Section 19 of The Comptroller and Auditor-General’s (Duties, Powers and Conditions of Service) Act, 1971
Audit of Government Companies and Corporations
Original Text
(1) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956 (1 of 1956).
(2) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations.
(3) The Governor of a State or the Administrator of a Union territory having a Legislative Assembly may, where he is of opinion that it is necessary in the public interest so to do, request the Comptroller and Auditor-General to audit the accounts of a corporation established by law made by the Legislature of the State or of the Union territory, as the case may be, and where such request has been made, the Comptroller and Auditor-General shall audit the accounts of such corporation and shall have, for the purposes of such audit, right of access to the books and accounts of such corporation:
Provided that no such request shall be made except after consultation with the Comptroller and Auditor-General and except after giving reasonable opportunity to the corporation to make representations with regard to the proposal for such audit.
Visual Summary
Summary
Section 19 establishes the legal framework for the Comptroller and Auditor-General (CAG) to audit commercial and statutory bodies. It distinguishes between three types of entities: Government Companies (audited under the Companies Act), Central Statutory Corporations (audited under their specific founding Acts), and State Statutory Corporations. For State Corporations, the CAG does not automatically have audit jurisdiction; it requires a specific request from the Governor or Administrator, based on public interest, and subject to procedural safeguards like consultation and the right of the corporation to be heard.
Key Takeaways
Govt. Companies: The CAG’s duties regarding Government Companies are governed by the Companies Act (originally 1956, now 2013).
Central Corporations: For corporations created by Parliament (not companies), the audit follows the rules set in their specific enabling legislation.
State Corporations: The Governor can request a CAG audit if it is in the “public interest.”
Procedural Justice: Before ordering a State Corporation audit, the Governor must consult the CAG and give the Corporation a chance to represent its case.
Key Analysis
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Legislative Interplay: Section 19(1) acts as a bridge between the CAG Act and the Companies Act. It ensures that when the Government forms a company (rather than a department), accountability to Parliament/Legislature is maintained through the CAG’s audit, currently under Section 143 of the Companies Act, 2013. - ➤
Respect for Autonomy: Section 19(2) acknowledges that statutory corporations (like LIC or Air India historically) are governed by their own special Acts. The CAG Act does not override these specific statutes but defers to them regarding audit procedures. - ➤
Checks and Balances (State Level): Section 19(3) provides a mechanism for the State Executive (Governor) to bring a State Corporation under CAG scrutiny. However, the proviso embodies the principle of Audi Alteram Partem (no one should be condemned unheard), requiring that the Corporation be allowed to object or explain before such an audit is imposed.
Key Ingredients
Entity Type: Must be a Government Company or a Statutory Corporation.
Trigger (State Corp): Request by Governor/Administrator.
Condition (State Corp): Must be in the “Public Interest”.
Safeguard: Consultation with CAG + Opportunity for Corporation to represent.
Related Provisions
Practical Illustrations
A company like ONGC (Oil and Natural Gas Corporation) is a Government Company. Under Section 19(1), the CAG audits it strictly following the provisions laid out in the Companies Act.
The Governor of a State suspects financial irregularities in the State Warehousing Corporation (established under a State Act). He believes an external audit is in the public interest. He consults the CAG, gives the Corporation a chance to explain, and then formally requests the CAG to audit the accounts under Section 19(3).
Practice Questions
Q: Under Section 19(1), the audit of Government companies is performed in accordance with which Act?
- A. The Comptroller and Auditor-General Act, 1971
- B. The Constitution of India
- C. The Companies Act, 1956 (now 2013)
- D. The Finance Act
View Correct Answer
Reasoning: Section 19(1) explicitly states that duties regarding Govt companies shall be performed in accordance with the provisions of the Companies Act.
Q: Who is empowered to request the CAG to audit a corporation established by a State Legislature?
- A. The President of India
- B. The Governor of the State or Administrator of the Union Territory
- C. The Chief Minister of the State
- D. The Board of Directors of the Corporation
View Correct Answer
Reasoning: Section 19(3) vests this power in the Governor or Administrator, subject to public interest.
Q: What is a mandatory requirement before the Governor can request an audit of a State Corporation?
- A. Approval from the High Court
- B. A majority vote in the State Assembly
- C. Giving the corporation a reasonable opportunity to make representations
- D. Immediate seizure of all books of accounts
View Correct Answer
Reasoning: The proviso to Section 19(3) explicitly safeguards the corporation’s right to be heard before an audit is imposed.
Frequently Asked Questions
Does the CAG automatically audit all State Corporations?
What is the difference between a Government Company and a Corporation in this section?
Can a State Corporation refuse a CAG audit?
Conclusion
Section 19 is a critical provision that extends the CAG’s oversight beyond traditional government departments to the commercial and statutory sector. By aligning audit procedures with the Companies Act for government companies and respecting the specific statutes of corporations, it balances the need for public accountability with the operational autonomy of these entities.