MANDATE

   

The Comptroller and Auditor General of India (CAG) is a Constitutional Authority. The CAG is the sole authority prescribed in the Constitution entrusted with the responsibility of audit of accounts of the Union and the States. The duties of the CAG also extend to the audit of Government companies and corporations and bodies and authorities in accordance with the laws made by the legislature and rules made thereunder. Parliament has enacted the Comptroller and Auditor Generalís (Duties, Powers and Conditions of Service) Act, 1971 which determines the condition of the service of the CAG and prescribes his duties and powers and other matters connected with or incidental to the Act.

The provisions of the Constitution of India and CAGís DPC Act are as follows:
 

Constitutional Provisions:

Article 148-   Comptroller and Auditor-General of India.-

1) There shall be a Comptroller and Auditor-General of India who shall be appointed by the President by warrant under his hand and seal and shall only be removed from office in like manner and on the like grounds as a Judge of the Supreme Court.
(2)  Every person appointed to be the Comptroller and Auditor-General of  India shall, before he enters upon his office, make and  subscribe before  the President, or some person appointed in that behalf by him, an  oath or affirmation according to the form set out for the  purpose in the Third Schedule.
(3)  The salary and other conditions of service of the Comptroller and Auditor-General shall be such as may be determined by Parliament by law and, until they are so determined, shall be as specified in the Second Schedule:
Provided that neither the salary of a Comptroller and Auditor-General nor his rights in respect of leave of absence, pension or   age of retirement shall be varied to his disadvantage after his appointment.
(4)  The Comptroller and Auditor-General shall not be eligible for further office either under the Government of India or under   the Government of any State after he has ceased to hold his office.
(5) Subject to the provisions of this Constitution and of any law made by Parliament, the conditions of service of persons serving in the Indian Audit and Accounts Department and the administrative powers of the Comptroller and Auditor-General shall be such as may be prescribed by rules made by the President after consultation with the Comptroller and Auditor-General.
(6)  The administrative expenses of the office of the Comptroller  and Auditor-General,  including  all  salaries,  allowances  and   pensions payable  to or in respect of persons serving in that office, shall  be charged upon the Consolidated Fund of India.

Article 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.

Article 150- Form of accounts of the Union and of the States.-

The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the Comptroller and Auditor-General of India, prescribe.

Article 151- Audit reports.-

(1) The reports of the Comptroller and Auditor-General of India relating to the accounts of the Union shall be submitted to the President, who shall cause them to be laid before each House of Parliament. (2) The reports of the Comptroller and Auditor-General of India relating to the accounts of a State shall be submitted to the Governor of the State, who shall cause them to be laid before the Legislature of the State.

DPC Act - CAG's Duties Powers and Conditions of Service

DPC Act - Full PDF Download  

Audit Regulations

Regulations on Audit & Accounts -2007
Amendments of Regulations of Audit & Accounts-2007 (Gazette Notification dated 18 May 2013)  
Amendments of Regulations of Audit & Accounts-2007 (Gazette Notification dated 25 June 2010)

Amendments to the CAG's DPC Act, 1971

Amendment I - No. 45-f of 1976

  • Comptroller and Auditor-General's (Duties, Powers and Conditions of Service)Act, 1971
  • In section 10 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971
  • In Section 11 of the principal Act
  • In section 22 of the principal Act

Amendment II - No. 2 of 1984

  • Comptroller and Auditor General's (Duties, Powers and Conditions of Service)Amendment act, 1984
  • Comptroller and Auditor-General's (Duties, Powers and [50 OF 1987] Conditions of Service) Amendment Act, 1987
  • Section 7 of the principal Act shall be omitted.
  • In section 9 of the principal Act

Amendment III - No. 50 of 1987

  • Comptroller and Auditor-General's (Duties, Powers and Conditions of Service)Amendment act, 1987
  • Comptroller and Auditor-General's (Duties, Powers and [50 OF 1987] Conditions of Service) Amendment Act, 1987
  • Section 7 of the principal Act shall be omitted.
  • In section 9 of the principal Act

Amendment IV - No. 51 of 1994

  • Comptroller and Auditor-General's (Duties, Powers and Conditions of Service)Amendment act, 1994
  • Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971
  • In section 6 of the principal Act, after sub-section (6C)

VCAG's DPC Act 1971 has been amended four times i.e. 1976, 1984, 1987 and 1994. The amendments are listed below:
I. The Comptroller and Auditor General's
(Duties, Powers and Conditions of Service)
Amendment act, 1976 no. 45-f of 1976
An Act further to amend the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971.
Be it enacted by Parliament in the Twenty-seventh Year of the Republic of India as follows:

  1.  
    1. This Act may be called the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Amendment act, 1976.
    2. It shall be deemed to have come into force on the 1st day of March, 1976.
  2. In section 10 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 (hereinafter referred to as the principal act), in sub-section (1),
    (a) for the first proviso, the following provisos shall be substituted, namely:- Provided that the President may, after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for compiling

(i) the said accounts of the Union (either at once or gradually by the i s sue of several orders); or
(ii) the accounts of any particular services or departments of the Union: Provided further that the Governor of a State may, with the previous approval of the President and after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for compiling
(i) the said accounts of the State (either at once or gradually by the issue of several orders); or
(ii) the accounts of any particular services or departments of the State:"; (b) in the second proviso, for the words "Provided further", the words "Provided also", shall be substituted.

  1. In Section 11 of the principal Act
     
    1. for the words "by any other person responsible in that behalf", the words "by the Governor any other person responsible in that behalf" shall be substituted.
    2. the following provisos shall be inserted at the end, namely:- Provided that the President may, after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for the preparation and submission of the accounts relating to annual receipts and disbursements for the purpose of the Union or of a Union territory having a Legislative Assembly: Provided further that the Governor of a State may, with the previous approval of the President and after consultation with the Comptroller and Auditor-General, by order, relieve him from the responsibility for the preparation and submission of the accounts relating to annual receipts and disbursements for the purpose of the State".
  2. In section 22 of the principal Act,
     
    1. in clause (b) of sub-section (2), after the words "the accounts of", the words "the Union or of a State or of" shall be inserted;
    2. in sub-section (3), for the words "in two successive sessions", the words "in two or more successive sessions", and for the words "the session in which it is so laid or the session immediately following", the words "the session immediately following the session or the successive sessions aforesaid" shall be substituted.
  3.  
    1. The Comptroller and Auditor-General's (Duties, Powers and Conditions of Service)Amendment Ordinance, 1976, is hereby repealed
    2. Not with standing such repeal, anything done or any action taken under the principal Act, as amended by the said Ordinance shall be deemed to have been done or taken under the principal Act as amended by this Act.

II. The Comptroller and Auditor General's
(Duties, Powers and Conditions of Service)
Amendment act, 1984
no. 2 of 1984
(16 march 1984)
An Act further to amend the Comptroller and Auditor General's (Duties, Powers and Conditions of Service)Act, 1971
Be it enacted by Parliament in the Thirty-fifth year of the Republic is follows:

  1. This Act may be called the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Amendment act, 1984.
  2. In the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (hereinafter referred to as the Principal Act), in section 6, after sub-section (6), the following subsection shall be inserted namely:-

(6A) Notwithstanding anything contained in the foregoing provisions of this section a person referred to in sub-section (1) who demits office (whether in any manner specified in sub-section (8) or by resignation) as the Comptroller and Auditor General after the commencement of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Amendment Act, 1984, shall, on such demission, be entitled to:-

    1. the pension to which he would have been entitled under the rules of the Service to which he belonged by reckoning his service as the Comptroller and Auditor General as continuing approved service counting for pension in such service ; and
    2. a special pension of seven hundred rupees per annum in respect of each completed year of service as Comptroller and Auditor General ; Provided that the aggregate of the amounts payable to him under clause (a) and clause (b) of this sub-section shall in no case exceed a sum of twenty thousand and four hundred rupees per annum.
  1. Comptroller and Auditor-General's (Duties, Powers and [50 OF 1987] Conditions of Service) Amendment Act, 1987, shall on such demission, be entitled to-
    1. a pension which is equal to the pension payable to a Judge of the Supreme Court,- (i) if such person is a person referred to in sub-section (1) or sub-section (3), in accordance with the provisions of Part III of the Schedule to the Supreme Court Judges (Conditions of Service) Act, 1958 (hereafter in this Act referred to as the Supreme Court Judges Act), as amended from time to time; and (ii) if such person is a person referred to in sub-section (4), in accordance with the provisions of Part I of the Schedule to the Supreme Court Judges Act, as amended from time to time;
    2. such pension (including commutation of pension), family pension and gratuity as are admissible to a Judge of Supreme Court under the Supreme Court Judges Act and the rules made thereunder, as amended from time to time."
  2. Section 7 of the principal Act shall be omitted.
  3. In section 9 of the principal Act, for the opening paragraph, the following shall be substituted, namely:-

"Save as otherwise provided in this Act, the conditions of service relating to travelling allowance, provision of rent-free residence and exemption, from payment of income-tax on the value of such rent-free residence, conveyance facilities, sumptuary allowance, medical facilities and such other conditions of service as are for the time being applicable to a Judge of the Supreme Court under Chapter IV of the Supreme Court Judges Act , and the rules made thereunder, shall, so far as may be, apply to a serving or retired Comptroller and Auditor-General, as the case may be.".
III. The Comptroller and Auditor General's
(Duties, Powers and Conditions of Service)
Amendment act, 1987
No. 50 of 1987
(16th December, 1987)
An Act further to amend the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971. Be it enacted by Parliament in the Thirty-eighth Year of the Republic of India as follows:-

  1. This Act may be called the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Amendment act, 1987.
  2. In the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 (hereinafter referred to as the principal Act), in section 6,-
    1. In sub-sections (6A) and (6B), the provisos shall be omitted, and shall be deemed to have been omitted with effect from the 1st day of January, 1986;
    2. after sub-section (6B), the following sub-section shall be inserted, namely:- "(6C) Notwithstanding anything contained in the foregoing provisions of this section, a person who demits office [whether in any manner specified in subsection (8) or by resignation] as the Comptroller and Auditor-General after the commencement of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service)Act.
    3. Comptroller and Auditor-General's (Duties, Powers and [50 OF 1987] Conditions of Service) Amendment Act, 1987, shall on such demission, be entitled to-

(a) a pension which is equal to the pension payable to a Judge of the Supreme Court,-
(i) if such person is a person referred to in sub-section (1) or sub-section (3), in accordance with the provisions of Part III of the Schedule to the Supreme Court Judges (Conditions of Service) Act, 1958 (hereafter in this Act referred to as the Supreme Court Judges Act), as amended from time to time; and
(ii) if such person is a person referred to in sub-section (4), in accordance with the provisions of Part I of the Schedule to the Supreme Court Judges Act, as amended from time to time;
(b) such pension (including commutation of pension), family pension and gratuity as are admissible to a Judge of Supreme Court under the Supreme Court Judges Act and the rules made thereunder, as amended from time to time."

  1. Section 7 of the principal Act shall be omitted.
  2. In section 9 of the principal Act, for the opening paragraph, the following shall be substituted, namely:-
    Save as otherwise provided in this Act, the conditions of service relating to travelling allowance, provision of rent-free residence and exemption, from payment of income-tax on the value of such rent-free residence, conveyance facilities, sumptuary allowance, medical facilities and such other conditions of service as are for the time being applicable to a Judge of the Supreme Court under Chapter IV of the Supreme Court Judges Act , and the rules made thereunder, shall, so far as may be, apply to a serving or retired Comptroller and Auditor-General, as the case may be.".

IV. The Comptroller and Auditor General's
(Duties, Powers and Conditions of Service)
Amendment act, 1994
no. 51 of 1994
(26 august 1994)
An Act further to amend the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 Be it enacted by Parliament in the Forty-fifth Year of the Republic of India as follows:-

  1. (1) This Act may be called the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Amendment act, 1994.

(2) Section 2 of this Act shall be deemed to have come into force on the 27th day of March, 1990 and section 3 thereof shall be deemed to have come into force on the 16th day of December, 1987

  1. In the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 (hereinafter referred to as the principal Act), in section 3, in the proviso,-

(i) in clause (b), the word "and" occurring at the end shall be omitted;
(ii) clause (c) shall be omitted.

  1. In section 6 of the principal Act, after sub-section (6C), the following subsections shall be inserted namely:-

(6D) Notwithstanding anything contained in the foregoing provisions of this section, a person who demitted office [whether in any manner specified in sub-section(8)or by resignation] as the Comptroller and Auditor General, at any time before the 16th day of December, 1987, shall be entitled to the pension specified in sub-section (6C) and from that date."

Important Judgements

I. Arvind Gupta Vrs. Union of India

  • Powers of CAG to Conduct Performance Audit
  • Extracts of the Judgement

II. Reghu Nath Kelkar Vrs. Union of India and others

  • Powers of CAG regarding time, scope and extent of audit
  • Extracts of the Judgement

III. National Dairy Development Boards Vrs. CAG of India.

  • Powers of CAG to Conduct Performance Audit

IV. Arun Kumar Aggarwal Vrs. Union of India

  • CAG Audit Report as a basis for grant of relief or initiating action
  • Extracts of the Judgement

V. Shri S. Subramaniam Balaji Vrs. the Government of Tamil Nadu and others.

  • Duty of CAG regarding examination of expenditure
  • Extracts of the Judgement

VI. Telecom Judgement - Delhi High Court   (153 KB)

  • Power of CAG to audit the revenue of telecom companies

VII. Telecom Judgement - Supreme Court of India   (180 KB)

  • Power of CAG to audit the revenue of telecom companies

I. Arvind Gupta Vrs. Union of India
(2013) Supreme Court Cases 293
(BEFORE Hon'ble Judges R.M. LODHAAND ANIL R. DAVE, JJ
Powers of CAG to Conduct Performance Audit
In this case decided by the Supreme Court, the Petitioner submitted that CAG of India has no power to give performance audit report and the provisions in the Regulations of Audit and Accounts, 2007 framed under the CAG(DPC)Act, 1971 empowering the CAG to conduct performance audit is violative of the Constitution.
The Supreme Court held that the CAG's functions to carry out examination into economy, efficiency and effectiveness with which the Government has used its resources, is in-built in the 1971 Act. Performance Audit Reports prepared under the Regulations have to be viewed accordingly. The Court observed no unconstitutionality in the Regulations.
Extracts of the Judgement
Writ Petition(C) No. 393 of 2012, decided on October 1, 2012

  1. We have heard Mr. Santosh Paul, learned counsel for the petitioner. The learned counsel for the petitioner submits that the Comptroller and Auditor General of India (CAG) has no power to give performance audit report and the Regulations on Audit and Accounts, 2007 (for short “the Regulations”) framed under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (for short “the 1971 Act”) empowering CAG to conduct performance audit are violative of the Constitution.
  2. Article 149 of the Constitution of India provides that CAG shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament. In pursuance of Article 149 of the Constitution, the 1971Act has been enacted. Amongst other provisions in the 1971 Act, Section 16 provides that:

    “16 Audit of receipts of Union or of States – It shall be the duty of the Comptroller and Auditor General to audit all receipts which are payable into the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon.”
  3. CAG's function to carry out examinations into economy, efficiency and effectiveness with which the Government has used its resources is inbuilt in the 1971 Act. Performance audit reports prepared under the Regulations have to be viewed accordingly. We find no unconstitutionality in the Regulations. Moreover, Article 151 of the Constitution provides that the reports of CAG relating to the accounts of the Union shall be submitted to the President, who shall cause them to laid before each House of Parliament and the reports relating to the accounts of a State shall be submitted to the Governor of the State who shall cause them to be laid before the legislature of the State. The audit reports which are submitted byCAGare, thus, subject to scrutiny by Parliament or the legislature of the State, as the case may be.
  4. The writ petition is wholly misconceived and is dismissed accordingly.

II. Reghu Nath Kelkar Vrs. Union of India and others
in The High Court of Bombay
Public Interest Litigation No. 40 of 2008
Decided on: 24-3-2009
(Before Hon'ble Judges / Coram: Swatanter Kumar, CJ and D.Y. Chandrachud, J)
Powers of CAG regarding time, scope and extent of audit
In this case decided by the High Court of Bombay, an allegation was made about the failure of the CAG to conduct a comprehensive audit. The Court considered scope of Section 23 of the CAG (DPC) Act. The Court observed that the time, scope and extent of audit are all matter which fall within the jurisdiction of the CAG and is not a matter on which Court ought to tread.
Extract of Judgement

  1. In so far as prayer Clause (b) of the Petition is concerned, an affidavit has been filed on behalf of the Comptroller and Auditor General in which it has been stated that receipts and disbursements under the Market Stabilizations Scheme are duly budgeted in the receipt and expenditure budget which is subject to parliamentary control. The account of the Ministry of Finance and appropriation account of the Government of India are audited at 'regular frequency' by the Comptroller and Auditor General. Under Section 23 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 the scope and extent of audit is determined by the Comptroller and Auditor General. The Comptroller and Auditor General reports his findings to Parliament by submitting audit reports under Article 151 of the Constitution. The Reserve Bank of India has clarified that funds collected from the sterilization of liquidity by the Market Stabilization Scheme form part of the Consolidated Fund of India and are hence, deemed to be audited by the Comptroller and Auditor General.
  2. The Petitioner, however, relies upon a response received to a query under the Right to Information Act in which it has been disclosed by the Comptroller and Auditor General on 19th June, 2008 that no specific audit in respect of the borrowings of the Central Government under the Market Stabilization Scheme was conducted since 2004 nor was there any specific audit of the application of funds borrowed thereunder. The Comptroller and Auditor General has also clarified that no audit has been conducted in respect of the currency and Gold Revaluation Account in the balance-sheet of the Reserve Bank of India since the accounts of the Reserve Bank of India do not fall under the audit jurisdiction of the Comptroller and Auditor General in response to the query for information that no specific audit was conducted either in respect of the borrowings or the application of funds under the Market Stabilization Scheme since 2004 does not in our view detract from what has been stated in the affidavit filed on behalf of the Comptroller and Auditor General. The affidavit discloses that under Section 23 of the Act the scope and extent of audit is determined by the Comptroller and Auditor General and that the accounts of the Ministry of Finance as well as the appropriation account of the Government of India are audited at regular frequency by the Comptroller and Auditor General. The timing, scope and extent of audit are all matters which fall within the jurisdiction of the Comptroller and Auditor General and this is certainly not matter on which the Court ought to tread. There is neither a constitutional nor statutory dereliction of duties by the Comptroller and Auditor General and it is undoubtedly for the Comptroller and Auditor General to consider whether and if so to what extent a specific audit should be undertaken.

III. National Dairy Development Boards Vrs. CAG of India.
in The High Court of Delhi
W.P. (Civil) 4834 OF 1998
Decided on: 27-1-2010
(Before Hon'ble Justice Sanjeev Khanna)
Powers of CAG to conduct audit
In this case decided by the Delhi High Court, the powers of the CAG to conduct audit under section 14, 15 and 19 of the CAG (DPC) Act was considered. The Petitioner challenged the authority of the CAG to invoke and exercise the powers under Section 14 (2) of the 1971 Act to conduct audit of accounts of the NDDB which is governed by its own Act viz.NDDBAct, 1987, and which has a provision of overriding effect to the NDDB Act over any other law. The Court laid down the following preposition:-

  1. CAG Act is a Special Act as distinguished from a General Act.
  2. CAG's power to audit under Section 14 (1) can be curtailed, conditional or even prohibited under any law applicable to the Body or Authority.
  3. Section 14 (2) is an independent section which will apply once the conditions mentioned in the said Section are satisfied and the fact that the body or authority cannot be subject to audit under Section 14 (1) is irrelevant.
  4. Section 15 confers power to undertake scrutiny of the accounts/records of the sanctioning authority to ensure that proper procedure was followed while sanctioning any grant/loan.
  5. Section 15 and Section 14 (2) are independent sections and come into operation when the pre-conditions mentioned therein are satisfied. Section 15 cannot be read to override Section 14 (2) or vice-versa.
  6. The provisions of the Section 19 are clarificatory in nature. Section 19 (2) does not override the provisions of Section 14 (2) and other provisions of the CAG (DPC) Act. Section 19(2) protects the power and right given to the CAG to audit accounts of Corporations under the Law made by Parliament by which they are established. This means that CAG can conduct audit under Section 14 (1), 14 (2) or 15 of the CAG Act in respect of any corporation when under the respective legislation annual financial audit is not undertaken by the CAG.


IV. Arun Kumar Aggarwal Vrs. Union of India
in the Supreme Court of India
W.P. (Civil) 469 OF 2012
Decided on: 9-5-2013
(Before Hon'ble Justice K. S. Radhakrishnan & Justice Dipak Misra)
CAG Audit Report as a basis for grant of relief or initiating action
In this case the Supreme Court considered, whether a CAG Audit Report by itself can be accepted by the Court to grant relief or as a basis for initiating action. The Court held that CAG's Report is always subject to scrutiny by the Parliament and it is for the Parliament to decide whether after receiving the report to make its comments on the CAG's report.
Extracts of the Judgement
We have referred to the report of the CAG, the role of the PAC and the procedure followed in the House, only to indicate that the CAG report is always subject to scrutiny by the Parliament and the Government can always offer its view on the report of the CAG.
The question that is germane for consideration in this case is whether this court can grant reliefs merely placing reliance on the CAG's report. The CAG's report is always subject to parliamentary debates and it is possible that PAC can accept the ministry's objection to the CAG report or reject the report of the CAG. The CAG, indisputably is an independent constitutional functionary, however, it is for the Parliament to decide whether after receiving the report i.e. PAC to make its comments on the CAG's report.
We may, however, point out that since the report is from a Constitutional functionary, it commands respect and cannot be brushed aside as such, but it is equally important to examine the comments what respective ministries have to offer on the CAG's report. The Ministry can always point out, if there is any mistake in the CAG's report or the CAG has inappropriately appreciated the various issues.
V. Shri S. Subramaniam Balaji Vrs. the Government of Tamil Nadu and others.
in the Supreme Court of India
Civil Appeal 5130 of2013
Decided on: 25-7-2013
(Before Hon'ble Justice P Sathasivam and Justice Ranjan Gogoi)
Duty of CAG regarding examination of expenditure
In this case decided by the Supreme Court, the Petitioners prayed that CAG of India has a duty to examine expenditures even before they are deployed. The Court while considering the various issues observed that in addition to the Legislative control, the founding fathers of the Constitution have also thought it fit to keep a check on Government account and expenses through the agency outside the Legislature also. Article 148 has created a Constitutional functionary in the form of CAG of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government and exercises effective control over the Government accounts.
Extracts of the Judgement
The Comptroller and Auditor General of India is a Constitutional functionary appointed under Article 148 of the Constitution. His main role is to audit the income and expenditure of the Governments, Government bodies and State-run corporations. The extent of his duties is listed out in the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. The functioning of the Government is controlled by the Constitution, the laws of the land, the Legislature and the Comptroller and Auditor General of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government. The office of CAG exercises effective control over the government accounts and expenditure incurred on these schemes only after implementation of the same. As a result, the duty of the CAG will arise only after the expenditure has incurred.
The Comptroller and Auditor General of India is a Constitutional functionary appointed under Article 148 of the Constitution. His main role is to audit the income and expenditure of the Governments, Government bodies and State-run corporations. The extent of his duties is listed out in the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. The functioning of the Government is controlled by the Constitution, the laws of the land, the Legislature and the Comptroller and Auditor General of India. CAG examines the propriety, legality and validity of all expenses incurred by the Government. The office of CAG exercises effective control over the government accounts and expenditure incurred on these schemes only after implementation of the same. As a result, the duty of the CAG will arise only after the expenditure has incurred.

Instructions of Government of India

F.No. 6(5)-B (R) / 99
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi 13th June, 2006

Subject: - Performance Audit by Comptroller and Auditor General of India
Clarification has been sought whether Performance Audit falls within the scope of audit by C&AG under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971.

    • The Government has considered the matter. Under Section 23 of the DPC Act, 1971, the Comptroller and Auditor General of India has the powers to make regulations for carrying into effect the provisions of the Act in so far as they relate to scope and extent of audit. In pursuance of these provisions C&AG has been conducting performance audits in addition to financial audits and compliance audits based on guidelines / principles / regulations framed for the purpose. All audit reports of the C&AG are placed before the Parliament and State Legislatures, as the case may be as constitutionally mandated.
    • It is, therefore, clarified that performance audit, which is concerned with the audit of economy, efficiency and effectiveness in the receipt and application of public funds is deemed to be within the scope of audit by Comptroller and Auditor General of India for which Performance Auditing Guidelines drawn up by the Comptroller and Auditor General of India already exist.
    • All the Ministries / Departments are accordingly expected to facilitate the conduct of audits including performance audit by providing access to all the documents required by C&AG in connection with such audits. In this regard attention of all the ministries is invited to O.M. F.No.1(43)-B/78 dated 23rd September 1978 issued from the Ministry of Finance, clarifying the procedure in respect of submission of official documents for audit without any apprehension and with due care with respect to custody and handling of classified files in accordance with standing instructions.
    • The respective subordinate offices and other entities that come under the purview of the CAG audit may also be advised accordingly.

    (P. R. Devi Prasad)
    Officer on Special Duty (FRBM)
    To,
    1. Secretaries to Government of India (All Ministries / Departments)
    2. Chief Secretaries of State and Union Territory Governments
    3. Financial Advisors (All Ministries / Departments of Government of India)
    4. Copy for information and record to:

      • The Cabinet Secretariat and
      • The Office of the Comptroller and Auditor General of India

Commentary

Commentary on Duties and Powers of the Comptroller and Auditor General of India under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971.

  • Introductory

The functions of the Comptroller and Auditor of India are derived mainly from the provisions of Article 149 to 151 of the Constitution of India. Article 149 provides that 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 exercisable by the Auditor General of India before the commencement of the Constitution in relation to the accounts of the Dominion of India and of the provinces respectively. Under these transitional provisions the Comptroller and Auditor General continued to perform the duties and exercise the powers in relation to the Accounts of the Union and of the States as provided in the Government of India (Audit and Accounts) Order 1936, as adopted by the India (Provisional Constitution) Order, 1947 till the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (hereafter called the Act) was enacted by the Parliament. The Act which came into force on 15th December, 1971 has been amended in 1976, 1984, 1987 and 1994. The Act is a comprehensive legislation framed under Article 148(3) and 149 of the Constitution. It prescribes (a) the salary and other conditions of service of the CAG and (b) his duties and powers in relation to the accounts and audit of accounts of the Union, the States, the Union Territories and other authorities and bodies. No law of State Legislature can cast any duties or confer any powers upon the CAG or his representatives. Likewise the duties and powers of the CAG prescribed by law made by the Parliament cannot be superseded or abridged by or under any law made by the State Legislature.

  • Duties and responsibilities of the Comptroller and Auditor General in relation to accounts.

Sections 10 to 12 of the Act deal with the responsibility of the Comptroller and Auditor General in relation to compilation of the accounts of the Union and the States and the UnionTerritories with Legislatures.
The first proviso of Section 10(1) authorises the President to relieve the Comptroller and Auditor General, after consultation with him, by an order, from the responsibility for compiling (i) the accounts of the Union (either at once or gradually by issue of several orders), (ii) the accounts of any particular service or department of the Union.
The second proviso to section 10 authorises the Governor of a State to relieve the Comptroller and Auditor General, with the previous approval of the President and after consultation with the Comptroller and Auditor General, by an order, from the responsibility for compiling (i) the accounts of the State (either at once or gradually by issue of several orders) and (ii) the accounts of any particular service or department of the State. The President may also, after consultation with the Comptroller and Auditor General, by an order, relieve him from the responsibility for keeping the accounts of any particular class or character.
In 1976, in exercise of powers under the first proviso to Section 10 (1) of the Act, Comptroller and Auditor General has been relieved of the responsibility of compiling and keeping the accounts of various Departments/Ministries of the Union Government, except in respect of accounts relating to (a) pensions in lieu of resumed jagirs, lands etc (b) the Indian Audit and Accounts Department. Similarly, Comptroller and Auditor General is also relieved from the responsibility of compiling accounts of Union Territories except Union Territory of Chandigarh, Dadra Nagar Haweli and Lakshadweep.In so far as the States are concerned, Comptroller and Auditor General continues to (a) compile the accounts of all States except the State of Goa (b) keep such accounts in relation to compilation of accounts of the States as may be necessary (c ) prepare the Appropriation Accounts and Finance Accounts thereof.
The third proviso to sub-section (i) of section 10 authorises the President to relieve the Comptroller and Auditor General from the responsibility for keeping the accounts of any particular class or character. Pursuant to these provisions, the President has, by issue of several orders, relieved the Comptroller and Auditor General from the responsibility for maintaining the Provident Fund accounts of all State Government employees, in the States of Rajasthan, Mizoram, Arunachal Pradesh, Jammu & Kashmir, Bihar (now including Jharkhand), Punjab and Sikkim. As part of the schemes of transfer of the responsibility of compiling the accounts of various departments / Ministries of the Union Government from the Comptroller and Auditor General, he has been relieved from the responsibility of maintaining the provident fund accounts of all employees of the Union Government, except those of the Indian Audit and Accounts Department.
Section 11 authorises the President to relieve the Comptroller and Auditor General after consultation with him, from the responsibility for the preparation and submission of accounts relating to annual receipts-and disbursements (Finance Accounts) for the purpose of the Union or a Union territory having Legislative Assembly. It authorises the Governor of a State, with the previous approval of the President and after consultation with the Comptroller and Auditor General, to relieve the Comptroller and Auditor General from the responsibility for preparation and submission of accounts relating to annual receipts and disbursements for the purpose of a State. The President has issued orders on 20th June, 1978 relieving the Comptroller and Auditor General from the responsibility of preparing the Finance Accounts of the Union Government from 1977-78 onwards. The C&AG has also been relieved vide orders issued by the President on 10th April 1989, from the responsibility for the preparation, in each year, of the accounts showing under the respective head the annual receipts and disbursements for the purpose of the Union Territory of Pondicherry from 1988- 89 accounts onwards. He has also been relieved vide order issued by the Governor of Goa with the previous approval of the President on 27.6.89 from the responsibility for the preparation in each year of the accounts showing under the respective heads and annual receipts and disbursements for the purpose of Goa State for the year 1988-89 onwards. It should be noted that in above cases the Comptroller and Auditor General has been relieved from the responsibility for preparation of the Finance Accounts (of the Union) but he is responsible for its submission to the President/Governor/Administrator for being laid before the Parliament/State/UT Legislature. Prior approval of the President and consultation with the Comptroller and Auditor General are required to relieve the Comptroller and Auditor General from the responsibility for the preparation of the Finance Accounts of a State.
Section 12 of the Act deals with the responsibility of the Comptroller and Auditor General to give information and render assistance to the Union Government, to the State Governments and Union Territory with the Legislative Assembly in preparation of financial statements.

  • Duties in relation to Audit

General provisions relating to audit are contained in Sections 13 to 21, 23 and 24 of the Act. Section 13 of the Act enjoins on the CAG the duty to audit all expenditure from the Consolidated Fund of India, of each State and of each Union Territory having legislative assembly and to ascertain whether the monies 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. Such audit of expenditure is comprehensive and includes;
 

    • audit against provision of funds;
    • regularity audit;
    • propriety audit;
    • efficiency-cum-performance audit and
    • systems audit.

The completeness and accuracy of the accounts is examined and it is seen that there is proper voucher or proof of payment. Audit against provision of funds is aimed at ascertaining whether the monies 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. The Appropriation Accounts of the Union Government and of such State Governments and Union Territory Governments, whose accounts are compiled and kept by the respective Governments, are prepared by the Governments concerned and audited by the Comptroller and Auditor General. The Appropriation Accounts of other State Governments are prepared by the Comptroller and Auditor General from the accounts compiled and kept by him. It is seen in audit that the expenditure conforms to the authority which governs it (regularity audit). Audit also examines the propriety of executive action and looks beyond formality of the expenditure to its wisdom, faithfulness and economy and brings to the notice of the Legislature, cases of waste, losses, extravagant and nugatory expenditure and thus challenges any improper exercise of discretion, and comments on propriety of expenditure (Propriety audit). Efficiency-cum-performance audit is a comprehensive appraisal of the progress and efficiency of the execution of development programmes. In this audit, an attempt is made to assess and appraise to what extent, social"· and economic objectives sought to be achieved have been achieved and at what cost; and to examine how far the agency or department is adequately discharging its financial responsibilities and ascertain whether the schemes are being executed and their operations conducted economically. In systems audit, organisation and systems governing authorisation, recording, accounting and internal control are analysed and standards of quality and performance evaluated.
Section 13 of the Act also requires the Comptroller and Auditor General to audit all transactions of the Union, of the States and of the Union Territories having a Legislative Assembly, relating to the Contingency Funds and Public Accounts and to audit all trading, manufacturing, profit and loss accounts and balance sheet and other subsidiary accounts kept in any department of the Union or of a State or a UnionTerritory.
This Section 13 also enjoins on the Comptroller and Auditor General the duty to report on the expenditure, transactions or accounts so audited by him.
Duties and responsibilities in relation to audit of bodies and authorities
financed by Government The expenditure incurred by the Government from the Consolidated Fund often takes the form of grants and loans to various bodies and authorities. Under Section 13 of the Act, it is the responsibility of the Comptroller and Auditor General to audit such expenditure. This audit of such expenditure is restricted to \ the records available in Government offices and is directed towards examining the admissibility of the grant and loan, the adequacy of sanction and verifying the fulfillment of conditions of grants and loans and their utilisation for the purposes for which they are intended. Prior to the promulgation of the Act, access to the records of the bodies and authorities was not available as a matter of right and it was secured by way of a provision in the orders of sanction issued by Governments as a condition for payment of grants and loans.
The Act has made provisions in Section t4 and 15 for the audit of the accounts of authorities and bodies receiving financial assistance in the form of grants or/and loans from the Government of India or State or UnionTerritory Section 14 of the Act deals with the audit of receipts and expenditure of Bodies and Authorities substantially financed from Union or State Revenue. Section 15 of the Act envisages scrutiny of procedure of departments and agencies giving grants or loans to outside institution for a specific purpose with a view to examining as to how such departments/agencies satisfy themselves as to the fulfillment of the conditions subject to which such grants or loans is given. The provisions in Section 14 and 15 for audit of accounts of authority or bodies receiving financial assistance in the forms of grants or loans are subject to certain conditions and criteria specified in those Sections.
The essential ingredients for any institution to attract audit under Section 14(I) are:-

  • The grant and/or loan must be to a body or authority.
  • The grant or loan must have been paid out of the Consolidated Fund.
  • The autonomous body must be "substantially financed" by grant or loan in accordance with the explanation of that term given in the Section.
  • The audit will be of all receipts and expenditure of the body or authority.
  • Audit will be subject to the provisions of any law, for the time being in force applicable to the body or authority. The said clause is interpreted to mean that our audit will co-exist with and compliment the audit arrangements that may be specified in such law.
  • The words "body" and "authority" used in Article 149 of the Constitution, have not been defined either in the Constitution or in the Act, wherein also these words have been used. However, "authority" has been interpreted by the Attorney General of India to mean a person or body exercising power or command vested in it by virtue of provisions in the Constitution or Acts passed by the Parliament or the State Legislatures. "Body" has been interpreted by him to mean an aggregate of persons, whether incorporated or unincorporated. The expression 'body' would therefore include institutions or organizations set up as autonomous organisations under specific statutes or as a society registered under the Societies Registration Act, 1860 or Indian Trust Act 1882 or other statutes, voluntary organizations or non-governmental organizations, Urban and Rural local self-government institutions, co-operative societies, societies or clubs etc.
  • The term 'body' and 'authority' includes a Company or Corporation. Thus, if a Company or Corporation is not covered by Section 19(1), 19(2) or 19(3) of the Act, it is open, to take up audit under Section 14(1), 14(2) or 20(2), as the case may be subject to the conditions specified in each section being satisfied. The second condition in Section 14 is that the grant and/or loan must be paid from the Consolidated Fund. Cases in which the grants or loans are received by a body or authority through another body or authority which is itself financed by the Central or State Government, have to be excluded for purposes of audit under Section 14, unless it could be clearly established that the intermediary body or authority was a mere agency for remitting the grant/loan provided by Government.

Taxes and duties of the Central Government, State Governments and Union Territory Governments having a Legislative Assembly are sometimes assigned and transferred in whole or in part to local bodies. It has been held that the 'assignment' of taxes etc. to local bodies may be treated as grant for the purpose of application of Section 14 of the Act if the amounts have been given to local bodies by way of financing their expenditure through payment of non-returnable amounts for specific purposes. On the other hand 'compensation amounts' when paid to make good losses, damages etc. caused to local bodies should not be treated as grant for this purpose.
The third condition in this section is to be read with the "Explanation" under the sub section. If the amount of the grant or loan or both to a body· or authority in any financial year together with the unutilised grant or loan to that body or authority carried over from the preceding financial year, from either the Consolidated Fund of India or of any State 'or of any UnionTerritory having a Legislative Assembly are collectively not less than Rs. 25 lakhs in a year (this limit was Rs. 5 lakhs prior to amendment in 1984) that body or authority will be coveted by this sub-section if the other provision in regard to the financial assistance being not less than seventy five percent of the total expenditure of the body or authority is also fulfilled. It may be noted that. in case of loans, only "unutilised" should be taken into consideration and not the entire outstanding loan against a body or authority; When the accounting year of a body or authority is not identical with the financial year of Government (e.g. cooperative societies), the test for determining whether the body or authority falls under Section 14 may be applied with reference to the normal accounting period of the particular body or authority.
The fourth condition for audit under section 14 is that audit is not intended to confine itself to the grant or loan and utilisation thereof, but has to cover all receipts and expenditure of the body or authority from whatever source they are derived. The type, scope, nature and periodicity of audit to be conducted is entirely at the discretion of the Comptroller and Auditor General under Section 23 of the Act. With the amendment of the Act in 1984, an enabling provision has been made vide sub-section (2) of Section 14, for the audit by the Comptroller and Auditor General with the prior approval of the President/Governor of a State/Administrator of a UnionTerritory having a Legislative Assembly to audit all receipts and expenditure of anybody or authority where the grants and/or loans to such body or authority from the Consolidated Fund(s) is not less than rupees one crore in a financial year. Another change brought out by the amendment is that under Section 14(3), the Comptroller and Auditor General will continue to audit the receipts and expenditure of a body or authority for a further period of two years notwithstanding that the conditions specified in sub-section (1) or sub section (2) are not fulfilled during any of the two subsequent years.
Section 15 of the Act describes the functions of the Comptroller and Auditor General in the case of grants or loans given to authorities and bodies for specific purposes. This section has two parts. The first part imposes a statutory responsibility on the Comptroller and Auditor General to scrutinise the procedures by which the authority sanctioning a grant or loan for any specific purpose to any authority or body not being a foreign State or International organisation from the Consolidated Fund of India or of any State or of any Union Territory satisfies itself as to the fulfillment of the conditions subject to which such grants or loans are given.
The second part gives him the right of access to ,the books and accounts of the authority or body in receipt of such grants and loans, subject to certain restrictions, namely:-

  • The authority or body is not a foreign State or International organisation.
  • the President/Governor/Administrator concerned may, if he is of the opinion, in public interest, by order, relieve the Comptroller and Auditor General after consultation with him, for making any such scrutiny in respect of any body or authority;
  • The right of access to the books and accounts of any corporation where the law establishing it (or the rules and regulations framed under that law) provides (which includes appointment by Government or any such authority under powers conferred by that law) for audit by an agency other than the Comptroller and Auditor General is available only with the authority of the President/Governor/ Administrator concerned. Such authorisation is made after prior consultation with the Comptroller and Auditor General and after giving the concerned corporation a reasonable opportunity of making representation with regard to the proposal.

It would be observed from the provisions of Section 15 that, whereas the examination of the records of the sanctioning authorities for purposes of examining the procedure adopted is an obligatory or statutory function, it is not obligatory that the books of all authorities and bodies, the accounts and books of which are open to audit by the Audit Department must necessarily be scrutinised Further, the examination under this section relates to grant or loan given for specific purposes but does not cover grants or loans for general purposes without any conditions. Grants/loans given for maintenance, purchase/procurement of specific items like land, building, equipments etc. grants/loans which are subject to fulfillment of certain conditions, grants/loans to cover deficit etc. should be treated as specific purpose grants/loans.
It should be noted that unlike Section 14(1) Section 15 does not specifically provide for reporting the results of audit of loans/grants. However, as the grants/loans constitute expenditure out of the Consolidated Fund, reporting there on is automatic under the provisions of Section 13 of the Act.
Duties and responsibilities in relation to audit of receipts
Section 16 of the Act provides for audit of all receipts which are payable into the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly by the Comptroller and Auditor General of India. It also requires him to satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon. Even prior to the enactment of the CAG Act, audit of receipts was entrusted to the Auditor General on consent basis. As per Para 13(2) of the "Government of India (Audit and Accounts) Order, 1936, the Auditor General could with the approval and on the request of the Governor General or Governor of any Province, audit the receipts of the Government.
Duties and responsibilities in relation to audit of accounts of stores and stocks
Section 17 of the Act vests in the Comptroller and Auditor General the authority to audit and report on the accounts of the stores and stock kept in any office or department of the Union or a State or a UnionTerritory.
Duties and responsibilities in relation to audit of Government Companies
Sub-Section 1, Section 19 of the Act provides that the duties and powers of the Comptroller and Auditor General in relation to the audit of the accounts of Government Companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956.
The relevant provisions of the Companies Act, 1956 in this regard are contained in Section 617 and 619 (Annexure-I) thereof.
The Companies Act 1956 has since been replaced by Companies Act 2013. The relevant provisions of the Companies Act 2013 in this regard are contained in section 2(45), 139, 143, 394 and 395 thereof (refer Annexure-II).
Section 2(45) defines a Government company as ''any company in which not less than 51 percent of the paid-up share capital is held by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.''
Under section 139 and 143 of the Companies Act 2013:

  • The auditor of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, shall be appointed by the CAG,
  • The CAG shall direct the manner in which the accounts of the Government company are required to be audited,
  • The auditor shall submit a copy of the audit report to the CAG which shall include the directions, if any, issued by the CAG, the action taken thereon and its impact on the accounts and the financial statements of the company,
  • The CAG shall have the right to conduct a supplementary audit of the financial statements of the Company by such person or persons as he may authorise in this behalf, and for the purposes of such audit require information or additional information to be furnished to any person or persons, so authorised, on such matters, by such person or persons, and in such form as the CAG may direct, and comment upon or supplement such audit report and any such comments upon or supplement to the audit report shall be sent by the company to every person entitled to copies of audited financial statements and also be placed before the annual general meeting of the company,
  • The CAG may, in case of any company covered under section 139 (5) or 139 (7), if he considers necessary, by an order, cause test audit to be conducted of the accounts of such company and the provisions of section 19A of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971, shall apply to the report of such test audit.

Under section 394 and 395 of the Companies Act 2013,

  • Where the Central Government is a member of a Government Company, the Central Government shall cause an annual report on the working and affairs of that company to be (a) prepared within three months of its annual general meeting before which the comments given by the CAG and the audit report is placed under the proviso to Section 143 (6) ; and (b) as soon as may be after such preparation, laid before both Houses of Parliament together with a copy of the audit report and comments upon or supplement to the audit report, made by the CAG;
  • Where in addition to the central government, any state government is also a member of a Government Company, that state government shall cause a copy of the annual report prepared under Section 394 (1) to be laid before the House or both House of the state legislature together with a copy of the audit report and the comments upon or supplement to the audit report referred to in Section 394(1).
  • Where Central Government is not a member of a Government Company, each State Government (s) which is member of that company, shall cause an annual report on the working and affairs of the company to be (a) prepared within the time specified in section 394 (1); and (b) as soon as possible laid before the House or both Houses of the State Legislature together with a copy of the audit report and comments upon or supplement to the audit report referred to in sub-section (1) of that section;
  • The provisions of section 394 and section 395 shall, so far as may be, apply to a Government company in liquidation as they apply to any other Government company.

Audit of Corporations established by Parliament.
Section 19(2) of the Act deals with the audit of the accounts of corporations established by or under law made by Parliament. The Act provides that CAG's duties and powers in relation to audit of such corporations shall be performed and exercised by him in accordance with the provisions of the respective legislations. The same was the position prior to the coming into force of the Act. The word "legislations" used in the section refers not only to the provisions in the parent Acts relating to the corporations but also to rules and regulations framed by competent authorities by virtue of powers vested in them under the relevant acts.

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