Bses Rajdhani Power Limited & Anr. vs Government Of Nct Of Delhi & Ors.

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 19.06.2026
Judgment delivered on: 22.06.2026
+ W.P.(C) 8283/2026, CM Nos.39088/2026 & 39089/2026
BSES RAJDHANI POWER LIMITED & ANR. .....Petitioners
Versus
GOVERNMENT OF NCT OF DELHI & ORS. .....Respondents
Advocates who appeared in these cases
For the Petitioner : Mr. Sandeep Sethi & Mr. Buddy
Ranganathan, Sr. Advs. with Mr.
Amit Kapur, Mr. Alok Kumar, Mr.
Anupam Varma, Mr. Gauhar Mirza,
Mr. Varun Chandiok, Mr. Aditya
Gupta, Mr. Aditya Ajay, Mr. Yash
Srivastava, Ms. Shreya Sethi, Mr.
Krishna Gambir, Mr. Adamya Ojha &
Ms. Mahima Kaur, Advs .
For the Respondents : Mr. S.V. Raju, ASG with Mr. Annam
Venkatesh, Mr. Shaurya Sarin & Ms.
Aditi Andley, Advs. for GNCTD.
Mr. Sameer Vashisht & Ms. Harshita
Nathrani, Advs. for GNCTD.
Mr. Sanjeev Kumar Dubey, Sr. Adv.
with Mr. Anirudh & Mr. Shah Rukh
Khan, Advs. For R-2/DERC.
Dr. S.S. Hooda, Mr. Aditya Hooda &
Ms. Rashmi Rawat, Advs. for R-3 /
CAG.
W.P.(C) 8283/2026 Page 1 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

CORAM:
HON'BLE MR. JUSTICE TEJAS KARIA
JUDGMENT
TEJAS KARIA, J
1. The present Petition has been instituted under Article 226 of the
Constitution of India, 1950, assailing the notice dated 06.06.2026
(“ Impugned Notice ”) issued by the Government of National Capital
Territory of Delhi (“ GNCTD ”) under Section 20(3) of the Comptroller and
Auditor General (Duties, Powers and Conditions of Service) Act, 1971
(“ CAG Act ”), whereby the GNCTD has proposed the entrustment of audit
of the Petitioners to the Comptroller and Auditor General of India (“ CAG ”).
FACTUAL MATRIX
2. The Petitioners, namely BSES Rajdhani Power Ltd. (“ BRPL ”) and
BSES Yamuna Power Ltd. (“ BYPL ”), are distribution companies which
were granted licences by the Delhi Electricity Regulatory Commission
(“ DERC ”) under Section 20 of the Delhi Electricity Reforms Act, 2000
(“ Reforms Act ”) to undertake distribution and retail supply of electricity in
their respective areas of supply in Delhi.
3. On 06.01.2001, GNCTD resolved to unbundle the Delhi Vidyut Board
(“ DVB ”), together with its undertakings and assets, into six successor
companies. On 15.02.2001, GNCTD issued a Request for Qualification in
furtherance of the said unbundling process. Thereafter, on 20.11.2001,
GNCTD notified the Delhi Electricity Reforms (Transfer Scheme) Rules,
2001 (“ Transfer Scheme ”), in exercise of powers conferred under Sections
15, 16 and 60 of the Reforms Act, inter alia , prescribing the manner of
W.P.(C) 8283/2026 Page 2 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

transfer and vesting of the assets, liabilities, proceedings and personnel of
the erstwhile DVB in the successor entities, together with the terms and
conditions governing such transfer and vesting.
4. On 01.07.2002, the Transfer Scheme was brought into effect by
GNCTD, whereupon the erstwhile DVB was functionally unbundled, and its
undertakings, assets, liabilities and personnel were vested in seven successor
companies, comprising one Holding Company, two Generating Companies,
one Transmission Company and three Distribution Companies, including the
Petitioners. The functions of generation, transmission and distribution of
electricity were transferred to the Generating Companies, Transmission
Company and Distribution Companies, respectively, with clean opening
balance sheets, while the residuary assets and liabilities were vested in the
Holding Company.
5. Soon after the privatization of the erstwhile DVB, the Petitioners
requested CAG to conduct their audit. However, by letter dated 23.10.2002,
CAG declined to conduct such audit on the ground that the Petitioners had
ceased to be Government companies. Prior to the privatization and
unbundling of the erstwhile DVB on 01.07.2002, its audit was undertaken
by CAG, DVB being an instrumentality of the Government and wholly
owned by GNCTD.
6. On 10.06.2003, the Electricity Act, 2003 (“ Electricity Act ”) came
into force, and the Petitioners have continued to function in terms of
Sections 185(2)(a) and 14 thereof.
7. During the period 2002-2003 to 2006-2007 (“ Policy Direction
Period ”), the tariff for supply of electricity in Delhi was to be determined on
W.P.(C) 8283/2026 Page 3 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

the basis of the principles specified by the DERC in the Bulk Supply Tariff
Order dated 02.01.2001, read with the Transfer Scheme and the Policy
Directions. At the end of the Policy Direction Period, the Regulatory Asset
(“ RA ”) / under-recovery of costs by the Petitioners stood at ₹562.97 crores.
8. On 06.01.2006, the Ministry of Power, Government of India
(“ MoP ”), notified the Tariff Policy, 2006 under Section 3(1) of the
Electricity Act, inter alia , providing that RA may be created only as an
exception, including in cases involving natural causes or force majeure
conditions; carrying costs of RA were to be allowed to the utilities; recovery
of RA was to be time-bound and ordinarily completed within a period not
exceeding three years, preferably within the control period; and resort to RA
was not to be repetitive. It was further provided that, where RA was
proposed to be adopted, it must be ensured that the Return on Equity
(“ RoE ”) of the licensee did not become unduly low in any year so as to
adversely affect its borrowing capability.
9. On 08.07.2010, the DERC requested GNCTD to seek an audit of the
accounts of the Petitioners by CAG, in view of serious allegations of
discrepancies in their accounts. In response, on 06.08.2010, GNCTD sought
clarification from the DERC as to the provision of law under which such a
request could be made. On 15.12.2010, in response to the issues raised by
GNCTD, the DERC issued a Statutory Advice under Section 86(2)(iv) of the
Electricity Act to GNCTD, stating that tariffs in the past years had not been
cost-reflective and that the Petitioners had been compelled to resort to
extensive borrowing to sustain their operations, with no surplus towards
RoE. The Statutory Advice further recorded that the DERC’s past practice
W.P.(C) 8283/2026 Page 4 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

of assuming higher surplus for tariff fixation had not adequately accounted
for delays in commissioning of various generating plants, reduction in the
rate for sale of surplus energy due to the CERC (UI Charges and Related
Matter) Regulations, 2009, and the unprecedented increase in power
purchase costs owing to substantial increase in the variable cost of NTPC
Ltd. stations.
10. The Statutory Advice also recorded that revenue from the sale of
electricity had been insufficient even to meet power purchase costs, thereby
requiring the Petitioners to borrow on that account as well, and rendering
their financial position more precarious, with revenue gaps far beyond
sustainable levels. Lastly, Statutory Advice observed that there was no fuel
cost adjustment mechanism to provide for periodic recovery of variation in
fuel costs.
11. On 20.12.2010, GNCTD responded to the Statutory Advice dated
15.12.2010, inter alia , stating that the DERC, while determining the tariff of
the Petitioners, had overlooked the principles laid down in the Tariff Policy,
and that GNCTD had undertaken an exercise to ascertain the true and fair
financial position of the Petitioners. It was further stated that GNCTD had
engaged M/s SBI Caps as consultant, along with the Institute of Chartered
Accountants of India, to analyze the operational and liquidity position of the
Petitioners. Lastly, GNCTD stated that the DERC would pass the Tariff
Order after considering all aspects of the Tariff Policy, the orders of the
Appellate Tribunal for Electricity (“ APTEL ”), the applicable laws, and
other relevant documents while deciding the tariff issues.
W.P.(C) 8283/2026 Page 5 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

12. On or about 08.02.2011, United Residents Joint Action (“ URJA ”)
filed a Public Interest Litigation bearing W.P.(C) No. 895/2011 (“ PIL ”)
before this Court, seeking a direction that the CAG should conduct an audit
of the Petitioners.
13. On 09.11.2011, GNCTD filed an affidavit in the PIL stating that it had
no locus in law to accede to the request of the DERC, and that there was no
enabling provision, either under the Electricity Act or under the Reforms
Act, to refer the audit of accounts of private companies to CAG.
14. On 01.02.2013, the DERC issued another Statutory Advice to
GNCTD under Section 86(2) of the Electricity Act, acknowledging
regulatory failure and recommending that Central Government-sponsored
schemes be extended to the Petitioners, considering that such schemes
would ultimately benefit consumers by reducing tariffs.
15. On 07.01.2014, GNCTD informed the Petitioners that, pursuant to
GNCTD’s request, the CAG would conduct an audit of the Petitioners under
Section 20 of the CAG Act from the date of privatization, i.e., 01.07.2002.
16. In January 2014, the Petitioners filed W.P.(C) Nos. 529 and 539 of
2014 challenging GNCTD’s request for conduct of a CAG audit of the
Petitioners. On 24.01.2014, this Court issued notice in the said petitions and
directed that the CAG shall not submit its final report.
17. The Petitioners preferred LPA Nos. 125 and 140 of 2014 (“ LPAs ”)
against the order dated 24.01.2014. On 24.03.2014, this Court declined
interim relief and directed the Petitioners to continue to fully cooperate with
the CAG.
W.P.(C) 8283/2026 Page 6 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

18. On 06.02.2014, the Petitioners filed Writ Petition (Civil) Nos. 104 and
105 of 2014 (“ BSES Writs ”) before the Supreme Court, inter alia, seeking a
declaration that they were entitled to costs and allowances prudently
incurred in accordance with Sections 61 and 62 of the Electricity Act and the
methodology specified under the Multi Year Tariff Regulations, and further
seeking a direction to the DERC to give effect to the deferred cost created as
RA in accordance with the Tariff Policy.
19. On 26.03.2014, the Supreme Court passed an order in Civil Appeal
No. 884/2010 directing the DERC to submit liquidation plans for liquidation
of RA and directing the Petitioners to make payment of current dues with
effect from 01.03.2014, relating to the billing period from 01.01.2014.
20. On 01.05.2014, the DERC proposed a roadmap for recovery of the
Petitioners’ revenue gap over a period of six to seven years by way of an 8%
surcharge on each year’s Annual Revenue Requirement (“ ARR ”), which
was thereafter implemented by the DERC.
21. On 30.10.2015, the Division Bench of this Court delivered judgment
in the PIL (“ URJA Judgment ”), holding that GNCTD had rightly exercised
power under Section 20 of the CAG Act. However, it further held that the
powers of the State Government in relation to electricity stood vested in the
DERC, and that once a regulatory body vested with the power to audit
accounts had been constituted, no parallel audit could be directed at the
instance of the State Government. It was further held that, though an audit
by the CAG of the Petitioners may be possible on the ground that the
Petitioners satisfied the test of “body or authority”, such audit would be a
futile exercise and would not serve any public interest. Accordingly, the
W.P.(C) 8283/2026 Page 7 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

Division Bench quashed and set aside the direction issued by GNCTD under
Section 20(1) of the CAG Act for audit of the Petitioners.
22. On 01.12.2015, the United Raws Joint Action Judgment was
challenged by URJA by filing Civil Appeal No. 12013/2016 before the
Supreme Court. On 13.01.2016, GNCTD also filed Civil Appeal Nos.
12014-12019/2016 before the Supreme Court assailing the URJA Judgment.
On 14.01.2016, the CAG filed Civil Appeal Nos. 12020-12025/2016 before
the Supreme Court assailing the URJA Judgment.
23. On 06.08.2025, the Supreme Court delivered judgment in the BSES
Writs (“ RA Judgment ”), holding that the revenue gap between the
approved ARR and the estimated annual revenue from approved tariff may
be permitted only in exceptional circumstances, and that RA should not
exceed a reasonable percentage, namely 3% of the ARR, as a guiding
principle. It was further held that, where RA is created, it must be liquidated
within a period of three years, and that the existing RA must be liquidated
within a maximum period of four years commencing from 01.04.2024. The
Supreme Court further directed the Regulatory Commissions to provide a
trajectory and roadmap for liquidation of the existing RA, including
provision for carrying costs, and to undertake a stricter and intensive audit of
the circumstances in which the Distribution Companies had continued
without recovery of RA.
24. On 14.08.2025, suo motu proceedings were initiated by the APTEL
and, by order dated 29.08.2025, the APTEL directed all Regulatory
Commissions to furnish affidavits in terms of the RA Judgment.
W.P.(C) 8283/2026 Page 8 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

25. On 19.09.2025, the DERC addressed a letter to the CAG requesting it
to conduct the intensive audit of the Petitioners in terms of the RA
Judgment. On 25.09.2025, the DERC filed its affidavit before the APTEL,
stating that it had written to the CAG to undertake a special audit of the
Petitioners and that the response of the CAG would be placed on record
upon receipt.
26. By order dated 26.09.2025, the APTEL recorded the statement of the
DERC that it had approached the CAG to undertake the special audit in
terms of the RA Judgment, and that, in the event of refusal by the CAG, the
DERC would initiate steps to appoint an auditor on its own and endeavour to
complete the process by 31.03.2026.
27. The Petitioners filed brief submissions before the APTEL contending
that the DERC had enlarged the scope of audit and was seeking to do
indirectly what it could not do directly, namely, subject the Petitioners to a
CAG audit. It was further submitted that the APTEL had not directed any
Regulatory Commission to conduct an audit through the CAG and that, in
terms of Sections 19 and 20 of the CAG Act, the CAG is mandated to
conduct audits of Government companies and corporations only upon a
request by the President, Governor, or Administrator of a State / Union
Territory. The Petitioners also submitted that the proposed CAG audit had
already been set aside by the Division Bench of this Court in the URJA
Judgment.
28. On 28.10.2025, the Supreme Court, in Miscellaneous Applications
filed by the DERC, modified the operative portion of the RA Judgment to
W.P.(C) 8283/2026 Page 9 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

provide that the existing RA shall be liquidated within a maximum period of
seven years, instead of the previously stipulated period of four years.
29. On 14.01.2026, the APTEL passed an order observing that the DERC
had not complied with the directions of the Supreme Court in the RA
Judgment with respect to conduct of audit, and that it was not obligatory that
such audit be conducted only by the CAG, as nothing prevented the DERC
from appointing Chartered Accountants to conduct the intensive audit. The
APTEL directed that, in the event the CAG did not undertake the audit
within one week from 14.01.2026, the DERC shall proceed to initiate and
intimate the process for appointment of a suitable Chartered Accountant to
conduct the intensive audit in terms of the RA Judgment within two weeks
from 14.01.2026.
30. Pursuant to the order dated 14.01.2026 passed by the APTEL, the
DERC, on 16.01.2026, addressed a letter to the CAG seeking confirmation
for conducting the CAG audit of the Petitioners. By reply dated 19.01.2026,
the CAG sought details regarding the scope of audit, the detailed objectives
for conducting the audit, and the expected audit product. On 20.01.2026, the
CAG addressed another communication to the DERC conveying its in-
principle approval for conducting the audit of the Petitioners and requesting
that a valid entrustment under Section 20(1) of the CAG Act be obtained
from the Hon’ble Lieutenant Governor. On 22.01.2026, the DERC requested
GNCTD to seek such entrustment from the Hon’ble Lieutenant Governor for
conduct of a CAG audit of the Petitioners. On 02.02.2026, the DERC
addressed letters to GNCTD setting out the broad and tentative scope,
objectives, expected audit product, and time schedule for the proposed CAG
W.P.(C) 8283/2026 Page 10 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

audit. On 04.02.2026, the DERC addressed a further letter to GNCTD
requesting that the process of obtaining entrustment from the Hon’ble
Lieutenant Governor be expedited before the next date of hearing before the
APTEL, i.e., 09.02.2026.
31. Vide order dated 11.02.2026, the APTEL observed that the objection
raised by the Petitioners, based on the URJA Judgment, that an audit by the
CAG was impermissible could not be brushed aside. However, the APTEL
further observed that the said objection could not be examined at a stage
when no auditor had yet been appointed.
32. On 05.03.2026, GNCTD addressed a communication to the DERC
intimating entrustment of the audit of the Petitioners to the CAG by the
Hon’ble Lieutenant Governor. By order dated 06.03.2026, APTEL restrained
the DERC from pursuing or acting in furtherance of the proposed CAG audit
of the Petitioners until the next date of hearing.
33. On 31.03.2026, the DERC filed an affidavit in compliance with the
order dated 06.03.2026, submitting that the proposed CAG audit was not in
contravention of the RA Judgment. After hearing the submissions advanced
on behalf of the Petitioners and the DERC, the APTEL, by order dated
20.04.2026, observed that the DERC had contravened the statutory
provisions of Section 20 of the CAG Act in directing the audit of the
Petitioners by the CAG, and consequently upheld the objections raised by
the Petitioners and quashed the approval granted by the Hon’ble Lieutenant
Governor of Delhi vide communication dated 05.03.2026.
34. APTEL further directed the DERC to appoint a Chartered Accountant
within one week from 20.04.2026, with a specific direction to conclude the
W.P.(C) 8283/2026 Page 11 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

strict and intensive audit of the Petitioners in terms of the RA Judgment
within three months thereafter. APTEL also rejected the DERC’s request for
extension of time for commencement of liquidation of RA and directed the
DERC to commence the process of liquidation of RA in terms of the RA
Judgment within three weeks from 20.04.2026, while granting time up to
30.06.2026 for passing the true-up order for FY 2023-2024.
35. On 28.04.2026, the DERC filed a Review Petition seeking review of
the order dated 20.04.2026. On 13.05.2026, the Petitioners filed an
application seeking implementation of the directions contained in the order
dated 20.04.2026 passed by the APTEL, particularly the direction requiring
commencement of liquidation of RA within three weeks. The DERC also
filed a Review Petition seeking review of the order dated 20.04.2026 on the
issue of commencement of RA liquidation.
36. By two separate orders dated 27.05.2026, the APTEL disposed of the
Review Petition filed by the DERC and the Interim Application filed by the
Petitioners, directing the DERC to appoint an appropriate Chartered
Accountant to conduct the intensive audit in terms of the RA Judgment and
to commence RA liquidation by 16.06.2026.
37. On 30.05.2026, the DERC filed a Civil Appeal before the Supreme
Court challenging the orders dated 20.04.2026 and 27.05.2026 passed by the
APTEL.
38. On 06.06.2026, GNCTD issued the Impugned Notice seeking to
initiate a CAG audit of the Petitioners. On 12.06.2026, the Petitioners
addressed a communication to GNCTD requesting withdrawal of the
Impugned Notice on the ground that it was non est , void ab initio , illegal,
W.P.(C) 8283/2026 Page 12 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

violative of the judgments of the Supreme Court and this Court and
amounted to executive overreach interfering with the suo motu proceedings
pending before the APTEL pursuant to the RA Judgment. However, no
response was received from GNCTD. Hence, the Petitioners have filed the
present Petition.
SUBMISSIONS ON BEHALF OF THE PETITIONERS
39. Mr. Sandeep Sethi, learned Senior Counsel for the Petitioners made
the following submissions:
39.1. The Impugned Notice is ex facie illegal, constitutes a
colourable exercise of power, and is liable to be stayed and set
aside at the threshold, having been issued in the teeth of binding
judicial pronouncements. The Impugned Notice is in direct
contravention of the RA Judgment, the URJA Judgment,
Section 20 of the CAG Act, and the subsisting orders passed by
the APTEL, each of which forecloses the very course sought to
be adopted by the Impugned Notice.
39.2. The sole object of the Respondents, it is submitted, is to derail
the long-overdue liquidation of the Petitioners’ RA. Tariff
Orders which have attained finality since Financial Year 2007-
08 cannot be reopened by executive action, more so when such
reopening would offend the principles of estoppel and res
judicata .
39.3. The Impugned Notice is void ab initio , being premised upon a
complete misreading and mischaracterization of the RA
W.P.(C) 8283/2026 Page 13 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

Judgment and is contrary to the binding decision of the
Division Bench of this Court in the URJA Judgment.
39.4. Further, the Impugned Notice is contrary to the orders passed
by the APTEL, which is monitoring implementation of the RA
Judgment, and whereby the proposed audit by the CAG has
been specifically quashed.
39.5. The audit contemplated by the RA Judgment is an audit “of the
circumstances in which the distribution companies have
continued without recovery of regulatory asset”. It is, therefore,
submitted that the audit directed to be undertaken is not an audit
of the Petitioners, but of the DERC. This, according to the
Petitioners, is evident from the issue framed by the Supreme
Court in paragraph 41.2 of the RA Judgment, namely, “to
examine the circumstances and the compelling reasons for the
creation and undue extension of the regulatory asset over a
period of time”. Thereafter, in paragraphs 42 and 58, the
Supreme Court examined the DERC’s record since 2006-2007,
and the findings in paragraphs 60, 66.1, 67.3, 67.4, 69.6 and
70(V) constitute commentary on “regulatory failure” and
“regulatory capture” of the DERC, and not on, or against, the
conduct of the Petitioners.
39.6. It is in this context that the Supreme Court, in paragraph 71(vi),
directed a strict and intensive audit of the circumstances in
which the Distribution Companies continued without recovery
of RA. Accordingly, it is submitted that DERC and GNCTD
W.P.(C) 8283/2026 Page 14 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

have mischaracterized the audit as an audit of the Petitioners,
which is contrary to the RA Judgment. This
mischaracterization, according to the Petitioners, has been
specifically noticed by the APTEL, and the entrustment of the
audit of the Petitioners to the CAG pursuant to the RA
Judgment has already been quashed by the APTEL.
39.7. Paragraph 1(ii) of the Impugned Notice is contrary to the ratio
laid down in paragraphs 78, 79, 82, 83 and 88-90 of the URJA
Judgment, wherein the Division Bench of this Court held that
once the Electricity Act assigns tariff determination exclusively
to the DERC, an audit by the CAG cannot be employed as a
parallel mechanism to scrutinize, revisit, or interfere with
matters falling within the regulatory domain.
39.8. The URJA Judgment further holds that a CAG audit of the
Petitioners would serve no public interest where the audit report
cannot lawfully affect tariff determination, the field being
occupied by the Electricity Act. Further, paragraph 4 of the
URJA Judgment records GNCTD’s admitted position on
affidavit that it had “ no locus standi ” to accede to a request for
a CAG audit. GNCTD, therefore, cannot be permitted to
approbate and reprobate.
39.9. RA is, in substance, unrecovered tariff. Therefore, any action
affecting RA, including its creation, computation, or recovery,
is intrinsically rooted in electricity tariff determination.
Consequently, the audit relating to the Petitioners falls entirely
W.P.(C) 8283/2026 Page 15 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

within the regulatory domain of the DERC and cannot be sub-
delegated to the CAG.
39.10.Just as monetary policy cannot be determined by an authority
other than the Reserve Bank of India, tariff determination
cannot be subjected to oversight by an external authority acting
as a super-regulator not contemplated by, or recognised under,
the Electricity Act.
39.11.The present case cannot be distinguished from the URJA
Judgment by relying upon Section 20(3) of the CAG Act.
Section 20(3) merely prescribes a procedural safeguard before
the power of entrustment can be exercised; it does not create a
separate or independent statutory process. Section 20(1) of the
CAG Act is the substantive source of power for entrustment of
audit, whereas Section 20(3) only provides the procedure for
exercising such power.
39.12. Vide order dated 20.04.2026, the APTEL has already quashed
the CAG audit entrusted vide letter dated 05.03.2026. In view
thereof, the Impugned Notice, which seeks to revive the very
same audit expressly quashed by the APTEL, on the purported
ground of curing the defect of absence of prior hearing before
entrustment, is unsustainable. The orders dated 20.04.2026 and
27.05.2026 passed by the APTEL have been challenged before
the Supreme Court by the DERC in view of the quashing of the
CAG audit; however, unless and until the said orders are stayed
or set aside by the Supreme Court, they continue to remain
W.P.(C) 8283/2026 Page 16 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

valid and binding. It is, therefore, not open to GNCTD to issue
the Impugned Notice.
39.13.The CAG audit was quashed by the APTEL not merely on the
ground of absence of hearing, but also on merits, namely, that
no public interest would be served, that such audit was not
contemplated by the RA Judgment, the audit being confined to
the circumstances leading to non-recovery of RA, and that the
proposed audit was contrary to the URJA Judgment.
39.14.In terms of the APTEL’s order, the DERC has initiated a tender
process on 18.05.2026 for appointment of a Chartered
Accountant. The DERC cannot, therefore, simultaneously seek
to resurrect a CAG audit which has already been set aside by
the APTEL.
39.15.No other Regulatory Commission or State Government has
construed paragraph 71(vi) of the RA Judgment as permitting a
CAG audit of the licensees. It is the DERC alone which has
neither commenced liquidation nor appointed an auditor. Out
of the 12 Regulatory Commissions which created RA, 11 have
already appointed an auditor, completed the audit, and placed
the report of the Chartered Accountant / Firm before the
APTEL.
39.16.In view of the aforesaid submissions, it is submitted that the
Impugned Notice is void ab initio , without authority of law, and
ex facie without jurisdiction. It seeks to achieve indirectly what
has already been rejected by this Court in the URJA Judgment
W.P.(C) 8283/2026 Page 17 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

and by the APTEL in its orders dated 20.04.2026 and
27.05.2026. The Impugned Notice is, therefore, liable to be
quashed and set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
40. Mr. S.V. Raju, learned Additional Solicitor General appearing for
Respondent No.1 submitted that:
40.1. At the outset, the present Petition is not maintainable, as it
seeks to challenge the Impugned Notice, which is merely in the
nature of a show-cause notice. It is settled law that a writ
petition does not ordinarily lie against a show-cause notice, as
such notice does not give rise to any cause of action and does
not constitute an adverse order affecting the rights of any party.
The present Petition is, therefore, premature, since the
Impugned Notice only affords the Petitioners an opportunity to
submit their representation in terms of Section 20(3) of the
CAG Act. No adverse order has been passed against the
Petitioners by virtue of the Impugned Notice, and the present
Petition is consequently liable to be dismissed as not
maintainable.
40.2. The audit of the Petitioners is necessary in public interest and is
in conformity with the directions issued by the Supreme Court
in the RA Judgment, which require a “strict and intensive audit
of the circumstances” in which the Distribution Companies
continued without recovery of RA. The said direction is rooted
in public interest, as the Supreme Court has held that
W.P.(C) 8283/2026 Page 18 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

disproportionate and long-pending RA adversely affects
consumers and imperils sectoral governance.
40.3. The entrustment of the audit to the CAG is warranted in view of
the clear and overwhelming public interest involved,
particularly since the expenditure incurred by the Petitioners
and claimed before the DERC through the ARR is ultimately
recovered from consumers through tariff and surcharge
mechanisms.
40.4. The Impugned Notice records that Petitioner No. 1 has
extended loans / financial advances to Petitioner No. 2 instead
of prioritising the discharge of statutory liabilities. It is
submitted that an independent audit is, therefore, essential to
verify the true and fair financial position of the Petitioners,
particularly in view of the likelihood of further related-party
transactions and / or diversion of funds for purposes other than
those for which recoveries were permitted.
40.5. The audit of the Petitioners is intended to ascertain the
circumstances in which the Distribution Companies continued
to function for several years without recovery of RA.
40.6. The URJA Judgment is distinguishable on facts. In that case,
the Distribution Companies had disputed the CAG audit, inter
alia , on the ground that they had not been afforded a reasonable
opportunity of hearing prior to the ordering of such audit. In the
present case, however, the Petitioners have been afforded such
opportunity by way of the Impugned Notice. In any event, the
W.P.(C) 8283/2026 Page 19 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

Petitioners were represented before the Supreme Court in the
BSES Writs and are fully aware of the RA Judgment, including
the scope and purpose of the proposed audit. Further, the
Petitioners have participated throughout the proceedings before
the APTEL and are, therefore, fully conscious of the terms of
the RA Judgment and the manner of its implementation.
40.7. The Supreme Court, in the RA Judgment, directed the conduct
of a “strict and intensive audit” while dealing with issues
arising from the accumulation of RA in the electricity sector,
with a view to ascertaining the circumstances in which such
substantial RA came to be accumulated. In public interest, such
audit is required to be entrusted to the CAG. The proposed
CAG audit would ensure transparency, accountability, and
regulatory compliance in the functioning of the concerned
entities in implementation of the RA Judgment.
40.8. The conduct of audit by the CAG is necessary to safeguard
consumer interest, examine the utilization and deployment of
public funds and regulatory recoveries, ensure financial
propriety, and secure the integrity and sustainability of the
electricity sector in Delhi.
40.9. In view of the aforesaid submissions, it is submitted that the
present Writ Petition deserves to be dismissed as not
maintainable, and that the Impugned Notice does not warrant
interference by this Court.
W.P.(C) 8283/2026 Page 20 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

ANALYSIS AND FINDINGS
41. We have heard learned Senior Counsel appearing for the Petitioners as
well as the learned Additional Solicitor General of India appearing for
Respondent No. 1.
42. The following issues arise for consideration in the present Petition:
(i) Whether the present Petition, which challenges the Impugned
Notice at the show-cause stage, is maintainable.
(ii) Whether the Impugned Notice mischaracterises the direction
for conduct of audit contained in the RA Judgment and whether
the Impugned Notice could have been issued in view of the
orders dated 20.04.2026 and 27.05.2026 passed by the APTEL.
(iii) Whether the Impugned Notice is contrary to the decision of the
Division Bench of this Court in the URJA Judgment.
Maintainability of the Present Petition
43. At the outset, it is evident that, by way of the Impugned Notice, the
Petitioners have merely been called upon to submit their written
representation / response in relation to the proposed entrustment of audit to
the CAG, and have been afforded an opportunity of hearing scheduled on
22.06.2026 at 4:00 PM. The Impugned Notice does not record any adverse
finding against the Petitioners, nor does it determine any right or liability. It
only affords the Petitioners an opportunity to respond to the proposed
entrustment of audit to the CAG.
44. The Impugned Notice, therefore, cannot be regarded as adverse to the
Petitioners. Rather, it is in furtherance of the statutory requirement under
Section 20(3) of the CAG Act, which contemplates an opportunity of being
W.P.(C) 8283/2026 Page 21 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

heard before entrustment of audit to the CAG by the Hon’ble Lieutenant
Governor.
45. It is well settled that a notice which merely affords an opportunity to
submit a representation and fixes a date and time for hearing is not in the
nature of an adverse order and does not, by itself, give rise to a cause of
action for challenge. Ordinarily, this Court would not exercise its
discretionary writ jurisdiction to interfere with a show-cause notice, unless it
is demonstrated that the notice is perverse, suffers from a jurisdictional
infirmity, or has been issued by an authority lacking inherent jurisdiction.
46. In Union of India v. Kunisetty Satyanarayana , (2006) 12 SCC 28,
the Supreme Court held that writ jurisdiction is discretionary jurisdiction
and hence such jurisdiction under Article 226 of the Constitution of India,
1950 should not ordinarily be exercised by quashing a show cause notice.
The relevant extract of the said judgment is as under:
“ 13. It is well settled by a series of decisions of this Court that
ordinarily no writ lies against a charge-sheet or show-cause notice
vide Executive Engineer, Bihar State Housing Board v. Ramesh
Kumar Singh [(1996) 1 SCC 327 : JT (1995) 8 SC 331] , Special
Director v. Mohd. Ghulam Ghouse [(2004) 3 SCC 440 : 2004 SCC
(Cri) 826 : AIR 2004 SC 1467] , Ulagappa v. Divisional Commr.,
Mysore [(2001) 10 SCC 639] , State of U.P. v. Brahm Datt Sharma
[(1987) 2 SCC 179 : (1987) 3 ATC 319 : AIR 1987 SC 943] , etc.
14. The reason why ordinarily a writ petition should not be
entertained against a mere show-cause notice or charge-sheet is that
at that stage the writ petition may be held to be premature. A mere
charge-sheet or show-cause notice does not give rise to any cause of
action, because it does not amount to an adverse order which affects
the rights of any party unless the same has been issued by a person
having no jurisdiction to do so. It is quite possible that after
considering the reply to the show-cause notice or after holding an
W.P.(C) 8283/2026 Page 22 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

enquiry the authority concerned may drop the proceedings and/or
hold that the charges are not established. It is well settled that a writ
petition lies when some right of any party is infringed. A mere show-
cause notice or charge-sheet does not infringe the right of anyone. It
is only when a final order imposing some punishment or otherwise
adversely affecting a party is passed, that the said party can be said
to have any grievance.
15. Writ jurisdiction is discretionary jurisdiction and hence such
discretion under Article 226 should not ordinarily be exercised by
quashing a show-cause notice or charge-sheet. ”
47. In Secretary, Ministry of Defence & Ors. v. Prabhash Chandra
Mridha , (2012) 11 SCC 565 , the Supreme Court held that a writ petition
does not lie against a show cause notice for the reason that it does not give
rise to any cause of action. The relevant extract of the said judgment is as
under:
“ 10. Ordinarily a writ application does not lie against a charge-
sheet or show-cause notice for the reason that it does not give rise to
any cause of action. It does not amount to an adverse order which
affects the right of any party unless the same has been issued by a
person having no jurisdiction/competence to do so. A writ lies when
some right of a party is infringed. In fact, charge-sheet does not
infringe the right of a party. It is only when a final order imposing
the punishment or otherwise adversely affecting a party is passed, it
may have a grievance and cause of action. Thus, a charge-sheet or
show-cause notice in disciplinary proceedings should not ordinarily
be quashed by the court. (Vide State of U.P. v. Brahm Datt Sharma
[(1987) 2 SCC 179 : (1987) 3 ATC 319 : AIR 1987 SC 943] , Bihar
State Housing Board v. Ramesh Kumar Singh [(1996) 1 SCC 327] ,
Ulagappa v. Commr. [(2001) 10 SCC 639 : AIR 2000 SC 3603 (2)] ,
Special Director v. Mohd. Ghulam Ghouse [(2004) 3 SCC 440 :
2004 SCC (Cri) 826 : AIR 2004 SC 1467] and Union of India v.
Kunisetty Satyanarayana [(2006) 12 SCC 28 : (2007) 2 SCC (L&S)
304] .) ”
W.P.(C) 8283/2026 Page 23 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

48. Accordingly, in view of the settled position of law noticed
hereinabove, the present Petition, insofar as it assails the Impugned Notice at
the show-cause stage, would ordinarily not be maintainable. However, since
the Petitioners have raised objections founded on the URJA Judgment as
well as the orders dated 20.04.2026 and 27.05.2026 passed by the APTEL,
this Court considers it appropriate to examine the said objections before
returning a final conclusion on the maintainability of the present Petition.
Scope of Strict and Intensive Audit under the RA Judgment and
compliance with directions contained orders dated 20.04.2026 and
27.05.2026 passed by the APTEL:
49. In the RA Judgment, the Supreme Court directed examination of the
circumstances and compelling reasons which led to the creation and undue
continuation of RA over a prolonged period of time. For ascertaining the
causes of regulatory failure, the Supreme Court directed the Regulatory
Commissions to undertake a strict and intensive audit of the circumstances
in which the Distribution Companies continued without recovery of RA.
50. The Petitioners contend that GNCTD and the DERC have
misconstrued and mischaracterised the scope of the audit contemplated
under the RA Judgment, as well as the manner in which such audit is
required to be undertaken.
51. According to the Petitioners, a proper construction of the directions
contained in the RA Judgment would show that the audit contemplated
therein is an audit of the DERC, and not of the Petitioners. It is further
submitted that such audit is required to be conducted by the DERC itself, or
through a Chartered Accountant appointed by it, and not by the CAG.
W.P.(C) 8283/2026 Page 24 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

52. The aforesaid objections do not merit acceptance. The RA Judgment
directs a strict and intensive audit of the circumstances in which the
Distribution Companies continued without recovery of RA. The said
direction does not exclude examination of the records, conduct, accounts, or
financial position of the Distribution Companies. The scope of the audit is,
therefore, sufficiently broad to include all relevant circumstances that may
explain the accumulation of RA over a prolonged period and the continued
functioning of the Distribution Companies without recovery of RA.
53. The contention that the audit contemplated under the RA Judgment is
confined only to the DERC, and not to the Petitioners, is therefore without
merit. It is also relevant that such a contention does not appear to have been
urged before the APTEL, which is monitoring implementation of the RA
Judgment. On the contrary, the APTEL has passed orders directing
appointment of a Chartered Accountant for conduct of an audit concerning
the Petitioners, which orders have not been assailed by the Petitioners before
the Supreme Court. Therefore, the submission that GNCTD and the DERC
have mischaracterised the scope of audit by referring to an audit of the
Petitioners is, accordingly, unsustainable.
54. Further, the RA Judgment does not specify the agency by whom the
audit is to be conducted. Nor does it contain any express prohibition against
the audit being conducted by the CAG. Subject to strict compliance with the
provisions of the CAG Act, including the requirements of Section 20
thereof, the conduct of audit by the CAG cannot be excluded merely on the
ground that the RA Judgment does not expressly identify the CAG as the
auditing agency.
W.P.(C) 8283/2026 Page 25 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

55. In view of the foregoing, this Court finds no mischaracterisation of
the RA Judgment either by the DERC or by GNCTD. The scope and extent
of the audit to be undertaken stand delineated in the RA Judgment.
Consequently, there is no legal impediment to the DERC or GNCTD
initiating the process for audit by the CAG in respect of the Petitioners,
provided the same is undertaken in compliance with the CAG Act.
56. As regards the alleged delay in compliance with the RA Judgment and
the alleged non-compliance by the DERC with the directions issued by the
APTEL, the appropriate remedies lie elsewhere. Admittedly, the DERC has
challenged the orders dated 20.04.2026 and 27.05.2026 before the Supreme
Court, and compliance with those orders would be subject to the outcome of
the proceedings pending before the Supreme Court. Since the Petitioners
have not initiated any independent challenge to the said orders, nor any
contempt proceedings alleging non-compliance thereof, the scope of
consideration in the present Petition remains confined to the challenge to the
Impugned Notice. It is accordingly left open to the Parties to avail such
remedies as may be available in law in relation to the timelines specified in
the RA Judgment and for compliance with the orders dated 20.04.2026 and
27.05.2026 passed by the APTEL to the extent of the timelines specified
therein.
Applicability of the URJA Judgment:
57. The Petitioners have contended that the Impugned Notice is in direct
contravention of the URJA Judgment. It is further submitted that paragraph
1(ii) of the Impugned Notice runs contrary to the ratio laid down in
paragraphs 78, 79, 82, 83 and 88 to 90 of the URJA Judgment, wherein the
W.P.(C) 8283/2026 Page 26 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

Division Bench of this Court held that, once tariff determination stands
exclusively assigned to the DERC under the Electricity Act, an audit by the
CAG cannot be employed as a parallel mechanism to scrutinise, revisit, or
interfere with matters falling within the regulatory domain.
58. It is further contended by the Petitioners that the present case cannot
be distinguished from the URJA Judgment merely by placing reliance on
Section 20(3) of the CAG Act. According to the Petitioners, Section 20(3)
only prescribes a procedural safeguard prior to exercise of the power of
entrustment and does not create a separate or independent statutory source of
power since Section 20(1) of the CAG Act is stated to be the substantive
provision for entrustment of audit, whereas Section 20(3) merely regulates
the procedure for exercising such power.
59. It is pertinent to note that the URJA Judgment was rendered in a
Public Interest Litigation before the Division Bench of this Court, wherein a
direction was sought for conduct of audit of the Petitioners by the CAG. In
those proceedings, the Petitioners herein had opposed the proposed CAG
audit, inter alia , on the ground that they had not been afforded a reasonable
opportunity of hearing prior to the ordering of such audit.
60. In the URJA Judgment, the Division Bench held that GNCTD had
invoked Section 20 of the CAG Act, however it was further held that the
powers in relation to electricity domain stood vested in the DERC and that,
once a specialised regulatory body was vested with the power to audit
accounts, a parallel audit could not be directed at the instance of GNCTD.
61. The Division Bench further held that, although an audit by the CAG
of the Petitioners may be possible on the ground that the Petitioners satisfied
W.P.(C) 8283/2026 Page 27 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

the test of a “body or authority”, conduct of such audit, in the facts of that
case, would be a futile exercise and would not serve any public interest.
Consequently, the Division Bench quashed and set aside the direction issued
by GNCTD under Section 20(1) of the CAG Act for audit of the Petitioners.
62. The present case, however, is materially distinguishable from the facts
and circumstances in which the URJA Judgment was rendered as:
a. Firstly , the proposed audit is sought to be undertaken pursuant
to the directions contained in the RA Judgment and not as an
audit under the Electricity Act. The purpose and context of the
audit in the URJA Judgment and in the present case are,
therefore, materially different.
b. Secondly , the audit process has been initiated by the DERC for
compliance with the RA Judgment. It is not a case where
GNCTD is seeking to conduct a parallel audit to usurp or
interfere with the regulatory functions of the DERC in relation
to tariff fixation.
c. Thirdly , an opportunity of hearing has been afforded to the
Petitioners by way of the Impugned Notice, which was one of
the safeguards alleged to be absent in the proceedings
considered in the URJA Judgment.
d. Fourthly , the scope and object of the proposed audit in the
present case are distinct from the audit considered in the URJA
Judgment, as the present audit is confined to examining the
circumstances contemplated in the RA Judgment.
W.P.(C) 8283/2026 Page 28 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

e. Lastly , the proposed audit is prima facie in public interest as the
decision on RA would directly affect the consumers of the
Petitioners.
63. In view of the foregoing, this Court is of the considered view that the
ratio laid down in the URJA Judgment arose in a materially different factual
and legal context and is not attracted to the facts of the present case. The
issuance of the Impugned Notice, therefore, cannot be held to be barred by
the law declared in the URJA Judgment.
CONCLUSION:
64. In view of the foregoing analysis, this Court is of the considered
opinion that the Impugned Notice merely affords the Petitioners an
opportunity to submit their representation and to appear for hearing within
the timelines stipulated therein. The Impugned Notice does not record any
adverse finding against the Petitioners warranting any interference on merits
at this stage in exercise of writ jurisdiction. The present Petition is,
therefore, premature.
65. Further, the RA Judgment contains no prohibition against an audit of
the Petitioners, nor does it preclude such audit from being conducted by the
CAG, provided that the same is undertaken strictly in accordance with the
provisions of the CAG Act and for complying with the directions contained
in the RA Judgment. The facts and circumstances in which the URJA
Judgment was rendered are materially distinguishable, and the ratio thereof
is not attracted to the present case. The URJA Judgment cannot be read as
excluding, in all circumstances, the possibility of an audit by the CAG in
accordance with the CAG Act as it only held that such an audit would be a
W.P.(C) 8283/2026 Page 29 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05

futile exercise in the context of the provisions of the Electricity Act under
consideration in URJA Judgment. In the present case, the proposed audit is
sought to be undertaken specifically for compliance with the directions
contained in the RA Judgment. Accordingly, the URJA Judgment does not
bar issuance of the Impugned Notice.
66. It is clarified that the observations contained in the present Judgment
are confined to the limited purpose of adjudicating the validity and legality
of the Impugned Notice. The proceedings to be conducted pursuant to the
Impugned Notice under Section 20(3) of the CAG Act shall be decided by
the competent authority after affording the Petitioners an opportunity of
hearing and upon due consideration of all submissions that may be advanced
by the Petitioners on merits, without being influenced in any manner by the
observations made hereinabove.
67. All rights and contentions of the Parties in relation to compliance with
the timelines specified in the RA Judgment and the orders passed by the
APTEL are kept open, subject to the outcome of the proceedings pending
before the Supreme Court.
68. The present Petition stands dismissed with the aforesaid observations.
All pending Applications stand disposed of.
TEJAS KARIA, J
(VACATION JUDGE)
JUNE 22, 2026
‘gsr’
W.P.(C) 8283/2026 Page 30 of 30
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:22.06.2026
13:53:05