SC upholds constitutional validity of Aadhaar card, but with caveats

The Supreme Court on Wednesday upheld the constitutional validity of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, but curbed the scope of the controversial biometric identity project by diluting several of its provisions.

A five-judge Constitution Bench presided over by Chief Justice Dipak Misra ruled that Aadhaar would not be mandatory for opening bank accounts and getting mobile connections. But the 12-digit unique identity number would remain mandatory for filing income tax returns and availing of subsidies and benefits under various schemes of the the government, according to the majority judgment.

The Bench said Section 139AA of the Finance Act, 2017, which made linking the Permanent Account Number (PAN) with Aadhaar mandatory, had a legal backing. Additionally, it was right to pass the Aadhaar Act as a money Bill in Parliament as it passed the test of impacting the Consolidated Fund of India by way of Section 7, which dealt with the expenditure incurred on subsidies, benefits or services, it said. “In the present case, there is no dispute that the first requirement stands satisfied as Section 139AA is a statutory provision and, therefore, there is a backing of law,” wrote Justice A K Sikri in the judgment, backed by two other judges. 

Justice Sikri, however, said the mandatory linking of Aadhaar with bank accounts as well as mobile numbers didn’t pass the proportionality test. The judges said the linking of bank accounts just to check the evasion of black money was not acceptable. 

Required for 

PAN cards, social security schemes, public distribution system (PDS), state-run health insurance schemes, Employees’ Pension Scheme 

Not required for 

Bank accounts, mobile phone connections, school admissions, CBSE/UGC examinations, mobile wallets, buying insurance policy or investing in the markets

On linking Aadhaar with mobile numbers, the court said, “For the (fear of) misuse of SIM cards by a handful of persons, the entire population cannot be subjected to intrusion into their private lives.” 

The majority judgment was written by Justice Sikri on behalf of himself, the CJI, and Justice A M Khanwilkar. Two other judgments were written by Justice D Y Chandrachud and Justice Ashok Bhushan. In his dissenting judgment, Justice Chandrachud wrote that the whole scheme violated the right to privacy and the Constitution.

Justice Bhushan, on the other hand, concurred with the majority judgment with a few dissenting points. 
 

The majority judgment came out strongly against the use of Aadhaar by private enterprises as the judges held parts of Section 57 of the Aadhaar Act as unconstitutional. This is expected to have implications for various fintech start-ups, the banking sector as well as other enterprises in the business of verifying the identity of their users. “That portion of Section 57 of the Aadhaar Act which enables body corporate and individuals to seek authentication is held to be unconstitutional,” the judgment stated. 

With petitioners arguing that various provisions of the Aadhaar Act violated the right to privacy, even for children, the SC said Aadhaar shall not be mandatory for children seeking admission to a school or an educational institution. For the first time, the court also decided to provide an opt-out option from the identity project for children enrolled in Aadhaar at a young age. “On attaining the age of majority, such children who are enrolled under Aadhaar with the consent of their parents, shall be given the option to exit from the Aadhaar project, if they so choose, in case they do not intend to avail of the benefits of the scheme,” the judgment stated. Section 7 of the Aadhaar Act stands upheld by the majority judgment. This section allows the government to insist on Aadhaar for providing welfare, subsidies and services to citizens by authenticating them through the Aadhaar database first. In effect, individuals will be required to furnish Aadhaar for availing of LPG subsidies, MGNREGA payments and other government schemes. 

However, educational bodies such as CBSE and UGC can no longer ask for Aadhaar from citizens for the purpose of conducting any entrance examination or running a scheme. 

“On that basis, CBSE, NEET, JEE, UGC, etc, cannot make the requirement of Aadhaar mandatory as they are outside the purview of Section 7 and are not backed by any law,” the court stated. The judgment also sought to reform the Aadhaar Act operationally by amending or reading down certain sections of the Act which were found in violation of constitutional rights. For instance, the metadata of transactions cannot be stored under Regulation 26, while the authentication transaction data cannot be stored anymore. This would require amendments to Regulation 26 and 27, the judgement said. There is, however, an exception to deletion of this data when it is required to be maintained by the judiciary. 

“Retention of this data for a period of six months is more than sufficient after which it needs to be deleted except when such authentication transaction data are required to be maintained by a Court or in connection with any pending dispute,” the court clarified.

The court additionally asked the government to bring out a robust data protection regime in line with the Justice BN Srikrishna Committee, which has already submitted the draft Personal Data Protection Bill to the government. 

The 500-page judgment came on a batch of public interest petitions challenging the Aadhaar scheme, started by the UPA regime and implemented by the NDA government. The petitioners, led by retired judge K Puttaswamy, had challenged the scheme as violative of the fundamental rights of citizens enshrined in the Constitution, especially the right to privacy. It would lead to a surveillance state, they had argued.