No Adverse Action Against Private Parties Solely on Basis of CAG Observations: HC

Jammu, Sept 10: The High Court of Jammu & Kashmir and Ladakh ruled that private parties **cannot** be subject to recovery or adverse actions **solely** based on observations made by the Comptroller and Auditor General (CAG) unless those findings are supported by proper adjudicatory proceedings. The direction came while allowing writ petitions filed by **Mahajan Roller Flour Mills** and **Amar Roller Flour Mills** and others.

Pil Millers’ Case

The two mills argued that the **Food Corporation of India (FCI)** had initiated recovery proceedings based only on a CAG audit, without giving them notice or hearing. They claimed they had lifted wheat under *Under Relaxed Specification (URS)*, with official supervision and signed weighment slips, and that any quality issues were the responsibility of FCI staff.

HC’s Key Findings

• The HC held that CAG reports are **recommendatory/advisory** and do not have binding force.
• Quality determinations (e.g. whether wheat was URS or FAQ) need technical testing by competent authorities, not just audit observations.
• The Court also found the recovery claims made by FCI for contracts completed in 2016 (but notices issued much later) were **time-barred** under the Limitation Act.

Relief Granted & Orders

The High Court quashed the recovery orders issued in 2021 and 2022, restrained FCI from withholding any amounts payable to the mills, and barred FCI from blocking their participation in future tenders or auctions.

Legal & Constitutional Observations

The judgment observed that use of CAG audit remarks without giving private parties opportunity of hearing (audi alteram partem) violates Articles 14 (right to equality) and 21 (right to life/liberty/fair procedure) of the Constitution.

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Source: Daily Excelsior (Read original report)

Labels: High Court, CAG Observations, Private Parties, FCI, Judicial Procedure

Tags: #CAG #Judgment #HighCourt #FairProcedure #DailyExcelsior

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