How Far Audit Reaches

In one line

Where a private licensee shares revenue from a national resource, its books are open to the auditor, not to audit the company but to ascertain whether the Union got its share, because the people are entitled through Parliament to know how their natural resources have been dealt with.

In the wording a student can write in an exam: in Association of Unified Tele Services Providers v. Union of India, (2014) 6 SCC 110, the Supreme Court held that article 149 must be given a purposive interpretation, the Constitution being a living organic thing whose content must vary from age to age, so that the words "any other authority or body" are not confined to entities performing State functions or financed or controlled by the State; that Parliament has an obligation to ascertain whether the entire receipts by way of licence fee and spectrum charges have been realised and credited to the Consolidated Fund; and that in seeking the records of a licensee under a revenue sharing arrangement the Comptroller and Auditor-General is not auditing the service provider's accounts as such but examining the receipts to ascertain whether the Union is getting its legitimate share, for which limited purpose the service providers are bound to make available all their books of accounts and other documents.

The case

Facts. Association of Unified Tele Services Providers v. Union of India, (2014) 6 SCC 110, decided on 17 April 2014, K.S. Radhakrishnan J. Licences to provide telecommunication services were granted on a revenue sharing basis: the licensee kept its revenue and paid the Union a licence fee and spectrum charges calculated as a share of it. The Comptroller and Auditor-General sought the licensees' records. The service providers resisted, contending that they were private companies, that article 149's words "any other authority or body" covered only entities performing State functions or financed or controlled by the State, and that the Constituent Assembly debates supported that reading; and the Tribunal had held that an audit under the licence depended on the Department forming an opinion that the statements submitted were inaccurate or misleading.

The reasoning, in five steps

Step one: article 149 is to be read purposively. The Court said: "we are dealing with a natural resource which belongs to the peoples of this country, and hence we have to give a purposive interpretation to Article 149 read with Section 16 of 1971 Act."

Step two: the debates do not fix the meaning. The "Constitution, as it is often said, is a living organic thing and must be applied to meet the current needs and requirements"; it is "not bound to be understood or accepted to the original understanding of the constitutional economics"; and the Parliamentary Debates "may not be the sole criteria to be adopted by a court while examining the meaning and content of Article 149, since its content and significance has to vary from age to age."