INC42: Supreme Court Verdict: Aadhaar Legal, Mandatory Only For IT Returns And PAN

Sep 28, 2018

To be or not to be is no longer the question. The question has now been pushed into the details — what form should it exist in and how should it be implemented. We’re talking about Aadhaar — the controversial, much-debated, biometrics-based identification system for 1.3 Bn Indians.

After months of waiting, the landmark judgement of the Supreme Court (SC) on Aadhaar’s constitutionality is finally out and, as , the ruling is in favour of the Aadhaar Act. The SC ruled that Aadhaar is mandatory only for filing income tax returns and for the allotment of PAN. It won’t be essential for opening bank accounts or getting SIM cards from telecom operators.

Welcoming the verdict, Nandan Nilekani, the ex-chairman of UIDAI who coined the term ‘Aadhaar’, tweeted, “This is a landmark judgement in favour of #Aadhaar. More than just opining on the constitutionality of the act, the SC has unequivocally validated the founding principles for Aadhaar. Aadhaar is a unique identity project that is critical to the developmental goals of the nation.”

The constitutional validity of Aadhaar, backed by the Aadhaar Act, remained unquestioned at large with four out of five judges on the SC Constitution bench — Chief Justice of India Dipak Misra and Justices A K Sikri, A M Khanwilkar, and Ashok Bhushan — favouring the Aadhaar Act. The fifth judge — Justice Dhananjaya Y Chandrachud — however, said that Aadhaar is wholly unconstitutional.

Making some starkly different observations from the other judges, Justice Chandrachud stated that it can not be the institutional responsibility of UIDAI to protect the data of citizens.

The Aadhaar leaks and the right to privacy arguments were not enough to get the bench to declare the Aadhaar Act as unconstitutional.

While the Aadhaar verdict has been viewed as being in favour of the central government and the Unique Identification Authority of India (UIDAI), it also provides some relief to the petitioners. Constitutional validity notwithstanding, the bench has fine-tuned the Act, striking down some of its provisions.

The Court has struck down the Sections 33(2), 47 & 57 Of the Aadhaar Act.

Satisfied with the defence mechanism improvement against the Aadhaar data leaks, the SC has also defined who has the authority to seek Aadhaar data and who doesn’t.

Speaking to Inc42Vivek Wadhwa, Distinguished Fellow, Harvard Law School and Distinguished Fellow and professor, Carnegie Mellon University Engineering, Silicon Valley responded, “I think that the Supreme Court has made a very wise decision. Aadhar is very important, it has provided identity to hundreds of millions of people who lacked this and were left out of the formal economy. But when the private industry started using it and its privacy was com , things went too far.”

Aadhaar Verdict: What’s The Decision?

Here are the salient points of the SC’s 1448-page Aadhaar Verdict:

  • The SC struck down the provision that prevented individuals from filing cases under the Aadhaar Act. Now, Individuals too can approach courts to file cases under the Act.
  • It struck down Section 57 of the Aadhaar Act. Now, private companies won’t have the authority to demand people’s Aadhaar IDs. In his judgement, Justice Chandrachud instructed telecom operators to delete all data they have collected from users.
  • The SC struck down Section 33(2), which permits the disclosure of Aadhaar data for national security issues.
  • People can’t be denied any government benefits on grounds of having an Aadhaar card. So, Aadhaar IDs can’t be mandatory for children to avail of midday meals or admission to public schools.
  • Aadhaar has been made mandatory only for filing income tax returns and for the allotment of PAN. It won’t be essential for opening bank accounts or getting SIM cards from telecom operators.
  • Aadhaar-based authentication data should not be stored beyond six months. The current rule that it can be archived for five years has been struck down

Speaking of the Aadhaar verdict, Gopal Bohra, Partner, N.A Shah Associates told Inc42, “This judgement of Apex Court will set the guidelines on various ongoing controversial areas where the use of Aadhaar was made mandatory and consequential concern over data privacy.”

He added that the Apex Court has applied balanced approach making mandatory use of Aadhar at places such as filing of income tax return atleast for those individuals who are eligible to obtain Aadhar number and also restricting the data sharing with private parties. This ruling making mandatory Linking of Aadhaar with PAN will help the government in curbing tax evasion.

However, as , people have come up with mixed reactions over the Aadhaar verdict. A Twitter user pointed out that as per the verdict, Aadhaar IDs won’t be essential anymore for opening bank accounts; however, it’s been made essential for linking PAN, and PAN is essential for the opening bank accounts. So, the Aadhaar verdict contracts itself.

Bhavin Patel, Co-founder, and CEO LenDEnClub told Inc42, “This verdict is really good that the Supreme Court has accepted Aadhaar’s constitutional validity. There have been many questions regarding the data security, the surveillance state, privacy problem etc. and with today’s verdict, the air is now clear around those concerns.”

However, “the Supreme Court highlighted some of the flaws in Aadhar law due to which private companies have been barred from using Aadhar for identity verification. This may affect the fintech as well as other financial companies which uses the only Aadhar as their identity verification mechanism,” added Patel.


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