Unhappy Reliance fights back against CAG

Vol 15, PW 9 (03 Nov 11) People & Policy

Reliance is preparing to take India’s Comptroller and Auditor General (CAG) to court for allegedly carrying out a ‘biased’ audit of the D6 block.

CAG submitted an ‘audit report’ on September 8 to the government, alleging Reliance violated the PSC at its gas producing KG basin block. In response, Reliance is expected to file a ‘writ petition’ in the Delhi High Court later this month, a draft of which has been seen by this report, “to restrain the government, by itself or through any agency” from taking any action based on the CAG report.

CAG charges Reliance with ‘hoarding’ D6 acreage and not surrendering 25% of the block’s area after each exploration phase, as required by the PSC. Reliance hits back by saying the government should give the company a “fair and reasonable opportunity to submit comments and make submissions on the (CAG) report and consider its (Reliance’s) explanations and responses.

” Reliance believes CAG’s bias is demonstrated by its October 3 note to the oil ministry emphasising “in no uncertain terms that action should be initiated against Reliance even while the purported audit report awaits consideration by the Public Accounts Committee of parliament.” Reliance wants the court to declare the CAG report to be in violation of the PSC and India’s constitution, stripping it of all legal basis.

“Any action initiated by the government based on the completely illegal and biased audit is likely to expose Reliance to long and protracted proceedings without cause or justification,” argues Reliance. Reliance also argues CAG overstepped boundaries by carrying out a ‘performance audit’ of the D6 block instead of just auditing the accounts.

Such a ‘performance audit’, we learn, is “contrary to and beyond the provisions and accounting procedures prescribed in Appendix-C of the PSC.” Senior lawyers Rajeev Dhawan and Harish Salve will argue for Reliance.

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