  judicial
review, unity and integrity of the country, secular  and  federal  character
of the Constitution, and so on.


35.   The scope of Article 148 vis-à-vis the powers of the CAG came  up  for
consideration before this Court in S.Subramaniam Balaji v.  State  of  Tamil
Nadu and others (2013) 9 SCC 659 and this Court held that  the  CAG  is  the
constitutional functionary appointed under Article 148 of  the  Constitution
and its main role is to audit the income and expenditure of the  Government,
government bodies and State run corporations and the extent  of  its  duties
is listed in the Comptroller and Auditor General (Duties, Powers etc.)  Act,
1971.  It is stated that functioning of the Government is controlled by  the
government, laws of the land, legislature and the CAG.  CAG  has  the  power
to examine the propriety, legality and validity of all expenses incurred  by
the government and the office of the CAG exercises  effective  control  over
the government accounts and expenditure incurred on the schemes  only  after
implementation of the scheme, as a result, the duties of the CAG will  arise
only after the expenditure has been incurred.


36.   In Arvind Gupta v. Union of India and others (2013)  1  SCC  393  this
Court, while examining the scope  of  Articles  149,  150  and  151  of  the
Constitution, vis-à-vis the reports of the  CAG,  noticed  and  pointed  out
that the CAG’s functions are carried out in  the  economy’s  efficiency  and
effectiveness with which the government has used its resources  and  it  was
pointed out that performance/audit reports prepared  under  the  regulations
have to be viewed accordingly. In Arun Kumar Agrawal v. Union of  India  and
others (2013) 7 SCC 1 this Court while interpreting Section 16 of  1971  Act
held that the CAG has to satisfy himself  that  the  rules  and  procedures,
designed to secure an effective check  on  the  assessment,  collection  and
proper allocation of revenue are being duly observed and CAG has to  examine
the decisions which have financial implications, including the propriety  of
decision making.  This Court also noticed that the  report  of  the  CAG  is
required to be submitted to the President, who shall cause them to  be  laid
before each House of Parliament, as provided under  Article  151(1)  of  the
Constitution  of  India.   By  placing  the  reports  of  the  CAG  in   the
Parliament, CAG  regulates  the  accountability  of  the  Executive  to  the
Parliament in the field of financial administration, thereby  upholding  the
parliamentary democracy.

37.   We are of the considered view that when the executive deals  with  the
natural resources, like spectrum,  which  belongs  to  the  people  of  this
country, Parliament should know how the nation’s wealth has been dealt  with
by the executive and even by the UAS Licence holders and the quantum of  the
Revenue generated out of the use of the spectrum and whether  the  same  has
been properly assessed, collected and accounted for by  the  Union  and  the
UAS Licence holders. When nation’s wealth, like  spectrum,  is  being  dealt
with either by the  Union,  State  or  its  instrumentalities  or  even  the
private parties, like service providers, they are accountable to the  people
and to the Parliament.  Parliamentary democracy also envisages, inter  alia,
the accountability of the Council of Ministers to the Legislature.  In  this
connection reference may be made to the  Judgment  of  this  Court  in  S.R.
Chaudhuri (supra) and  Kihoto Hollohan (supra).


38.   Learned senior counsel appearing  for  the  service  providers,  while
interpreting  Article  149  of  the  Constitution,  questioned   the   CAG’s
jurisdiction, stating that so far as the service  providers  are  concerned,
it does not extend to them since they are not government companies,  nor  do
they receive any funding from the government.  Further, it is  also  pointed
out that they do not fall, rather not  covered  within  the  ambit  of  ‘any
other authority or body’ prescribed under any law made  by  the  Parliament.
It was also pointed out that the CAG cannot audit  private  companies,  like
the service providers.


39.   While examining the scope of Article 149,  read  with  Section  16  of
1971 Act, let us not forget that we are  dealing  with  a  natural  resource
which belongs to the peoples of this country, and hence we have  to  give  a
purposive interpretation to Article 149 read with Section  16  of  1971  Act
and Rule 5(i)(ii) of 2002  Rules.   Much  emphasis  has  been  made  on  the
Constituent  Assembly  Debates  in  respect  of  Article  149   (which   was
previously Article  145  in  the  1940’s  Draft  Constitution)  and  it  was
submitted that the term “any other authority or body”  in  Article  149  was
only meant  to  cover  entities  that  performed  State  functions  and/  or
entities financed or controlled by the State, as opposed  to  “local  bodies
and other miscellaneous corporations and organizations”.


40.   Constitution, as it is often said “is a living organic thing and  must
be applied to meet  the  current  needs  and  requirements”.   Constitution,
therefore, is not bound  to  be  understood  or  accepted  to  the  original
understanding  of  the  constitutional  economics.   Parliamentary  Debates,
referred to by service providers may not be the sole criteria to be  adopted
by a court while examining the meaning and content  of  Article  149,  since
its content and significance has to  vary  from  age  to  age.   Fundamental
Rights enunciated in the Constitution itself,  as  held  by  this  Court  in
People’s Union For Civil Liberties (PUCL) and another v. Union of India  and
another (2003) 4 SCC 399, have no fixed content,  most  of  them  are  empty
vessels into which each generation has to pour its content in the  light  of
its experience.

41.   Parliament has an obligation to ascertain whether the entire  receipts
by way of licence fee, spectrum charges, have been realized by the Union  of
India and credited to the Consolidated Fund of  India  (CFI).   Article  266
says, all the public moneys received by or on behalf of  the  Government  of
India shall be credited to CFI. CAG  can  carry  out  examination  into  the
economy, efficacy and effectiveness with which the Union of India  has  used
its resources,  and  whether  it  has  realized  the  entire  licencee  fee,
spectrum charges and also whether the Union of India has  correctly  carried
out the audit under Clauses 22.5 and 22.6 of UAS Licence  Agreement.   CAG’s
examination of the accounts of the Service Providers in  a  Revenue  Sharing
Contract is extremely important to ascertain whether there  is  an  unlawful
gain to the Service Provider and an unlawful loss to  the  Union  of  India,
because the revenue generated  out  of  that  has  to  be  credited  to  the
Consolidated  Fund  of  India.  The  subject  matter,  with  which  we   are
concerned, as already indicated, is “spectrum”, a  natural  resource,  which
belongs  to  the  people,  therefore,  people  of  this   country,   through
Parliament should know how its natural resources have  been  dealt  with  by
the Union, State or its instrumentalities or even by  UAS  licence  holders.
Instances are not rare, where even the Executive, at  times,  acts  hand  in
glove with licence holders, who deal  with  the  natural  resources,  hence,
necessity of proper parliamentary control over the resources.   We  have  to
understand the scope of Article 149 of the Constitution, Section 16 of  1971
Act and Rule 5 of TRAI Rules 2002, in that perspective.


42.   Chapter 3 of the Act of 1971 deals with the duties and powers  of  the
CAG.  Section 13 of the Act deals with the general  provisions  relating  to
audit and the same is extracted hereinbelow:
      “13.  It shall be the duty of the Comptroller and Auditor General –


        a) to audit all expenditure from the Consolidated Fund of India and
           of each State and of each Union Territory having  a  Legislative
           Assembly and to  ascertain  whether  the  moneys  shown  in  the
           accounts as having been disbursed were legally available for and
           applicable to the service or purpose to  which  they  have  been
           applied or charged and whether the expenditure conforms  to  the
           authority which governs it;


        b) to audit all transactions of the Union and of the State relating
           to Contingency Funds and Public Accounts;


        c) to audit all trading, manufacturing, profit  and  loss  accounts
           and balance sheets and other subsidiary  accounts  kept  in  any
           department of the Union or of a State;


      and in each  case  to  report  on  the  expenditure,  transactions  or
      accounts so audited by him.”




43.   Section 13(b) provides that the CAG would “audit all  transactions  of
the Union and of  the  States  relating  to  Contingency  Funds  and  Public
Accounts”.  The expression “transaction” means an  incident  of  buying  and
selling or action of conducting business,  it  also  means  an  exchange  or
interaction between people.  The “transaction” is, therefore, an  expression
of widest amplitude and would cover even the lease  agreement  entered  into
by the Union with service providers. The expression “relating to” refers  to
“Contingency Funds and Public  Accounts”.   While  examining  the  scope  of
Section 13, the test to be applied is, is  it  a  transaction  of  Union  or
State or is it, in any way, “relates to contingency public fund”.

44.   Section 16 of the Act of 1971 deals with audit of  receipts  of  Union
or States, reads as under:
      “16.  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 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.”



45.   The expression “to  audit  all  receipts”  does  not  distinguish  the
revenue receipts and non-revenue receipts.  For  the  purpose  of  audit  of
receipts, the duty of the CAG extends “to such examination of  the  accounts
as it thinks fit and report thereon”.  Section 13 read  along  with  Section
16 makes it clear that the expression “to audit all  transactions”  so  also
“audit of all receipts”, payable into Consolidated Fund of India would  take
in not only the accounts of the Union and of the  State  and  of  any  other
authority or body as may  be  prescribed  or  under  any  law  made  by  the
Parliament but also to audit all transactions which  Union  and  State  have
entered into which has a nexus with Consolidated Fund, especially  when  the
receipts have direct connection with Revenue Sharing.


46.   Above reasoning is further re-inforced if we look  at  Section  18  of
the Act, which deals with the powers of  the  CAG  in  connection  with  the
audit of accounts, which reads as follows :-
      “18.  (1) The Comptroller and Auditor-General shall in connection with
      the performance of his duties under this Act, have authority –


        a) to inspect any office of accounts under the control of the Union
           or of a State including treasuries, and such offices responsible
           for the keeping of initial or  subsidiary  accounts,  as  submit
           accounts to him;


        b) to require that any accounts, books, papers and other  documents
           which deal with or form the basis of or an otherwise relevant to
           the transactions to which his duties in respect of audit extend,
           shall  be  sent  to  such  place  as  he  may  appoint  for  his
           inspection;


        c) to put such questions  or  make  such  observations  as  he  may
           consider necessary, to the person in charge of the office and to
           call for such information as he may require for the  preparation
           of any account or report which it is his duty to prepare.



      (2)   The person in charge of any office or department,  the  accounts
      of which have to be inspected  and  audited  by  the  Comptroller  and
      Auditor-General, shall afford all facilities for such  inspection  and
      comply with requests for information in as complete a form as possible
      and with all reasonable expedition.”




Section 18(1)(b) delineates the powers of the CAG to call for the  books  of
accounts, papers and  other  documents  which  form  the  basis  of  various
transactions to which his duties extend.


47.   Section 16 of Act 56 of 1971 has to be  understood  in  the  light  of
Article 266 of the Constitution.  Article 266 also uses the expression  “all
revenue receipts by  the  Government  of  India”  which  evidently  includes
income of the nation received by the DoT in parting with the privilege  i.e.
‘spectrum”  on  a  revenue  sharing  basis  with  service  providers.    The
expression “licence fee” in clause 18.1  and  “Radio  spectrum  charges”  in
clause 18.3.1 in the licence agreement for UAS  have  to  be  understood  in
that perspective.  The licence fee received by the DoT  so  also  the  Radio
spectrum charges while granting the privilege to deal with the  spectrum  by
the licensees is a “revenue received by the Government” within  the  meaning
of Article 266 i.e. “a receipt payable into the Consolidated Fund of  India”
within the meaning of Section 16 of 1971 Act.

48.   Revenue share receivable by the Union being  a  receipt  payable  into
the Consolidated Fund” by virtue of Section 16 and 18(1)(b) of 1971 Act,  in
relation to  such  receipts,  the  CAG  is  entitled  to  seek  the  records
maintained in terms of Rule 3 of Rules of 2002 and  the  records  maintained
under clauses 22.1 and 22.2 of the licence agreement.  We are  of  the  view
that unless the underlying records which are in  the  exclusive  custody  of
the Service Providers are examined, it would not be  possible  to  ascertain
whether the Union of India, as per the agreement, has received its full  and
complete share of Revenue, by way of licence fee and spectrum charges.

49.   We may now examine the challenge made to Rule 5 of  TRAI  Rules  2002,
on the basis that the same is ultra vires to Section 16  of  CAG  Act,  1971
and Article 149 of the Constitution.  Clauses 9.1 as well  as  16.1  of  the
Licence Agreement categorically states that the licensee shall be  bound  by
the  terms  and  conditions  of  the   agreement   as   well   as   by   the
order/directions/regulations of TRAI as per  the  provisions  of  TRAI  Act,
1997.   For  effective  fulfillment   of   the   above-mentioned   statutory
obligations, TRAI framed 2002 Rules under Section 35 of Act of 1971. Rule  3
of TRAI Rules 2002, as already stated, casts an obligation  on  the  service
providers to maintain the Books of Accounts and other  documents  so  as  to
make available the same to CAG.     Article  149  of  the  Constitution,  as
already indicated, provides for confirmation of powers upon  CAG  under  any
law i.e. even by supporting legislation and Rule 5 falls in  that  category.
Rule 5 obliges every service provider to produce all such books of  accounts
or documents referred to in sub-rule (1) of Rule  3  so  that  the  CAG  can
carry out audit entrusted to it by virtue  of  the  powers  conferred  under
Article 149 read with Section 16 of Act of  1971.   Rule  5  only  manifests
conferment of powers upon CAG in relation to the accounts of bodies  in  the
nature  of  private  service  providers  which  we  have  already  found  is
consistent with Article 149 of the Constitution.

50.   We have to read Section 13, 16 and 18  of  the  1971  Act  along  with
Article 149 of the Constitution and Sections 3 and 5 of the TRAI  Act,  1997
and, if so read, in our view, CAG is entitled to seek the records  in  terms
of Rule 3 of TRAI Rules 2002 read with Clause 22 of the  Licence  Agreement.
 CAG, in that process, is not actually auditing  the  accounts  of  the  UAS
Service providers as such, but  examining  all  the  receipts  to  ascertain
whether the Union is getting its  due  share  by  way  of  licence  fee  and
spectrum charges, which it is legitimately entitled to, by  way  of  Revenue
Sharing.  By adopting that process, CAG is not carrying  out  any  statutory
audit of the accounts of the service providers, but for the limited  purpose
of ascertaining whether the Union is getting its legitimate share by way  of
“Revenue Sharing”.   Service providers are, therefore, bound to provide  all
the records and documents called for by the CAG.


51.   CAG has, therefore, a duty to examine and  satisfy  himself  that  all
the rules and procedures in that behalf are being met not only by the  Union
but also the service providers as a whole, since both, the  Union,  as  well
as the service providers, are dealing with  the  natural  resources.   CAG’s
function is, therefore, separate and independent, which is  not  similar  to
the audit conducted by the DoT under Clause  22.5  or  special  audit  under
Clause 22.6.  CAG’s function is only  to  ascertain  whether  the  Union  of
India is getting its due share, while parting with the right  to  deal  with
its exclusive privilege to the Service Providers, who  are  dealing  with  a
national wealth, to that extent, Rule 5(1)(ii) has to be read down, but  the
service providers are bound to make available all the books of accounts  and
other documents maintained by them under Rule 3, so as to ascertain  whether
the Union of India is getting its full share of revenue.

CIVIL APPEAL NOS.10748 AND 10749 OF 2011


52.   We  are,  in  these  appeals,  concerned  with  the  legality  of  the
communication   dated   16.3.2010    issued    by    the    Department    of
Telecommunications and the  communication  dated  10.5.2010  issued  by  the
Director General of  Audit,  Post  and  Telecommunication,  to  the  various
Telecom service providers covered by Unified Access  Service  (UAS)  License
for making available all the accounting records for three  years  commencing
from 2006-2007 for the purpose  of  audit  by  the  Comptroller  of  Auditor
General of India (CAG).

53.    The  Telecom  Service  Providers  approached  the  Telecom   Disputes
Settlement and Appellate Tribunal (for short ‘the Tribunal’) and  filed  two
petition Nos. 139 and 141 of 2010 seeking following reliefs:
    “i.    Set aside/quash the impugned  communications  inter  alia  dated
         16th March, 2010 and  10th  May,  2010  seeking  audit  of  telecom
         companies by the C&AG and seeking information beyond the ambit  and
         scope of the UAS license;


    ii.    Strike down Rule 5(b) of TRAI Service Providers (Maintenance  of
         Books of Accounts and other Documents) Rules, 2002 as  being  ultra
         vires.


    iii.   Pass any order(s) as the Tribunal may deem fit in  the  interest
         of justice, equality and good conscience.”


54.   The Tribunal considered the question as to whether it  could  examine
the vires of Rule 5 of the Telecom Regulatory Authority of  India,  Service
Providers (Maintenance of Books of Accounts  and  other  Documents)  Rules,
2002 as a preliminary issue and, on 19.5.2010, held that  rules  framed  by
the Central Government in exercise of its Rule making power under  Sections
35 of the Act could not be a subject matter of challenge before it and held
that no relief could be granted on the challenge of the vires of Rule 5  of
TRAI Rules 2002.  The Tribunal, therefore, admitted the petitions  only  on
the limited ground of examining the legal validity  of  the  communications
dated 16.3.2010 and 10.5.2010.  The  Tribunal  also  noticed  that  a  writ
petition was already pending before the Delhi High  Court  challenging  the
vires of Rule 5 of TRAI Rules 2002 and then went on to examine the legality
of the above mentioned communications.

55.   The Tribunal proceeded as if the above mentioned communications  were
issued by the DoT in exercise of its jurisdiction conferred  under  Clauses
22.3 to 22.6 of  the  Conditions  of  License  enumerated  in  the  license
agreement for UAS.  The above mentioned communications,  as  noted  by  the
Tribunal, were  questioned  by  the  service  providers  on  the  following
grounds:
    “(i)   Before directing an audit in  regard  to  the  accounts  of  the
    licensees, the DOT was required to form an opinion which in turn  would
    require an application of mind on its part and  assignment  of  reasons
    which having not been complied with,  the  impugned  action  cannot  be
    sustained.


    (ii)   A  special  audit  having  been  conducted  in  respect  of  the
    financial years 2006-2007 and  2007-2008  by  a  private  Auditor,  the
    impugned action on the part of the respondent must be held to be wholly
    illegal.


    (iii)  Adherence to the principles of natural justice which is a  sine-
    qua-non for exercise of the power conferred  on  DOT  having  not  been
    complied with, the impugned letters are liable to be quashed.


    (iv)   The  invoices  and  other  documents  supporting  the  books  of
    accounts maintained by the petitioner would be  voluminous  keeping  in
    view the fact that Vodafone alone has about 200 million subscribers.


    (v)    Exercise of power by DOT in any event was an abuse of process of
    the Court.


    (vi)   DOT cannot be permitted to  do  something  indirectly  which  it
    cannot do directly.”


56.    The  Tribunal  also  considered  the  contentions  raised   by   the
Department, which are as follows:
    “(a) DOT has exercised its power in terms of the letter issued by  TRAI
    as also by the Comptroller of Auditor General of India.


    (b)     Some  of  the  parties,  namely,  Vodafone  and  Airtel  having
    expressly undertaken to produce the books of  accounts  and  co-operate
    with the respondent are stopped and precluded from raising the question
    of the jurisdiction of the Tribunal.


    (c)    Having regard to clause 22.4 of the Conditions of  License,  DOT
    could adopt one of the three measures, namely: (i) refer the matter  to
    the Comptroller and  Auditor  General  which  has  even  otherwise  the
    requisite  jurisdiction  to  audit  the  books  of  accounts   of   the
    petitioners for the purpose of ascertaining as to whether  the  revenue
    earned by them has correctly been shared with the DOT in terms  of  the
    conditions of license; (ii) conduct an  audit  within  the  meaning  of
    provisions of clause 22.5 of the license and; (iii) conduct  a  special
    audit.


    (d)    The power to conduct an audit through CAG or departmentally or a
    special audit  are  independent  powers  in  respect  whereof  DOT  can
    exercise its discretion.”



57.   The Tribunal noticed that a special audit had already been  conducted
and hence the question of having another audit  in  terms  of  Clause  22.5
would arise only if the Department “forms an opinion” which would  mean  an
“honest and bona fide” opinion that the accounts submitted by  the  service
providers were inaccurate and misleading.  The Tribunal also took the  view
that the recourse to Clause 22.5 could be taken only after the accounts for
the licencees had been audited by the auditor  and  that  a  special  audit
could be undertaken only for the audited accounts and  not  for  any  other
purpose. The Tribunal concluded as follows:
      “An audit or a special audit within the meaning of  clauses  22.5  and
      22.6 envisages some  special  actions.   For  the  purpose  of  taking
      recourse to clause 22.5 the respondent was required to form an opinion
      which would mean an honest and bonafide  one.   The  respondent  as  a
      ‘State’ within the meaning of Article 12 of the Constitution of  India
      is also required to act reasonably and fairly.”


58.   The Tribunal later referred to Clause 22.5 and stated as follows:
    “An audit in terms of Clause 22.5 of the  license,  therefore,  can  be
    directed, provided a misstatement or a mis-declaration is noticed.  The
    opinion can be formed only if the statement of accounts is found to  be
    inaccurate or misleading.  The licensees are also required to bear  the
    costs of the Auditors.  In terms of the aforementioned provisions,  not
    only the same would require assignment of reasons but  also  compliance
    of the principles of natural justice.”

59.   In support of its reasoning, the  Tribunal  placed  reliance  on  the
judgments of this Court in Rajesh Kumar and Others v. Deputy CIT and Others
(2007) 2 SCC 181 as also the reference order passed in Sahara India  (Firm)
Lucknow v. Commissioner of Income Tax, Central-I and Another (2008) 14  SCC
151.  The Tribunal also examined the principles laid down in Anisminic Ltd.
V. Foreign Compensation Commission 1969 (1) All England Reporter 208 on the
question of “jurisdictional error”  and  took  the  view  that,  after  the
special audit had been conducted, the question of having another  audit  in
terms of Clause 22.5 of the Conditions of License would not arise.  Holding
so, the Tribunal set aside the communications dated 16.3.2010 and 10.5.2010
and allowed the petitions with costs of Rs.50,000/.  Aggrieved by the same,
these two appeals have been preferred.

60.   Shri Paras Kuhad, learned Additional Solicitor General appearing  for
the appellants, submitted  that  the  Tribunal  has  completely  misapplied
various clauses of the licence agreement, especially Clauses 22.3, 22.5 and
22.6 which, according to the learned senior counsel, empower the Department
to call for the books of account of the service providers  for  its  audit.
Shri Kuhad submitted that the communications dated 16.3.2010 and  10.5.2010
are intended to carry out an audit by the CAG and that the  Department  has
got the legal right to call upon the service providers  to  make  available
all the records so that they could be scrutinized by the CAG.  CAG, it  was
pointed out, has got the power under Article 149 of the  Constitution  read
with Section 16 of the Comptroller of Auditor General’s (Duties, Powers and
Conditions of Service) Act, 1971 and Rule 5 of TRAI  Rules,  2002  and  the
conditions of license to carry on audit of  the  accounts  of  the  service
providers, since the Union of  India  and  the  service  providers  are  in
agreement for revenue sharing.  Shri Kuhad also questioned the  finding  of
the Tribunal that before exercising the powers by the CAG  for  audit,  the
department has to form an opinion that the statements and  account  already
submitted were inaccurate and misleading.   Shri  Kuhad  further  submitted
that the Tribunal has completely misread of  the  various  clauses  of  UAS
License as well as the powers conferred under the 1971 Act.

61.   Shri Gopal Jain, learned senior counsel appearing for the respondents
service providers, supported the reasoning of the Tribunal in setting aside
the communications dated 16.3.2010 and  10.5.2010  and  submitted  that  an
audit by CAG, or for that matter even by the Department, could be conducted
only if the DoT had formed an  opinion  that  the  statements  or  accounts
submitted by the service providers were inaccurate or misleading. In  other
words, it was pointed out, that for taking recourse  to  Clause  22.5,  the
department was required to form an opinion which  would  mean  “honest  and
bona fide opinion” that the accounts  made  available  were  misleading  or
inaccurate and, for that purpose, the department has to act reasonably  and
fairly.

62.   We are of the view that there has been a complete misreading  of  the
various clauses of the licensing agreement as well as understanding of  law
on the point.   Let  us  first  examine  the  background  under  which  the
communications dated 16.3.2010 and 10.5.2010 were issued  by  DoT  and  the
Director General of Audit, Post & Telecommunications respectively,  to  the
UAS license holders.  Both the communications would indicate that they were
sent for seeking cooperation for the Audit of Telecom service providers  by
the CAG, which is neither an audit by the department within the meaning  of
Clause 22.5, nor a special audit under Clause 22.6.  For easy reference, we
may, once again, refer the relevant portions  of  the  communication  dated
16.3.2010:
                            “Government of India
                          Ministry of Communication
                       Department of Telecommunication
                                  (AS Cell)
            Sanchar Bhawan, 20, Ashoka Road, New Delhi – 110 001


      No. 842-1086/1010-AS-IV
                                                      Dated 16th March, 2010


      To
           M/s. Bharti Airtel Ltd. And Bharti Hexacom Ltd., Unitech World
           Cyber Park
           Power-A, 4th Floor,
           Sector 39, Gurgaon – 122 001


      Subject :   Audit of Telecom Service Providers by C&AG


     Reference: Unified Access Service Licence Agreements as detailed below:


     |Sl. No.       |Service Area   |Licence No.    |Dated          |
|  xxx         |Xxx            |Xxx            |xxx            |


     In exercise of powers conferred on the Licensor under  clause  22.3  of
     Unified Access Service (UAS) Licence, it is requested  to  provide  the
     following accounting records, for three years commencing from  2006-07,
     consisting of books  of  accounts  and  other  documents  for  all  the
     services offered under the  above  referred  UAS  licences  issued,  to
     reflect:


        i) Total cost and break-up of original and current  cost  i.e.  cost
           after depreciation under separate head for different category  of
           fixed assets;
       ii) Cost and breakup of operation expenses
      iii) Service wise revenue
       iv) Income from other sources
        v) Supporting books of accounts/ other documents as
          a) Fixed asset register
          b) Stores and spares / inventory register
          c) Register showing service – wise particulars of subscribers
          d) Register showing deposits from customers
          e) Cash books
          f) Journals
          g) Ledger
          h) Copes of bill and counter foils of all receipts.
                                                     [Emphasis Supplied]


      2.    The above mentioned information should be sent directly  to  DDG
           (Accounts), Department  of  Telecommunications,  Room  No.  701,
           Sanchar Bhavan, 20, Ashoka Road, New Delhi  110  001  within  15
           days from date of issue of this letter.


                                                             Sd/-  16.3.2010
                                                              (Shashi Mohan)
                                                           Director (AS-IV)”


63.   The communication dated 16.3.2010 was issued by the DoT  in  exercise
of powers conferred under Clause  22.3  of  UAS  License  calling  for  the
accounting records for three years consisting  of  books  of  accounts  and
other documents referred to therein.   The purpose of issuing such a letter
has been specifically earmarked stating “Audit of telecom service providers
by C&AG”. Above mentioned communications were issued not under Clause 22.5,
as noticed by the Tribunal, but under Clause 22.3, which  is  reflected  in
the above mentioned communications itself.  Clause 22.3 reads as follows:
      “22.3 (a) The LICENSOR or the TRAI, as the case may be, shall  have  a
      right to call for and the LICENSEE shall  be  obliged  to  supply  and
      provide for examination any books of accounts that  the  LICENSEE  may
      maintain in  respect  of  the  business  carried  on  to  provide  the
      service(s) under this Licence  at  any  time  “without  recording  any
      reasons thereof”.


      22.3(b)     LICENSEE shall invariably preserve  all  billing  and  all
      other accounting records (electronic as  well  as  hard  copy)  for  a
      period of THREE years from the date of publishing of  duly  audited  &
      approved Accounts of the company and any dereliction thereof shall  be
      treated  as  a  material  breach  independent  of  any  other  breach,
      sufficient to give a cause for cancellation of the LICENCE.”
                                                         (Emphasis Supplied)

64.   Clause 22.3(a) specifically states that the licensor  or  TRAI  shall
have a right to call for and the licensee shall be obliged  to  supply  and
provide for examination  any  books  of  accounts  that  the  licensee  may
maintain in respect of the business carried on to  provide  services  under
this license at any time “without  recording  any  reasons  thereof”.    In
other words, while issuing the communication dated 10.5.2010, DoT  or  TRAI
is not expected to record any reasons and that they  can  summon  books  of
accounts in respect of the business at  any  time,  from  the  UAS  Licence
holders.

65.   Let us now examine the communication dated 10.5.2010  issued  by  the
Director General of Audit, Post & Telecommunications  to  the  UAS  service
providers, which specifically refers to the communication dated  16.3.2010,
which is extracted below, once again, for an easy reference:
                  “D.O. No. Report-PSP/F-4/Vol-II/2009-10/4


                                OFFICE OF THE
            Director General of Audit, Post & Telecommunications
           Sham Nath Marg, (Near Old Secretariat), Delhi – 110002


      R. P. Singh
      Director General                         Dated 10-5-2010


      Sub: Audit of Telecom Service Providers by C&AG-Reg.


      Ref:  1)     DoT letter No. 842-1086/2010/AS-IV dt. 16.03.2010
           2)    Your office letter No. TTSL/DoT/ Audit/2010 dt. 1.04.2010


      Dear Sh. Dalal
           Kindly refer to your office letter cited on  the  above  subject
      extending cooperation in conduct of the  audit  of  revenue  share  by
      C&AG.  Certain difficulty  has  been  expressed  by  your  Company  in
      providing the books of accounts in physical form  as  they  are  being
      maintained in electronic form in SAP ERP System.  Further, it has been
      stated that the audit could be carried out by access to  your  systems
      at Noida Office.  In this connection, it is requested that on 21st May
      2010 a presentation may be given covering  your  business  activities,
      accounting policies, accounting, billing and financial systems and all
      other issues relating to revenue shares, followed by  brief  interface
      meeting with my Audit term which would start  the  process  of  audit.
      The time and venue of the presentation is given in  Annexure-I.   Shri
      Subu R. Director (Report) of my office has  been  nominated  as  Nodal
      Officer who would be overseeing and coordinating the audit.


      Regards


                                                            Yours sincerely,
                                                                        Sd/-
                                                                R. P. Singh”




66.   Both the communications dated 16.3.2010 and  10.5.2010,  referred  to
above, clearly indicate that CAG intends to conduct the Audit, since  there
is “revenue sharing” between the Union of India and the UAS licence holders
and the revenue generated will have to be credited to the Consolidated Fund
of India.

67.   The Tribunal, in our view,  has  committed  a  fundamental  error  in
taking the view that the above mentioned communications were issued by  the
DoT in exercise of the powers conferred under  Clauses  22.3  to  22.6,  in
fact, the communications specifically refer to only Clause 22.3, and not to
any other clauses.  On the other hand, the Tribunal made specific reference
to Clause 22.5 which, in our view, is inapplicable  in  a  case  where  the
audit is sought to be conducted by CAG.  The Tribunal has also not properly
appreciated the scope of clauses 20.4, 22.5  and  22.6.   There  are  three
stages of audit.   First, audit is to be conducted by  the  Licencee  under
Clause 20.4 through an auditor appointed under Section 224 of the Companies
Act.  Clause 22.5 empowers the licensor to conduct an audit, if it is found
that statements or accounts submitted are inaccurate  and  misleading.   In
our view, the opinion to be  formed  is  purely  subjective,  it  need  not
establish to the satisfaction  of  the  licencee  that  the  statements  or
accounts are  inaccurate  and  misleading.   Further,  Clause  22.6  is  an
independent Clause which has no relationship with Clause 22.5.  This is  an
additional power conferred on the Licensor to conduct  special  audit.   In
other words, audit conducted by the licensor or the licencee,  has  nothing
to do with the audit conducted by CAG. If the reasoning of the Tribunal  is
accepted, then the DOT can always stall an Audit sought to be conducted not
only by CAG in exercise of  powers  conferred  under  Article  149  of  the
Constitution read with the 1971 Act and TRAI Rules 2002, but also an  audit
under  clause  22.5  as  well  as  special   audit   under   clause   22.6.
Consequently, an audit to be conducted by CAG would  not  depend  upon  the
“formation of opinion” by the DoT that the statements or accounts submitted
to it were inaccurate or misleading, which, in our view, would deprive  the
statutory and constitutional powers conferred on the  CAG  to  conduct  the
audit or enquiry or inspection.  Tribunal’s  order,  in  our  view,  is  an
encroachment upon the constitutional and statutory power conferred  on  CAG
under Articles 148, 149 of the Constitution as well as Section  16  of  the
1971 Act read with Rule  5  of  the  TRAI  Rules  2002  and  the  licensing
provisions.


68.   We may, in this connection, refer to Clauses 22.5  and  22.6  for  an
easy reference:
      “22.5 The LICENSOR may, on forming an opinion that the  statements  or
      accounts submitted are inaccurate or misleading, order  Audit  of  the
      accounts of the LICENSEE by appointing auditor  at  the  cost  of  the
      LICENSEE and such auditor(s) shall have  the  same  powers  which  the
      statutory auditors of the company  enjoy  under  Section  227  of  the
      Companies Act, 1956.  The remuneration of the Auditors,  as  fixed  by
      the LICENSOR, shall be borne by the LICENSEE.


      22.6        The LICENSOR may also get conducted a ‘Special  Audit’  of
      the LICENSEE company’s accounts/records  by  “Special  Auditors”,  the
      payment for which at a rate as fixed by the LICENSOR, shall  be  borne
      by the LICENSEE.  This will be in the nature  of  auditing  the  audit
      described in para 22.5 above.  The  Special  Auditors  shall  also  be
      provided the same  facility  and  have  the  same  powers  as  of  the
      companies’ auditors as envisaged in the Companies Act, 1956.”


69.   Clauses 22.5 and 22.6 are not meant for an audit to be  conducted  by
CAG or TRAI, but meant for an audit by the DoT. The Tribunal also committed
an error in holding that the “formation of opinion” under clause 22.5, that
the statements or accounts submitted by  the  Licensee  are  inaccurate  or
misleading, is  jurisdictional  fact,  referring  to  the  jurisdiction  of
DoT/CAG to conduct audit under clause 22.5 or a special audit under  clause
22.6.  ‘Formation of opinion’ under clause 22.5 is a subjective opinion  of
Licensor or else the power to conduct any form of audit under  clause  22.5
and 22.6 would be lost and Licensor has to go on  convincing  the  licensee
that the statements or accounts submitted by the  Licensee  are  inaccurate
and misleading.


70.   We, therefore, find no merit in the  appeals  filed  by  the  Service
Providers and hence those appeals are dismissed, as  above.    The  appeals
filed by the DoT and  others  are,  however,  allowed,  setting  aside  the
judgment of the Tribunal.  In the facts  and  circumstances  of  the  case,
there will be no order as to costs.


                                        ……..……………………J.
                                        (K.S. Radhakrishnan)

                                        ……..……………………J.
                                        (Vikramajit Sen)
New Delhi,
April 17, 2014.

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