APTEL Dismisses DERC's Bid to Review CAG Audit Quashing, Directs Regulatory Asset Liquidation from 16 June 2026

APTEL rejected Delhi Electricity Regulatory Commission's review petitions challenging its 20 April 2026 order on CAG audit and regulatory asset liquidation, granting only a 45-day window for chartered accountant appointment.

The Appellate Tribunal for Electricity (APTEL) on 27 May 2026 disposed of two review petitions filed by the Delhi Electricity Regulatory Commission (DERC) seeking to set aside or modify its order dated 20 April 2026. That earlier order had quashed the Lt. Governor's approval for DERC to entrust a strict and intensive audit of Delhi Discoms to the Comptroller and Auditor General (CAG), and had directed DERC to appoint a chartered accountant within one week. APTEL found no manifest error in the 20 April 2026 order on either ground raised by DERC. The Tribunal did, however, extend the deadline for appointing a chartered accountant to 45 days and directed DERC to commence the process of liquidation of regulatory assets — tentatively quantified at Rs. 38,552 crores — with effect from 16 June 2026.

The Dispute Before the Tribunal

Original Petition No. 1 of 2025 arose from APTEL's monitoring of directions issued by the Supreme Court in its judgment dated 6 August 2025 (the RA judgment). That judgment directed Regulatory Commissions across India to conduct strict and intensive audits of electricity distribution companies. DERC, acting on those directions, sought and obtained approval from the Lt. Governor on 5 March 2026 to have the CAG conduct the special audit of Delhi Discoms — BSES Yamuna Power Ltd., BSES Rajdhani Power Ltd., and Tata Power Delhi Distribution Limited.

The Delhi Discoms objected before APTEL to the CAG being appointed as auditor. By its order of 20 April 2026, APTEL upheld that objection, quashed the Lt. Governor's approval, and directed DERC to appoint a chartered accountant within one week. The same order also rejected DERC's request to defer commencement of the regulatory asset liquidation process to 1 July 2026, directing instead that the process begin within three weeks.

DERC filed Review Petition No. 7 of 2026 challenging the quashing of the CAG audit approval, and Review Petition No. 8 of 2026 (along with IA No. 1047 of 2026) challenging the directions on regulatory asset liquidation.

DERC's Case on the CAG Audit

Senior Counsel B.P. Patil, appearing for DERC, argued that APTEL's own earlier orders — dated 26 September 2025 and 11 February 2026 — had neither barred nor declined the Commission's move to have the CAG conduct the audit. He pointed to the September 2025 order, which recorded DERC's submission that it had approached the CAG and directed DERC to submit a progress report. He also pointed to the February 2026 order, which had refrained from ruling on the Discoms' objection to CAG audit on the ground that no auditor had yet been appointed.

DERC read these two orders as implicitly permitting the CAG route, and argued that the 20 April 2026 order reversing that position suffered from manifest error.

DERC also relied on the Supreme Court's order in Andhra Pradesh State Load Despatch Centre v. M/s KSK Mahanadi Power Company Ltd. & Ors. (Civil Appeal Nos. 226–227 of 2021) to contend that APTEL lacked jurisdiction under Section 121 of the Electricity Act, 2003 to decide the dispute over entrustment of the audit to CAG.

APTEL's Reasoning on the CAG Audit Ground

APTEL rejected both arguments. On the earlier orders, the Tribunal was direct: the September 2025 order had merely recorded DERC's submission and directed a progress report; the February 2026 order had expressly noted that the Discoms' objection to CAG audit “cannot be readily brushed aside” while declining to rule on it at that stage. Neither order approved the CAG route.

The Tribunal described DERC's reading of those orders as “patently fallacious and pre-posterous” and said the conclusion DERC sought to derive was “absolutely erroneous.”

On the jurisdiction point, APTEL distinguished the KSK Mahanadi precedent. In that case, the Supreme Court had found APTEL's action impermissible because the Tribunal had taken up and decided a petition that was pending before the Central Electricity Regulatory Commission, which Section 121 does not permit. Here, no dispute involving the Delhi Discoms was pending before DERC. DERC had proceeded to entrust the audit to CAG pursuant to the RA judgment, the Lt. Governor had approved it, and the Discoms had raised objections before APTEL. APTEL was monitoring compliance with the Supreme Court's directions across all Regulatory Commissions. The Tribunal held that it was implicit in those monitoring directions that APTEL must ensure compliance is achieved without contravening applicable rules, regulations, and statutory provisions. When APTEL found that entrusting the audit to CAG contravened Section 21 of the CAG Act, it was duty-bound to intervene.

The Tribunal concluded that the 20 April 2026 order disclosed no error on the face of the record and that DERC's contentions were “absolutely fallacious and mis-conceived.”

The Chartered Accountant Appointment Delay

On the prayer for 45 days to complete the chartered accountant appointment process, APTEL noted that a full month had elapsed since the 20 April 2026 order directing appointment within one week, and DERC had taken no steps in that period. DERC submitted that the Electricity Regulatory Commission (Appointment of Consultants) Regulations, 2001 mandated a process that required a minimum of 45 days, and that had DERC begun immediately after 20 April 2026, only 15 to 20 additional days would have been needed.

APTEL observed that the delay appeared deliberate. The Tribunal nonetheless granted the 45-day period, making clear that no further extension would be granted.

DERC's Case on Regulatory Asset Liquidation

Review Petition No. 8 of 2026 sought review, recall, or modification of the 20 April 2026 order to the extent it rejected DERC's request to commence the regulatory asset liquidation process from 1 July 2026, and also sought recall of the direction to begin the process within three weeks of that order.

APTEL noted that the grounds raised in this petition had already been considered in paragraphs 43 and 44 of the 20 April 2026 order and repelled in paragraphs 48 and 49. The petition therefore amounted to a request for fresh consideration of the same contentions, which is not permissible in review proceedings. The Tribunal noted that appropriate remedies may be available to DERC if it is dissatisfied with those directions, but the review petition did not make out any ground for review, recall, or modification.

APTEL also noted that the regulatory assets of the Delhi Discoms had been tentatively quantified by DERC itself at Rs. 38,552 crores. Given that scale, liquidation would take several years. The Tribunal held that it was in the interest of consumers that the process commence at the earliest without further delay.

Outcome

Both review petitions were disposed of. On Review Petition No. 7 of 2026, APTEL found no manifest error in the 20 April 2026 order quashing the CAG audit approval, and granted DERC 45 days from 27 May 2026 to complete the chartered accountant appointment process under the 2001 Regulations. The Tribunal stated that no further extension would be granted.

On Review Petition No. 8 of 2026, APTEL declined to review, recall, or modify the directions on regulatory asset liquidation. Since the three-week period fixed in the 20 April 2026 order had already lapsed, APTEL directed DERC to commence the process of liquidation of regulatory assets of the Delhi Discoms with effect from 16 June 2026 positively.

The order was pronounced in open court on 27 May 2026 by Hon'ble Mr. Virender Bhat, Judicial Member, and Hon'ble Ms. Seema Gupta, Officiating Chairperson.