Cautious optimism: Does the Supreme Court’s Aadhaar-PAN decision hold hope for a future victory?

What to make of the Supreme Court’s decision in Binoy Viswam v Union of India, popularly referred to as the Aadhaar-PAN linking case? Is it “pro” or “anti” Aadhaar?

The legal challenge to Aadhaar began in 2012 when a clutch of petitions were filed in the Supreme Court. Aadhaar is a biometric-based 12-digit unique identification number the Indian government wants to every citizen to have. Broadly, the objections were on three grounds – privacy and autonomy, exclusion and denial of benefits, and finally national security.

In August 2015, the court referred all Aadhaar cases to a constitution bench. Primarily, the bench will decide whether Aadhaar violates the right to privacy under Article 21 of the Constitution.

On the face of it, Article 21 is restrictive, explicitly guaranteeing only the rights to life and liberty. Over the decades, though, the Supreme Court has read several subsidiary rights, including to privacy, in this provision, reasoning that the right to life guarantees a person’s dignity, not merely animal existence.

In the Aadhaar case, the government has argued that the court’s decisions recognising the right to privacy under Article 21 do not adequately deal with its own conflicting judgements on the subject. In other words, the existence and extent of the right to privacy in India is not settled. It was to address this technical inconsistency that the entire batch of Aadhaar cases was sent to a Constitution bench.

As it takes time for a Constitution bench to be constituted and for it to sit and decide the matter, the judgement on Aadhaar has been delayed. The delay, while regrettable, is not unusual, but it has come to define every subsequent litigation and hearing related to Aadhaar.

Here, some questions need to be answered. Until a Constitution bench is formed, can the government force every Indian to get Aadhaar, or make it mandatory for accessing various services? The day the court referred the matter to a Constitution bench, it restricted the use of Aadhaar to a limited set of services such as cooking gas. Even for these services, Aadhaar was made voluntary. Voluntary, that is, in plain English, without the masquerade of inverted commas or legal jargon that camouflages coercion. This was so benefits are not denied to a person merely for not possessing Aadhaar. The court’s orders, however, have been defeated by legal stratagems of the government.

A year later, the Narendra Modi government brought the Aadhaar Act, 2016, and argued that it had effectively done away with the restraints placed by the apex court. Aadhaar could now be extended to all services, even made mandatory.

Soon, fresh petitions were filed in the Supreme Court challenging provisions of the Aadhaar Act and the notifications issued under it. Since many of the petitions dealt with the right to privacy, they were tagged with the previous pleas awaiting the formation of a constitution bench. While the petitioners awaited adjudication, Aadhaar expanded inexorably to encompass services such as mid-day meals and the permanent account number, or PAN.

Weak case

PAN is necessary for paying income tax but also for participation in India’s formal economy. Early this year, the Modi government, using the questionable instrument of the Finance Act, 2017, added Section 139AA to the Income Tax Act, 1961. Its two key sub-sections become operative from July 1, 2017. One makes it mandatory to quote Aadhaar for applying for PAN and for filing income tax returns. The other states that a person who has PAN and can get Aadhaar “shall intimate it in any manner as may be specified at a later date by the government”. Non-compliance is punished by the cancellation of PAN.

Challenges to Section 139AA came promptly. The Supreme Court offered the petitioners a choice: it could bunch this matter with the Aadhaar petitions awaiting the formation of a constitution bench or it could hear the case without considering arguments about the right to privacy. The first option would adjourn the case to an indeterminate future date while the latter would remove privacy as a ground for challenge, thereby making the case considerably weaker.

Aware that previous challenges that availed of the first option had failed to contain the Aadhaar blitzkrieg – and the court has shown no urgency to form a constitution bench – the petitioners opted to argue the Aadhaar-PAN challenge without touching upon the right to privacy.

In effect, the challenge to Section 139AA was a limited objection premised on Articles 14 and 19(1)(g) of the Constitution, alongside doctrines of statutory inconsistency and legislative competence. Without the aid of Article 21, these were subsidiary and weaker points of challenge. Moreover, the challenge was limited to Section 139AA of the Income Tax Act, not to the provisions Aadhaar Act or the scheme itself.

The court, in its judgement on June 9, rejected all the limited objections, reasoning that Parliament had the power to enact the specific provisions. Each point of rejection, however, raises a question that constitutional bench must answer. Whether Aadhaar “should remain voluntary or it can be made mandatory imposing compulsiveness”?

Sliver of hope

Still, even while rejecting all points of challenge to Section 139AA, the Supreme Court has provided a sliver of hope. For one, it has stayed cancellation of PAN as the penalty for not having Aadhaar, citing twin reasons. One, the penalty is severe. Cancelling the PAN would literally be a “civil death” as it would disqualify the person from day to day financial transactions that require it to be quoted, the court said. The second reason is more significant. The court stated:

“The validity of the provision upheld in the aforesaid manner is subject to passing the muster of Article 21 of the Constitution, which is the issue before the Constitution Bench...Till then, there shall remain a partial stay on the operation of proviso to sub-section (2) of Section 139AA of the Act.”

The implications of this statutory recasting are still being debated by legal experts, not least because it is ambiguous. Given that Section 139AA(1) stands as is, will Aadhaar still be mandatory for filing income tax returns? Is the stay only on the penalty for commercial transactions or does it apply to filing tax returns as well? If a person files the returns without quoting Aadhaar, will the filing be rejected, marked defective or accepted without the prescribed penalty of PAN cancellation?

That the judgement is not happily worded on these aspects is worrying because the government may adopt an interpretation that best serves its interests. The Central Board of Direct Taxes’ clarification on Saturday seems to confirm the apprehension: it is necessary for people without Aadhaar to obtain one if they wish to file their tax returns after July 1. This only adds urgency to the final determination of the Aadhaar cases by a Constitution bench.

Significantly, the June 9 judgement holds that restrictions placed by the apex court on the use of Aadhaar in 2015 cannot prevent the legislature from enacting provisions such as Section 139AA. This aspect of the judgement requires wider examination given the challenges in several High Courts against Aadhaar-related notifications draw strength from such orders. It also reinforces the seriousness of the main challenges to the Aadhaar Act as well as the constitutional reference.

On June 27, the Supreme Court is scheduled to hear a separate batch of petitions against the coercive nature of the Aadhaar Act and its denial of services. We may approach the hearing with tempered hope, but the fact is that until a constitution bench sits and decides, the legal opposition to Aadhaar cannot be properly adjudicated on the touchstone of our right to life, privacy and human dignity.

For now, the Aadhaar-PAN judgement is a cause for cautious optimism. It states that Aadhaar and Section 139AA of the Income Tax Act have to pass a “more stringent test” under Article 21. It also reinforces the spirit of earlier orders limiting the Aadhaar scheme by giving a limited stay on Section 139AA(2). At the same time, the decision signals urgency, and hope, for a more substantial challenge to the Aadhaar project.

Apar Gupta is a lawyer practising in Delhi. He assists senior counsel for petitioners in some Aadhaar cases and believes that Aadhaar violates individual privacy and also leads to denial of services to the most vulnerable Indians.