New Delhi: In a setback for Delhi government, the Delhi high court on Friday ruled that the office of Comptroller and Auditor General of India (CAG) could not audit the accounts of private power distribution companies.

The ruling came on a petition by three private power distribution companies (discoms) — BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd., and Tata Power Delhi Distribution Ltd, — which challenged the Delhi government’s decision to get their accounts audited by the CAG.

“We are allowing the plea of the discoms," said a bench comprising Delhi high court chief justice G Rohini and justice Rajiv Sahai Endlaw.

A purported 212-paged draft audit report by the CAG has claimed that the discoms had inflated their losses by massive amounts.

The discoms challenged the 7 January order by the Delhi government which asked the CAG to audit the accounts of the discoms, contending that the office of the auditor was not empowered to scrutinize the accounts of a private firm under Section 20 of the CAG Act.

They also referred to an earlier 2002 communication by the CAG that the discoms were “non-government entities" and therefore could not be audited by the government auditor.

Failing to secure a stay on the draft audit report by the single judge under the order on 24 January 2014, the discoms appealed to the division bench, which after hearing the parties reserved its judgment on 4 March.

A request was made by the discoms for not sharing the details of the report with any third party and a copy of the report in its entirety to be provided to them so that they could respond to the findings effectively.

They also sought to postpone the three-day exit conference which is a prelude to the government auditor finalizing its draft report on the discoms seeking a detailed break up of the figures of alleged losses under the report.

The court, however, refused to stall the exit conference while holding that the conference would take place as scheduled.

The Aam Aadmi Party government, which halved the electricity bill for consumption of power upto 400 units, alleged financial irregularities and ordered the CAG audit of the discoms’ account books.