In this article, Baibhav Panda discusses How the SC’s Aadhaar judgement affects the business entities.
The Aadhaar Judgement is one of those judgements which will affect the whole economy in a long run and it ran for a marathon 38 days making it the second longest hearing after the Keshavananda Bharati case. On 26th September 2018, a five-judge constitution bench headed by the Chief Justice Dipak Mishra and Justice A.K Sikri, Justice D.Y Chandrachud, Justice A.M Khanwilkar, Justice Ashok Bhushan upheld the Aadhaar scheme by 4:1 majority.
The majority judgement was delivered by Justice A.K Sikri on behalf of Chief Justice Mishra, Justice Khanwilkar and himself. Justice Bhushan delivered a separate concurring judgement and Justice Chandrachud delivered the sole dissenting judgement.
IMPORTANT TAKEAWAYS FROM THE FINAL JUDGMENT
- The court held that the Aadhaar Act is way more effective than the other identity proofs and it provides uniqueness to an individual and eliminates the chances of duplication of the identity.
- The Act satisfies the test of proportionality as the following conditions are satisfied:
- (a) legitimate goal
- (b) rational nexus between the measures undertaken for furtherance of achievement of goal
- (c) absence of alternative less invasive measures (d) absence of disproportionate impact on holder.
- In reference to the questions raised by the petitioners regarding safeguarding of fundamental right of privacy the apex court struck down certain important provisions of the Aadhaar Act and the regulations and related legislations namely:
- RETENTION AND ARCHIVAL OF RECORDS: Regulation 27(1) of the Authentication Regulations requires the UIDAI to retain the “authentication transactional data” (which also includes the meta data) for a period of 5 years thereafter. The part which permitted the archival for 5 years was declared to be unconstitutional. No data to be retained beyond 6 months.
- STORAGE OF META DATA: Regulation 26 of the Authentication Regulations which enabled the UIDAI to maintain and store the data related to authentication of the Aadhaar number of an individual. Maintenance of data has been held as impermissible as the scope of this provision is very wide and requires necessary amendments.
- NO ACCESS TO PRIVATE ENTITIES: Section 57 of the Act permitted the private entities to establish the identity of an individual for authentication. There was already a growing concern that the private entities getting access to the sensitive information of the individuals which could be misused and manipulated for their personal benefits. The Supreme Court held that the portion which enabled the body corporates and individuals to seek authentication has been held as unconstitutional.
- AADHAAR NOT MANDATORY FOR LINKING WITH SIM: The mandatory linking of Aadhaar with mobile SIM has been held as unconstitutional in reference to the circular issued by the TRAI on 23rd March 2017. It didn’t have the legal backing of authority of law and section 57 being struck down.
- AADHAAR NOT MANDATORY FOR LINKING WITH BANK ACCOUNT: The mandatory linking of Aadhaar with has been held has unconstitutional as it didn’t satisfy the conditions set out in the proportionality test. The reason being that on the failure to do so by an individual would result in restricting the access to bank account i.e depriving a person of property under article 300A.
- NON-APPLICABILITY OF ACT TO MINORS: Enrollment of minor under the Aadhaar scheme would now require the consent of the parents and such minors would also have the option of exiting out of the scheme once they attain majority.
- NOT MANDATORY FOR NEET, EGC AND CBSE: The Supreme Court observed that the requirement of NEET, EGC and CBSE and school admissions was not within the purview of section 7 of the Act and held that Aadhaar would not be mandatory for these things.
- STRIKING DOWN PROVISIONS OF SECTION 33: Section 33 basically speaks about disclosure of information in certain cases. Section 33(1) is about disclosure of information in the event of court order. This sub section has been struck down by the court with a clarification that the individual whose information has to be disclosed shall be afforded an opportunity of hearing. Section 33(2) which provided for disclosure of information in the interest of national security has been struck down.
- MANDATORY LINKING FOR IT FILING: The Supreme Court upheld the validity of section 139AA of Income Tax Act,1961 making it mandatory for linking Aadhaar with PAN for income tax filing.
DISSENTING VIEWS OF JUSTICE D.Y CHANDRACHUD
In a dissenting judgement Justice D.Y Chandrachud declared that the Aadhaar Act in its entirety was unconstitutional in the way it was passed.
Introduction of Aadhaar Act as a money bill in the Rajya Sabha also bypassed the constitutional authority of the Rajya Sabha. The passage of the Act in Rajya Sabha is an abuse of the constitutional process. He ruled that the Aadhaar Act was unconstitutional o the ground that it failed to meet the necessary requirements set out for qualification as a money bill in article 110(1).
Lastly, he said that the failure of authentication would leave a citizen nowhere as they would be denied to claim the benefits that they are otherwise entitled to automatically nullifying the objective of the Act.
EFFECT OF THE JUDGEMENT ON THE BUSINESS ENTITIES
The landmark judgements delivered by the apex Court in the past have affected the country as collective conscious and this judgement will also do the same. These type of judgements have long term implications in the truest sense.
For the people who had a linked their Mobile SIM and bank account with the Aadhaar Card it is win for them as they were earlier insisted by the telecom operators, banks and payment companies to do the same.
With the scrapping of section 57 of the Aadhaar Act the apex Court has done the right thing as earlier the provisions of this section permitted the body corporates to establish the identity of an individual by authentication. It is a major blow for the companies especially the payment companies, Fintech companies selling products like mutual funds, loans and the telecom giants who relied on Aadhaar based KYC( know your customer) which was all about electronic authentication infrastructure without the use of paper based documents.
No doubt the e-KYC infrastructure was effective but there was always a growing concern what if the sensitive information is used by the private entities for the wrong purposes. In light of this concern also scrapping of section 57 appears to be valid.
After the court struck off a portion of section 57 it is the private entities who are in a jittery as there is no more e-KYC. It was paperless and cost effective for these companies to do the verification for authentication say in less than 5 minutes. Now they will have to buckle up and get back to square one and use the paper based KYC procedure which is actually time consuming and more costly. the paper based KYC being a costly alternative means that the companies have to suck up more money from investor’s capital. In other words the judgement will affect the cost of doing business for these companies.
The companies have to bring changes in the business models to comply with the order of the court but for now first they have to delete all the data that they have collected from the individuals for verifying the identity.
The judgement doesn’t even spare the payment apps which were launched by the government last year to promote digital payments in India without the use of debit and credit cards. The first app called Bharat Interface for Money (BHIM) is a merchant app to receive digital payments from customers and the second one called Aadhaar Enabled Payment System (AePS) which allowed withdrawal or transfer of funds and check on account balances using biometric authentication through micro ATM’s. The Aadhaar linking here becomes optional and voluntary now.
The Aadhaar judgement is very well balanced judgement keeping in view the interests of the government by upholding its constitutional validity and safeguarding the fundamental rights of the citizens of the country. The implications in short term is somewhere predictable but it will be interesting to see what judgement brings in the the long term and what will be the implications.
The right of privacy has been upheld as fundamental right in the Puttaswamy case which has pushed for implementation of data protection laws in the country and there is an urgent need for robust data protection law for securing the sensitive data of the citizens. In July this year a nine member committee of experts headed by justice B.N Saikrishna submitted a report to the Ministry of Electronics and Information Technology (MeitY) along with a Personal Data Protection Bill,2018 (Draft).
It will be interesting to see if the draft bill is enacted in the near future what changes it will bring in the data protection regime in a long run.