CAG report can’t be sole basis for any liability or prosecution: Karnataka HC

Mar 28, 2016 17:29 IST

The Karnataka High Court on 24 March 2016 ruled that the report of Comptroller and Auditor General of India (CAG) cannot be the sole basis for any liability being caused or for prosecution to be launched.

The verdict was delivered by a Division Bench comprising the Chief Justice Subhro Kamal Mukherjee and Justice Ravi Malimath.

The bench termed that the action of the State-owned KPCL in recovering 52.37 crore rupees from EMTA Coal Ltd. and Karnataka EMTA Coal Mines Ltd was illegal as it is solely based on a CAG report.

The bench further ruled that the First Information Report (FIR) registered by the Central Bureau of Investigation (CBI) on the basis of a CAG report cannot provide legal basis for Karnataka Power Corporation Ltd. (KPCL) for proceeding against the two companies.

To substantiate its judgment, the bench cited the Supreme Court’s verdict in Arun Kumar Agarwal Vs Union of India case.

In the 2013 case, the SC ruled that reliefs cannot be granted merely based on CAG reports as they are subject to parliamentary debates and scrutiny before being accepted or rejected.


• The Karnataka Power Corporation Ltd. (KPCL) was allotted certain coal mines by the Union government for captive consumption of coal in its thermal power projects in Karnataka.

• To this end, the KPCL, in 2002, selected EMTA Coal Ltd. for the formation of a joint venture for development of captive mines and supply of coal from them.

• The CAG, in its report in March 2013, observed that the KPCL paid 52.37 crore rupees in excess to Kolkata-based EMTA Coal Ltd. and Karnataka EMTA Coal Mines Ltd.

• The excess payments was due to the fact that the payment was made without deducting the price for 8.28 lakh tonnes of coal rejects out of the total production of coal from one of the KPCL’s open-cast mines during 2008–12.

• Based on the CAG’s report, the CBI registered a criminal case against unknown officials of KPCL, EMTA and KEMTA for causing loss.

• Stating the CAG report as an evidence for excess payments, the KPCL issued notices to the two companies in July and December 2014 and March 2015 demanding for payback of the amount.

• Against these notices, the EMTA and Karnataka EMTA approached the high court for redressal.

About CAG

• The Comptroller and Auditor General of India (CAG) was established under the Article 148 of the Constitution.

• It is primarily responsible for auditing all receipts and expenditure of the Government of India and the state governments, including those of bodies and authorities substantially financed by the government.

• It is an independent body in the sense that it submits its reports directly to the Parliament.

• Its reports are taken into consideration by the Public Accounts Committees (PACs) and Committees on Public Undertakings (COPUs), which are special committees in the Parliament of India and the state legislatures.

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