Supreme Court refuses to pass direction on appointment of CAG
"Guidelines have to come through some legislation in accordance with the Constitution," a Bench headed by Chief Justice K G Balakrishnan said.
"We will not give any direction for the laying down of guidelines for the appointment. You have to find the guidelines in the Constitution," the Bench, also comprising Justice P Sathasivam, observed.
The Court declined to go into the petitioner's plea that the issue was needed to be discussed to keep at bay the appointment of "blue-eyed boys of the government" to the post, which has a tenure of six years.
The PIL filed by NGO Public Cause Research Foundation contended that a proper procedure has to be laid down for the appointment of CAG since the power assigned to the post was equivalent to that of an apex court judge.
When advocate Kamini Jaiswal, appearing for the NGO, said that during the pendency of the petition, the Centre has appointed Vinod Rai as the CAG, the Bench said "you are confining your argument to a particular person".
She said in the absence of any guidelines or procedure, retiring bureaucrats with no experience of accounts and audit were getting appointed as CAG.
In case, a Secretary of a particular department or ministry, like Defence or Petroleum, takes up the post there would be a conflict of interest as he or she might have to inquire into deals that they themselves executed during their tenure, she said.
Earlier, Vinod Rai was sworn in as the Comptroller and Auditor-General of India on 7 January 2007. He took the oath of office before the President, Pratibha Devisingh Patil.
His predecessor, Vijendra Nath Kaul has expressed his disappointment with the government's handling of its annual reports, saying action over them comes too late.
He said, CAG sends some 3,000 paragraphs on objections alone to state and central governments every year in its report. Parliament, he said, gets similar objections in 1,600 paragraphs. "By the time they are addressed or action is taken against secretaries, one year gets passed and cases keep piling up," Kaul remarked.
The CAG, who blamed what he called a lack of accountability in bureaucracy for delays in action on audit reports, said officials who sit over them should be punished. "Officials who sleep on the CAG report and do not act should be punished," he remarked.
Kaul, who regretted that the CAG had to encounter excuses whenever it enquired about the followup of its report, said he believed such action would help increase accountability in the system.
He also spoke about plans to switch the country's cash-based accounting system to the one based on approvals, saying all key departments have agreed to the proposals initial reservations by the defence and the railways ministries.
Kaul explained that the proposed approval system would require all ministerial and departmental sanctions for different transactions to be put down as accounting entries.
Kaul's term expired on January 6, 2008. Era Sezhiyan, a former parliamentarian had predicted that an IAS officer would occupy CAG's post. He has been proven right.
Checks and balances
The Comptroller and Auditor General’s office has become another public sector enterprise to accommodate superannuating government officials.
Commenting on the importance of the Comptroller and Auditor General (CAG) in the parliamentary system of governance, B.R. Ambedkar said in the Constituent Assembly on May 30, 1949: “I am of opinion that this dignitary is probably the most important officer in the Constitution of India. If this functionary is to carry out the duties – and his duties are far more important than the duties even of the judiciary – he should be certainly as independent as the judiciary.” Prof. K.T. Shah was against appointing the Auditor General from among the civil services cadre and demanded laying down of the qualifications which will provide for practical experience and technical knowledge in the person appointed as Auditor General.
On behalf of the Drafting Committee, T.T. Krishnamachari assured the Constituent Assembly that “we had some very good Auditor Generals who were good administrators and who have functioned as Accountant Generals in various places”. This observation gave the impression that the Auditor General, later designated as Comptroller and Auditor General, would be chosen from the experienced Accountant Generals belonging to the Indian Audit and Accounts Service (IAAS).
The assurance was followed up with the appointment of three CAGs such as V. Narahari Rao (1948-54), A.K. Chanda (1954-60) and A.K. Roy (1960-66) from the IAAS. Their rich experience and expertise not only succeeded in setting up an effective public audit on a sound foundation but also rendered valuable assistance to parliamentary committees taking firm decisions and adopting suitable procedures to ensure the accountability of the executive.
In the 1950s, the Government of India wanted to organise public enterprises as private limited companies in order to preclude the CAG audit. Though a few leading members felt that the formation of government companies under the Indian Companies Act would whittle away parliamentary control, they were hesitant to raise their objections against the powerful Nehru government. However, Narahari Rao boldly declared that it would be “a fraud on the Constitution” if the government companies were not subjected to public audit. Supporting the commendable views of the CAG, the Public Accounts Committee (PAC) recommended in its Third Report of 1952-53: “The Comptroller and Auditor General should have the unquestioned right to audit the expenditure of these concerns, by whatever name they may be called, because they are financed from the Consolidated Fund of India.”
During a discussion in the Lok Sabha on December 11, 1953, Finance Minister C.D. Deshmukh agreed for a legislation to bring all government companies under public audit. CAG Ashok Chanda introduced the system of Financial Advisers in the Union Ministries to cope with the huge volume of work generated by development planning. A.K. Roy initiated the system of revenue audit that improved the tax collection of the government. They are looked upon as the triumvirate responsible for establishing a responsible Supreme Audit Institution (SAI) in India.
However, of the seven CAGs appointed in the past 42 years, only one was an IAAS officer; the others were from the civil services cadre. An Indian Administrative Service (IAS) officer retires on completion of 60 years of age. The term of the CAG is six years or till the end of 65 years of age, whichever is earlier. If a Government Secretary who is about to retire manages to get the post of CAG, he or she, without any training or experience to deal with the high standards of auditing the vast complex government transactions, gets an extension of five years in the higher post. However, a talented Deputy CAG with more than three decades of experience in the IAAS is denied his rightful promotion. It is more of a loss to the supreme audit than to the individual concerned.
It looks as though the government has made an unwritten policy of appointing only IAS officers to head the Supreme Audit Institution. Thus the audit office has become another public sector enterprise to accommodate superannuating government officials.
In the United Kingdom, the CAG is an officer of the House of Commons and head of the National Audit, which is an independent parliamentary body for auditing central government departments, government agencies and non-departmental public bodies. The appointment of the CAG is made “on an address presented by the House of Commons and no motion shall be made for such an address except by the Prime Minister acting with the agreement of the Chairman of the Committee of Public Accounts”.
In Australia, the Governor General appoints the Auditor General on the recommendation of the Minister concerned, after the Minister has referred his recommendation for the approval of the Joint Committee of Public Accounts and Audit.
In Germany, on a proposal made by the Federal Government, the Bundestag (Parliament) and the Bundesrat (Federal Council) elect without debate the President and Vice-President of the Federal Court of Audit. Before making his proposal, the Federal President shall consult the standing committee of the large Senate of the Federal Court of Audit.
In Japan, the three Commissioners of the Board of Audit are appointed by the Cabinet with the consent of both Houses of the Diet. In South Korea, the Chairman of the Board of Audit is appointed by the President with the consent of the National Assembly. In Thailand, the Auditor General is appointed with the prior approval of the National Assembly.
In the United States, the Government Accountability Office (GAO) is the audit, evaluation and investigative arm of Congress and thus an agency in the legislative branch. The Comptroller General, head of the GAO, occupies a non-partisan position in the U.S. government and is appointed by the President, with the advice and consent of the Senate, for a 15-year, non-renewable term. The Comptroller General may not be removed by the President, but only by Congress through impeachment or joint resolution for specific reasons. Since 1921, there has been no formal attempt to remove a Comptroller General. The long tenure of the Comptroller General and the manner of appointment and removal gives the GAO a continuity of leadership and independence that is rare within government.
Thus, in most countries, there is no scope for the head of the Supreme Audit Institution to be chosen at the discretion of the government. India is a member of the International Organisation of Supreme Audit Institutions (INTOSAI), which, with 186 members, operates as an umbrella organisation for the external government audit community. The INTOSAI has been insisting that “the Supreme Audit Institutions should have the functional and organisational independence required to carry out their mandate”. It is, therefore, desirable that India adopts the international practice of appointing the head of the Supreme Audit Institution as an office independent of the discriminatory power of the executive.
At the foundation stone-laying function of the CAG Office in New Delhi on July 21, 1954, President Rajendra Prasad emphasised the importance of audit: “In a democratic set-up involving allocation of hundreds of crores of rupees, the importance of this kind of scrutiny and check can never be over-emphasised, particularly at the present moment when the government is incurring huge expenditure in so many welfare projects. It is essential that every rupee that we spend on all these is accounted for. The important task – I am afraid, a task not always very pleasant – devolves upon the Comptroller and Auditor General and his office. In accordance with the powers vested in him, he has to carry on these functions without fear or favour in the larger interests of the nation.”
As a true Gandhian, Rajendra Prasad was very much concerned about proper accounting of every rupee spent as part of the “huge expenditure” of the government. In the annual budget of 1954, the total budgetary transactions of the Centre and the States (including the extra-budgetary resources of public sector undertakings) was Rs.1,254 crore whereas the figure for 2005-06 was Rs.10,49,775 crore.
In 1951, there were only five public undertakings with a total investment of Rs.29 crore under the Union government and very few in the States. Now, at the end of the Tenth Plan, the total financial resources given to the public sector enterprises under the Centre and the States, including the Union Territories, come to Rs.15,92,300 crore. Public enterprises other than nationalised banks and some financial institutions are subjected to public audit. Thus, the CAG and his officers have a very heavy responsibility to see whether financial transactions of the governments and their enterprises are being managed with strict measures of economy, efficiency and effectiveness.
At a function held on June 2, 1954, in the Office of the Accountant General, Madras, Vice-President S. Radhakrishnan advised the audit officers to do the duty they owe to the country. He said: “The Comptroller and Auditor General is responsible not to the government. He must serve as the check on the government. The government may make mistakes. It is wrong to assume that the government can do no wrong. The Auditor General is independent of the executive. It is the duty of the Audit and Accounts Department to carry out the financial policies of the government and maintain the authority to Parliament. If I have to give one advice and if I am presumptuous enough to give any advice to the officers of the Audit and Accounts Department, it is this: ‘Do not shrink from the truth for fear of offending men in high places.’”
All these point to the important role assigned to public audit in ensuring the accountability of the executive to Parliament and through Parliament to the real sovereign, the people. The government has been appointing only IAS officers working as Secretaries in one or other of the Ministries to the post of CAG in the past 30 years. It is not clear why government considers an IAS officer superior to and more competent than a seasoned IAAS officer to perform the duties of the Auditor General. The Cabinet has a collective responsibility to Parliament and the Ministers are individually answerable to Parliament for all the work of their Ministries or Departments.
However, in the vast administrative and financial activities of the government, there may be occasions when an individual officer in charge of a Department acts against the rules and procedures laid down and becomes answerable to the Parliamentary Committees. Rule 52 (1) of the General Financial Rules states: “Departments of the Central Government shall be responsible for the control of expenditure against sanctioned grants and appropriations placed at their disposal. The control shall be exercised through the Heads of Departments and their Controlling Officers, if any, and Distributing Officers subordinates to them.”
When an officer working as Defence Secretary is suddenly raised to the post of CAG and if, at that time, audit officers are engaged in a long-standing scrutiny of some questionable defence deals, what will be the natural disposition of the new CAG who has been involved in making the wrong decisions concerned in the Defence Ministry?
If the Secretary of Petroleum Ministry is chosen to the post of CAG, how will he react to the audit investigations into the nebulous and surreptitious transactions by the Petroleum Ministry? Normally, India imports petroleum worth $50 billion at a time out of the total annual import of $180 billion. There are major public sector enterprises such as the Indian Oil Corporation, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited that deal with petroleum products.
How can someone involved in the executive decisions taken earlier in the Ministry be able to face audit objections? Unless a dossier is prepared for each officer about the irregularities, mismanagement and misuse of power committed as per the audit reports on the whole, how can he be promoted to such a sensitive and independent post as that of the CAG?
In January-February 1996, the Indian Audit and Accounts Service Association submitted that the “IA&AS is a service constituted under Article 148(5) of the Constitution with specific purpose to implement provisions of Articles 149 to 151 and the Comptroller & Auditor General’s (Duties and Powers) Act of 1971 and only a professional drawn from their rank who possesses the requisite experience of auditing and accounting can discharge the functions of the post of C&AG.”
It further observed that after Independence, during Jawaharlal Nehru’s time when the best traditions of parliamentary democracy were followed, the first three CAGs were drawn from the IAAS. Giving specific examples, the Association also pointed out that most countries chose an officer from within the rank of officers working in their national audit office to head the audit organisation.
It is learnt that the IAAS officers discussed this matter with the Chairman of the Public Accounts Committee of Parliament, who met the President and the Prime Minister and conveyed his full support to the representation made by the officers.
Narahari Rao was the first Comptroller and Auditor General of India.
The consultation paper circulated by the National Commission to Review the Working of the Constitution recommended a high-level committee for the appointment of CAG. However, the final report recommended that “a healthy convention be developed to consult the Speaker of the Lok Sabha, before the government decides on the appointment of the CAG so that the views of the PAC are also taken into account” (Para 5.16.3).
In recent years, the government has made statutory provisions of selection to sensitive posts through high-level committees. The Human Rights Act, 1993, lays down that appointment of the chairperson and other members of the National Human Rights Commission to be based on the recommendations of a committee consisting of the Prime Minister, the Home Minister, the Leaders of the Opposition in the two Houses of Parliament, the Speaker of the Lok Sabha and the Deputy Chairperson of the Rajya Sabha.
For the post of Central Vigilance Commissioner, the Act provides for the appointment of a three-member committee consisting of the Prime Minister, the Home Minister and the Leader of the Opposition in the Lok Sabha. One should be careful not to give, overtly or covertly, a stronger hand to the government to enforce its decisions in the matter of making appointments to any sensitive post.
If there is no independent audit, there will be no accountability; if there is no accountability, there will be no control of the executive and if there is no control, there will be no Parliament worth its name. The term of the present CAG expires on January 6, 2008, and there is already speculation about filling up the post with an IAS officer.
The parliamentary system of a functioning democracy can be saved only by appointing a competent and experienced IAAS officer to the post of CAG.
Era Sezhiyan is a former Member of Parliament.