Supreme Court Provides Partial Relief for Aadhaar

New Delhi: In a small but significant win for the government, the Supreme Court on Thursday allowed the use of the Aadhaar number for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the Pradhan Mantri Jan Dhan Yojana, pensions by central and state governments, and the Employees' Provident Fund Scheme, in addition to its current use in the public distribution system (PDS) and the distribution of cooking gas and kerosene.

In an interim order on 11 August, the apex court had restricted the use of Aadhaar, the unique identity number, to the PDS and the distribution of cooking gas and kerosene.

Subsequently, several state governments, government departments and regulatory agencies put up a joint defence seeking a modification of the interim order. They included the Reserve Bank of India (RBI), the Securities and Exchange Board of India and the Telecom Regulatory Authority of India, the governments of Jharkhand, Maharashtra, Uttarakhand, Himachal Pradesh, Gujarat and Rajasthan, and industry body Indian Banks' Association, along with the Unique Identification Authority of India (UIDAI), the issuer of Aadhaar.

A five-judge constitutional bench comprising Chief Justice H.L Dattu and justices M.Y Eqbal, C. Nagappan, Arun Mishra and Amitava Roy said in an order on Thursday: "We are of the opinion that in para 3 of the interim order, we can include schemes like MGNREGS, pensions by state and central government, Jan Dhan Yojana and Employees' Provident Fund Scheme along with PDS and LPG (liquefied petroleum gas)."

Para 3 of the 11 August interim order had allowed the voluntary use of Aadhaar only for direct benefit transfer in foodgrain, kerosene and cooking gas schemes.

The court's interim order threw an element of uncertainty around flagship government programmes such as biometric attendance for government employees; the Jan Dhan Yojana, the Prime Minister's ambitious financial inclusion initiative; digital certificates, and pension payments.

It also threatened to derail India's progress towards a cashless economy where payments banks are expected to play an important role.

All of these depend on linking accounts to individuals electronically, and are dependent on the Aadhaar number.

"The government was able to convince the court on the utility of Aadhaar which is critical to provide services to the most vulnerable section of the society," said a government official who spoke on condition of anonymity.

The apex court, however, did not allow the use of Aadhaar for the e-know-your-customer (e-KYC) specifically, which would have helped banks, including payments banks, to enrol new customers and telecom operators for issuing SIM cards. However, it is noteworthy that while obtaining bank accounts under the Jan Dhan scheme, banks use e-KYC. The clarification that RBI sought from the court, on whether the Aadhaar number can be used as proof of identification to open a bank account, still remains uncertain.

This will affect banks, mutual funds and companies that have won in-principle payments bank licences such as Airtel M Commerce Services Ltd (from the stable of Bharti Airtel Ltd, which had a customer base of 231.6 million as of July) and Vodafone m-pesa Ltd (a part of Vodafone India Ltd, which had a customer base of 185.4 million as of July).

The licensees also include the department of posts, which has 155,015 post offices across the country, of which 139,144 are in rural areas. The sheer reach of these entities is unrivalled. These entities hope to ride on the technology platform to reach customers, and e-KYC is critical to the process.

"The reason why the court has allowed use of Aadhaar for Jan Dhan Yojana and not other banking services is perhaps because the government made a humanitarian argument that the poorest will be able to avail banking services. It is, however, a technologically flawed argument, deeply so," said Sunil Abraham, executive director of Bengaluru-based research organization Centre for Internet and Society.

The bench ordered the Union government to follow all earlier interim orders issued by the Supreme Court starting September 2013. Some of these orders include restrain on sharing of biometrics and keeping Aadhaar voluntary.

As of now, 920 million Indian citizens have been allotted Aadhaar numbers. The interim stay was affecting beneficiaries of the MGNREGS (91.7 million), pensioners (27.1 million) and recipients of scholarships (25.7 million), among others, according to data from the Unique Identification Authority of India (UIDAI). Till now, 187 million bank accounts have been opened under the Pradhan Mantri Jan Dhan Yojana.

The apex court made the interim ruling in an ongoing hearing where several pleas related to Aadhaar were clubbed together. Some relate to Aadhaar numbers being made mandatory to enable people to avail of certain government benefits and services. Others deal with the number being a violation of privacy, especially in the absence of any backing regulation or oversight, and yet others deal with possible misuse of the information.

However, the constitution bench had clarified on Wednesday that only pleas seeking clarification and modification of the interim order will be decided, and the issue concerning the right to privacy will be heard subsequently by another constitution bench.

"I am very disappointed with the court's order. The government claims that Aadhaar is voluntary, but actually it will not be till it is delinked from all government schemes. This way, people who do have Aadhaar are excluded and will have to run from pillar to post to receive benefits if they do not have the number," said Kamayani Bali Mahabal, a Mumbai-based lawyer, human rights activist and a petitioner in the UIDAI case. She added that the order may increase the incidents of fake Aadhaar numbers as ineligible people choose to gain from all schemes, depriving the poor and aged of real benefits.

The attorney general, Mukul Rohatgi, on Wednesday assured the court that the government has issued advertisements in over 20 languages that Aadhaar is a voluntary scheme.

On Wednesday, PTI reported that a Right to Information application had shown that the UIDAI has identified more than 25,000 duplicate Aadhaar numbers till August.

Mathew Thomas, one of the petitioners challenging the use and validity of the Aadhaar scheme, also expressed disappointment at the court's ruling today. "Aadhaar is a case of great importance to the billion citizens of India. It is unfortunate that the constitution bench spent only a few hours in hearing the issues," he said.

The Supreme Court will appoint a larger bench of at least nine judges to hear the privacy issue. The court in 1954, in the case of M.P. Sharma vs Satish Chandra, ruled that the right to privacy was not a fundamental right recognized by the Constitution. This case was decided by an eight-judge bench of the apex court, and only a bench of equal or larger strength will be able to override that decision.

The Chief Justice in the order on Thursday said that the larger bench, with nine or 11 judges, will be constituted at the earliest to hear the matter on Aadhaar potentially violating privacy and other intervening applications.

The petitioners have argued that UIDAI was approved only by an empowered group of ministers during the United Progressive Alliance tenure and has no statutory authority to collect biometrics of residents. Senior counsel for the petitioners, Shyam Divan, said: "The only law in India which allows the government to collect fingerprints is the Prisoner's Act of 1920, which is a colonial enactment."

The UIDAI does not have any legislative backing and was constituted by notification in 2009 by the erstwhile Planning Commission. Divan, however, said that the Planning Commission notification has no effect since the body itself has ceased to exist, and added that the centre is not introducing a legislation empowering the Aadhaar scheme as it realizes the vulnerability of the entire exercise.

The National Identification Authority of India Bill was introduced in the Rajya Sabha in 2010.

In 2012, the centre was mulling a privacy law that could be enacted to support the UIDAI scheme and, in connection, the Planning Commission then formed an expert committee on privacy under A.P Shah, a former chairperson of the Law Commission.