Challenges and Opportunities-I

The legacy of former CAG Vinod Rai was nullified by his successor appointed by the scam-tainted UPA-II regime. Now, the chickens may be coming home to roost

The terms ‘CAG’ and ‘Vinod Rai’ have interchangeably become household names not only in urban India but also in far-flung rural areas of the country due to a series of scams unearthed by the Comptroller and Auditor General of India (CAG) during the last few years of the UPA Government.

The first wave of shock came in the form of the 2G spectrum allocation scam in November 2010, which was followed by the Commonwealth Games scam, the Adarsh housing society scam, the coal scam and the Delhi airport scam in quick succession. The higher judiciary, particularly the Supreme Court of India, acted expeditiously and ordered for the cancellation of 122 telecom licenses and directed investigating agencies like the Central Bureau of Investigation, the Enforcement Directorate, and Income Tax authorities to look into these cases under close supervision. This sent panic waves all around.

It was the foresight of the founding fathers of the Indian Constitution that they provided for an organization like the CAG office in a developing country like ours, which is pretty unrestricted and is able to make up its mind as to what it’s going to look at, when is it going to look at, and how to report.

It’s only a strong and vibrant democracy that could tolerate that kind of invasion of Government activities. That was the then CAG, Vinod Rai’s legacy. Though the UPA tried, through its prominent lawyer Ministers and General Secretary, to counter Rai by propounding zero loss theories, but it was clear that they were convincing no one. Rai, through his studied silence and solid no-nonsense work, gave a fitting response.

Conflict of interests:  The expiry of tenure of former CAG Vinod Rai in May 2013 gave a life-line to the UPA in form of power, to appoint a new CAG and they chose the then Defence Secretary, SK Sharma, for the post. In his 37 years of career, Sharma barely spent five months in finance charge (Secretary, Department of Financial services) either at the Centre at the State.

He had earlier worked in the Ministry of Defence for nearly a decade. As defence procurements accounted for a significant part (more than one-third) of the capital expenditure of the Union Government, a group of retired senior bureaucrats and former defence chiefs filed a Public Interest Litigation in the apex court against his appointment as the CAG on grounds of conflict of interest.

The petition, which was filed against an order of the Delhi High Court, had stated that as the country’s auditor, Sharma would be judging a number of defence deals that were concluded or cleared when he was the Defence Secretary and, therefore, he would have serious conflict of interests while acting as the CAG.

A Bench of the Supreme Court, led by the then Chief Justice HL Dattu, while dismissing the petition in February 2015 on allegations of conflict of interest, stated, “In this case, the only aspect to be considered is that he participated in defence purchases. He can always recuse in such a situation or the investigation may be carried out by the senior-most officer of the department. If required, the doctrine of necessity may be applied.”

In an important development in September this year, BJP leader Subramanian Swamy raised the issue of conflict of interest and requested Rajiv Mehrishi, the new CAG, to get all defence contract cases audited during Sharma’s regime, re-examined by a special team of competent officers so as to ensure that the defence audit reports issued during last few years did not remain compromised.

The BJP member also stated that though the former CAG had submitted more than a dozen audit reports on defence-related issues during his tenure, but in not a single case had he recused himself, as also indicated by the Bench.

He was also accused of suppressing or delaying audit reports on Aircel-Maxis case, Rajya Sabha TV and a few others. Such allegations or insinuations would have been unthinkable during Rai’s tenure. So, what has gone wrong in the last few years? The reasons need to be ascertained and analysed.

The importance of conflict of interests (actual or potential) in the course of auditing undertaken by the CAG’s office was also highlighted by the international peer-reviewer team that conducted the peer review of the performance audits undertaken by the CAG during 2010-11 and the then CAG, Vinod Rai, had agreed to accept the recommendation and address the issue.

However, Sharma appeared to have given a go by to the doctrine of conflict of interests while submitting the defence audit reports for the period in which he was the Joint Secretary (Air), Director General  (Defence Acquisition) and Defence Secretary. 

Thus, the principle of natural justice enshrined in the Latin phrase, ‘Nemo judex in causa sua’ (literally, ‘no-one should be a judge in his own cause’) appears to have been violated. This principle is very strictly applied in the judiciary to any appearance of a possible bias, even if there is actually none: “Justice must not only be done, but must be seen to be done”.

As the Constitution of India and the CAG Act thereunder have equated the position of the CAG with that of a Supreme Court judge in many aspects, it was naturally expected of Sharma to also act as supreme judges do in similar situations. By not acceding to the suggestions given by the Supreme Court Bench to recuse from the processing of defence audit reports, he has only compounded the appearance of possible bias/interest.

Even the International Standards for SAIs (ISSAIs), issued by the International Organisation of the SAIs (INTOSAI), prescribe that SAIs should prevent internal conflicts of interest and corruption and ensure transparency and legality of their own operations.

Thus, former CAG Sharma appeared to have overlooked his actual conflict of interests in auditing defence contracts in spite of the provisions of ISSAIs, which SAI India was mandated to comply with. This was done even when he was occupying important positions in international organizations.

(To be concluded. The writer is former Director-General, Audit, CAG)