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All Posts | May 04,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 6

Arguments in the Supreme Court litigations around linking Aadhaar with PAN, challenging the constitutionality of Section 139AA of the Income Tax Act, were concluded today by Senior advocate Mr. Arvind Datar (also see our updates from day 1day 2day 3day 4, and day 5 of this litigation).

Replying to the State’s arguments, Mr. Datar advanced the following contentions today:

  • Legislative competence: All the previous Supreme court orders including the one passed by a Constitutional bench on 15th October, 2015 pronounce that Aadhaar is voluntary. As long as that order stands, the legislative power of the Parliament under Article 246 remains eclipsed. The question before the court is: if a judgment is given qua executive power, can the Parliament exercise legislative power without removing the basis of the earlier orders? Mr. Datar pointed out that Article 73 of the Constitution says that executive power is coextensive with legislative power and if there is a restraint on executive power, there will be a restraint on the former as well. If the Supreme court has passed an order, it is as binding on the Parliament as it is on any other organ of the State. Therefore, the Parliament had no legislative competence to enact Section 139AA, linking Aadhaar to PAN. The only situations in which Section 139AA can be deemed valid are: 1) Aadhaar is made mandatory under Section 3, and 2) Inserting a non obstante clause under Section 139AA (notwithstanding anything in any other law)
  • Article 14 and Article 19(1)(g): The distinction made under the Aadhaar Act between individuals and companies has no rational nexus with the object sought to be achieved by the Act. Further, proportionality has been a facet of Article 14 since 1959 [Chintaman Rao v. State of Madhya Pradesh; (1950) SCR 759]. Mr. Datar highlighted that proportionality is a part of Article 19(1)(g) as well. A number of small entrepreneurs will be at risk if their PAN is invalidated. This is not a proportional restriction under Article 19(6).

Mr. Datar finished his arguments by appealing to the court to strike down Section 139AA of the Income Tax Act or at least read it down to make the Aadhaar-PAN linkage voluntary.

Senior Counsel Mr. Salman Khurshid also made a brief submission, countering the State’s argument that individuals do not have an absolute right over their body. He explained the meaning of human dignity and the importance of freedom of choice. He said that the measure of a nation is not just its economic growth, but the protection of dignity of every individual.

The State and the petitioners have finished their arguments and the matter is now reserved for judgment.

All Posts | May 03,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 5

The ongoing challenge in the Supreme Court regarding the linking of Aadhaar for filing of income tax returns, and making it mandatory for PAN, has reached Day 5 when the Union of India continued its arguments. We have been updating details from court proceedings from day 123, and 4 as well.

Day 5 of the hearing began with Dr. Arghya Sengupta laying the following points before the Bench:

  • The doctrine of proportionality is not a facet of Article 14 of the Constitution. It can only be invoked in cases where there is a balancing of rights and restrictions, and Article 14 does not envisage any such balance. Citing the case of K.T. Plantation vs. State of Karnataka, Dr. Sengupta said that the plea of proportionality is subjective by nature and therefore cannot be used to strike down a statute. He further mentioned that proportionality under Article 14 applies only to executive action and not legislative action. A long list of English cases were cited in this regard and to support the argument that in the UK, the doctrine of proportionality is not applied even today. He concluded by saying that the traditional principles of equality followed by Indian judiciary are strong and there is no need to import new principles to this case.

  • There is no absolute right to self determination under Article 21 in India. The state can ask for information from its citizens. Even if we had the right to informational self determination, it cannot be absolute. Further, the conception of privacy prevailing in different parts of the world cannot be incorporated in India. The social and cultural situation has to be assessed before giving meaning to this concept.

  • The safety and security of biometrics as a tool for identification has been studied and analyzed and it has been proven that it is the most fool proof method. He stated that the Aadhaar Act provides privacy protection under Chapter 6 of the Act and under Section 70 of the Information Technology Act, 2000. It was also pointed out that the UIDAI database has never been compromised.

Mr. Zoheb Hossain, Advocate-on-Record, continued the State’s argument. He made the following points:

  • A progressive taxation regime is itself a facet of equality under Article 14. Inclusion of Aadhaar strengthens Article 14 as it eliminates inequality between honest tax payers and individuals avoiding tax and holding multiple bogus PAN cards.

  • Every conduct is not free speech. In the present case, it is speech combined with action and therefore it cannot have protection under Article 19(1)(a). He cited United States vs. David Paul O’Brien to substantiate his argument.

After the state concluded its arguments, Senior Counsel, Mr. Shyam Divan replied from the petitioners’ side. His arguments are as follows:

  • The state has reconciled the voluntary nature of the Aadhaar Act and the mandatory nature of Section 139AA of Income Tax Act to infer that Aadhaar is mandatory. Section 3(1) of the Aadhaar Act uses the word “entitled” and not “obliged”. Section 3(2) says that the enrolling agency shall “inform” enrolling individuals, the manner in which their information shall be used, the nature of recipients with whom the information might be shared, the existence of a right to access information. Section 7 says alternate means of identification is to be provided if Aadhaar is not assigned. Section 8(2)(a) requires consent of an individual before collection of information. Aadhaar enrolment form also states that its free and voluntary. The Aadhaar Authentication Regulation number 6 states that consent of Aadhaar holder is required for authentication. The proviso to Section 57 states that the section is subject to the procedure and obligation under Section 8. The aforementioned sections establish the voluntary nature of Aadhaar as provided in the Act itself. Further, the absence of any sanctions in the Act for non compliance reinforces this fact. Mr. Divan pointed out that the UIDAI website itself claims that Aadhaar is voluntary.

  • Replying to the Attorney General’s argument that Aadhaar act cannot be struck down for lack of legislative competence, Mr. Divan pointed out that there are implied limitations to legislative competence. One of the implied limitations is that the state cannot coerce people to part with their biometric data. We are long past slavery and servitude. He further mentioned that the trajectory of the state’s arguments will create a chilling effect. He emphasized the enormous threat to civil liberties in the present case and prayed to the court to pass interim orders, in case the matter is referred to a larger bench.

Senior Counsel, Mr. Arvind P. Datar continued arguing for the petitioners’ made the following point before the court rose for the day:

  • The Aadhaar Act fails on the aspect of legislative competence. The Supreme Court has passed various orders saying Aadhaar is voluntary and nobody can be forced to enrol under it. The state has repeatedly defied these orders. On the assumption that there’s no Supreme Court order, even then Aadhaar Act and Income Tax Act have to be harmoniously construed, which means that Section 139AA of the IT Act has to be read down.

The hearing in the present matter will be concluded tomorrow with Mr. Datar finishing his final arguments.

All Posts | May 02,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 4

The State’s reply in the Aadhaar-PAN linking case was heard today (our coverage of arguments from previous hearings can be accessed at these links: Day 1Day 2Day 3). Attorney General, Mr. Mukul Rohatgi, arguing for the State laid down the following points:

  • The only issue to be considered in this case is the validity of Section 139AA. The petitioners’ lawyers have argued the issue of privacy which is already pending to be heard by a Constitution Bench and therefore not relevant in the present case.
  • A statutory provision can be questioned on the basis of two grounds only: 1) Legislative competence 2) If it is in violation of the Constitution. Legislative competence is established by Articles 246, 248 read with entries 82 and 97. On the second ground, the Attorney General pointed out that income tax by its very nature is coercive, so there is no question of it being in violation of Article 19. Further, he said that Article 21 cannot be invoked merely on the question of taxation. The Parliament is the sole authority to decide the rules of taxation.
  • PAN card was introduced in 1975 to give unique identities to tax payers. It was necessary during that time for orderly collection of taxes. In today’s world, we have to keep pace with technology and hence move towards a more fool-proof method of identification to prevent de-duplication of identity, which is only possible through collection of biometrics. He further highlighted that we live in a world where we are frisked for security reasons, and our fingerprints are taken for issuance of passport. Therefore, the right of bodily integrity is not absolute. Quoting Rousseau and the social contract theory, he said that the state is like a corporation and the citizens are its members. To avail benefits from the state, we need to comply with the rules and regulations made by it.
  • Interim orders passed by the Supreme Court cannot act as legislative estoppel because the orders were passed when Aadhaar was an executive scheme.
  • Section 7 and Section 57 of the Aadhaar Act establish the mandatory nature of the Act. Therefore, it cannot be said that Aadhaar is purely voluntary in nature.
  • India has international obligations under the various treaties signed with other countries for exchange of financial information of its citizens staying abroad, most notably the Foreign Account Tax Compliant Act. The Attorney General went on and explained the various benefits of Aadhaar including curbing black money, transferring benefits and preventing leakages. He mentioned that the right to be forgotten is a luxury of the rich. The poor do not want to be faceless. They want to have an identity and receive welfare benefits.

The hearing will continue tomorrow and Dr. Arghya Sengupta and Zohaib Hossain will argue for the State.

All Posts | Apr 28,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 3

The hearing for the Aadhaar-PAN case spilled over to day 3 with Senior Counsel, Shyam Divan making his concluding remarks. Attorney General, Mukul Rohtagi, representing Union of India is scheduled to raise his arguments in reply on Tuesday, 2nd May, 2017. Updates from day 1 and day 2 of this hearing can be accessed here.

 On day three of the hearing, Mr. Shyam Divan arguing for the petitioners laid the following points:

  • The right to informational self determination should be made a facet of Article 21. He quoted the population census decision of the German Federal Constitutional Court in which the new basic right of informational self determination was invented. It is considered the legal anchor for data protection in Germany. The protection of personal data is essential for a free and self determined development of the individual. Informational self determination and data protection have two corresponding effects: the individual is shielded from interferences in personal matters, thus creating a sphere in which he or she can feel safe. At the same time, data protection is also a precondition for citizens’ unbiased participation in the political process of the democratic constitutional state. The democratic state relies on the participation of all citizens and its legitimacy is based on respecting each person’s individual liberty. Neither the right to informational self determination nor a general right to privacy are explicitly mentioned in the German Constitution (Grundgesetz). However, the Federal Constitutional court had recognized a general right to personality which encompasses protection of human dignity and protection of personal liberty. In the Indian context, it is the legitimate concern of the petitioners to demand informational self determination even if the court does not consider it a constitutional value. The proof of identification and address is given to private parties and not to any government official, therefore informational self determination gets magnified by the manner Aadhaar is being implemented, by forcing individuals to part with their sensitive information.

[A few articles that Mr. Divan mentioned while discussing informational self determination can be accessed herehere, and here]

  • Registrar is an entity authorized by the UIDAI, and could be a bank, public sector employees, or any other agency. They are partner to UIDAI vide a Memorandum of Understanding and are the trustee of information given to them by individuals under Aadhaar. The functions of registrars includes, retaining of biometric data and demographic data till it is transferred to UIDAI. Also, registrars are allowed to formulate their own security policy. Mr. Divan further pointed out that the registrars have no privity with the Government. He called it a complete debasement of individuals’ right to informational self determination.
  • To compel individuals to speak to a third party about their confidential data is a violation Article 19(1)(a). He cited the 1986 judgment of Bijoe Emmanuel v. State of Kerala, where the court had recognized the students’ right to not sing the national anthem as part of Article 19(1)(a) and Article 25.
  • The State has no legislative competence under Entry 82 of List 1 or any other legislative power to secure dominance over an individual’s fingerprints and iris scans. There is no theory of eminent domain with regard to the body, except in narrowly tailored circumstances like border control and prisoners’ identification. He also went on to highlight that whenever a person gives anyone his personal data, the property and entitlement to that data remains with the individual. The state is merely a trustee and hence cannot force the individual (beneficiary) to part with his data. He also cited Lord Atkins’ immortal dissent in Liversidge v. Anderson and appealed to the court to not allow the government to canvas a Humpty Dumpty interpretation of the statute.
  • Aadhaar is applicable to children as well, and Mr. Divan questioned that how can they be compelled to be yoked to a digital network system like Aadhaar before they even reach the age of free consent. He further pointed out that Aadhaar is a violation of 19(1)(g) as it will restrict freedom of trade, movement and association.
  • Concluding his arguments, Mr. Divan requested the court for a blanket stay on Section 139AA. If a blanket stay is not permitted, then at least prevention of coercive action against those who do not have Aadhaar was prayed for. Also. he asked the court to pass an order to stop the invalidation of PAN in case Aadhaar is not linked by an individual.

In the end, Senior Advocate Salman Khurshid sought permission to file written submissions in the matter. The court is scheduled to hear it on 2nd May along with the State’s reply.

All Posts | Apr 27,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 1

The cases for linking Aadhaar to PAN and making it mandatory for Income Tax returns were heard before a bench of Justices A.K. Sikri and Alok Bhushan in the Supreme Court on 26th April, 2017. Senior Counsels Arvind Datar, and Shyam Divan were representing the petitioners in these cases, Binoy Viswam v. Union of India (W.P.(C)247/2017), S.G. Vombatkere & Anr. v. Union of India (W.P.(C) 277/2017) respectively, whilst the Union of India was represented by the Attorney General, Mukul Rohatgi.

At the outset it was clarified that in this hearing, the challenges to privacy, or the constitutionality of the Aadhaar Act would not be raised, and the arguments by the petitioners would be limited to the parliamentary action of introducing Section 139AA to the Income Tax Act, 1961.

Senior Counsel, Arvind Datar set the stage by pointing out that insertion of Section 139AA was not part of original finance bill, and was introduced on the last day when 30-40 statutes were amended. Section 139AA makes Aadhaar mandatory for filing income tax returns from 1st July, 2017, is required to be quoted when applying for PAN, and in case of failure in linking Aadhaar, the PAN will be deemed invalid.

Mr. Datar argued that Section 139AA should be struck down on the following grounds:

  1. It is ultra vires Article 14 of the Constitution:

  • Aadhaar is only eligible for residents, but under IT Act, there are 12 different types of categories, like HUFs, companies, and others that are eligible for PAN, and is not therefore limited to individuals. Under the classic Article 14 test of reasonable classification, the categories created should have an intelligible differentia, and the classification done, should have a rational nexus to the objective sought to be achieved. Mr. Datar argued that the classification between natural, and non natural persons has no intelligible differentia as proviso for Section 139AA makes the PAN invalid for individuals who do not have Aadhaar, but the income tax act, and Section 139A does not make any such distinction for either filing of income tax returns or for issuance of PAN. Also, the rational nexus between the objective for linking Aadhaar, curbing black money, or avoiding fake PAN cards would not be achieved by solely making individuals as a part of this process, and not other assessees.

  • Moreover, under Section 114B of the Income Tax Rules, having a PAN is mandatory for continuing various activities, like buying property, applying for a credit card, among other things. It was argued by Mr. Datar that by treating ‘individuals’ differently than other categories, they are put at a disadvantageous position; hence, violating their fundamental right under Article 14.

  • Furthermore, Mr. Datar argued that under the test of arbitrariness of Article 14, there have been previous judgments of the Supreme Court where a legislative action has been struck down on grounds of arbitrariness. He cited the case of Malpe Vishwananth Acharya v. State of Maharashtra ((1998) 2 SCC 1) in this regard.

  • Towards the end, Mr. Datar asked for the introduction of a facet of proportionality in Article 14, and put forth a doctrine of ‘rational connection’ devised by Chief Justice of Israel. This doctrine attempted to ensure that along with having a rational nexus to the object sought to be achieved, the element of proportionality of the measure, in the classification process should also be taken into account.

  1. It was over-ruling the orders previously issued by the Supreme Court:

  • On multiple occasions and in various cases, the Apex Court has maintained that Aadhaar cannot be made mandatory, and will be voluntary. Section 139AA, that makes it mandatory to have Aadhaar for applying for PAN as well as filing IT returns over-rules these SC orders. The legislature would have to remove the basis of such orders by amending Section 3 of Aadhaar Act and make it mandatory for every resident to have an Aadhaar. Without making such a change in the parent act, it cannot make it mandatory under the Income Tax Act.

  • Mr. Datar corroborated this with a judgement from the Supreme Court that held that direction of the court become the basis of a mandamus, and cannot be taken away in an indirect fashion (Madan Mohan Pathak v. Union of India (1978 AIR 803). He stated, “my right to not get an Aadhaar cannot be taken away in this indirect fashion.” He also pointed to a judgment, that held that cannot over-rule Supreme Court judgement, but remove basis ((1970) 1 SCC 509).

Post lunch, Mr. Shyam Divan, representing the second petition, S.G.Vombatkere v. Union of India commenced his arguments. He initially laid the context of his petition by giving an introduction of the petitioners as being ‘conscientious objectors’ of the program and in their opinion, it is illegitimate. Explaining their position, he pointed that ‘their bodies are theirs, and the State under this Constitution, has no dominion over the body.’ He elaborated further by stating that under Articles 14, 19, and 21, however far one may read legislative competence, the autonomy of an individual’s body cannot be taken away.

He emphasized on how an individual’s fingerprints and iris scans are their own, and due to the vast variety of rights granted under the Constitution to Indian citizens, the State cannot insist that for efficiency or expediency, the rights and bodies of individuals can be taken away. If an individual is willing to pay taxes, and be identified, they cannot be forced to part with their fingerprints. When asked about the photograph as a biometric feature, Mr. Divan responded that in a complex society such as ours, a photograph has become a legitimate source of identity.

He further dissected the Aadhaar project by pointing out that every database is susceptible to hacks, and biometrics cannot be changed, but can be easily duplicated, even from hi resolution photographs as has been proved by an incident where the German Defence Minister’s fingerprints were taken by a hacker from just a photograph. Mr. Divan, while explaining how the process of authentication can be tracked by the State, called the Aadhaar project an “electronic leash”, and laid down three major issues of surveillance, profiling, and seeding.

He continued his argument by further stating that the collection of such biometrics is undertaken by private parties, and no government official is present when such enrollment takes place. Also, per the UIDAI website, 34,000 enrollment centres have been suspended and 3.84 lakh Aahdaar cards have been canceled. While reading out the enrollment form for Aadhaar, he pointed to the first line that states that the scheme is ‘free and voluntary’ and argued that voluntary usually involves no element of coercion or mandatory nature.

Mr. Divan categorically stated that this was for mere background information on the project, and he is not raising any of these points in the petition at hand, as the matter of privacy and validity of the Aadhaar Act are pending before a larger Bench.

He continued his arguments on 27th April, 2017.

All Posts | Apr 27,2017

Supreme Court hears the Aadhaar-PAN case; updates from Day 2

The Supreme Court today continued the hearing on cases filed against linking Aadhar to PAN and making it mandatory for filing income tax returns [Binoy Viswam v. Union of India, W.P.(C) No. 247/2017 & S G Vombatkere and Anr. v. Union of India, W.P.(C) No. 277/2017 – see our coverage of arguments from day 1 here]. Mr. Shyam Divan, Senior Counsel appearing for the petitioners in the latter case, resumed his arguments from day 1, and made the following points:

  • The entire system of Aadhar is unreliable as is evident from the numerous leaks that have occurred. A letter written by the Ministry of Electronics and Information Technology confirms that the data, which the Government has been carefully guarding, has been leaked online. Mr. Divan read out a list of all the significant leaks that have taken place recently.
  • On 15th October, 2015, a Constitution Bench of the SC had directed the Union Government to follow all earlier interim orders issued by the SC starting September 2013. As these orders had made the use of Aadhar purely voluntary, the Aadhar Act can only create rights for citizens and not impose any duties. Converting a right into duty is colorable exercise of power.
  • The Preamble to the Constitution guarantees dignity of the individual and compelling people to part with their biometric data is a violation of their fundamental right to life as guaranteed by Article 21 of the Constitution. When there is a written Constitution that the citizens have given to themselves, the state, however powerful has limited power. This concept of limited government was recognized in the case of State of Madhya Pradesh vs. Thakur Bharat Singh. The Government is trying to change the notion of limited governance to an all pervasive one. Mr. Divan also mentioned that the Constitution of India is not a charter of servitude.
  • Right to life under Article 21 encompasses the right to protect one’s body from harm, which in turn includes the right to not part with one’s fingerprints and iris scans. Article 21 guarantees personal autonomy which was reinforced in the cases of Sunil Batra v. Delhi AdministrationNational Legal Services Authority v. Union of India, and Aruna Shanbaug v. Union of India. Further, it also incorporates the right of bodily integrity. Mr. Divan cited Salmond, Hobbes and Locke to elucidate the jurisprudential perspective on the same.
  • If the object of the statute is discriminatory, then the statute violates Article 14 of the Constitution. Before invoking the test of reasonable classification, it has to be checked if the object of the Act itself is discriminatory or not. Aadhar creates two classes of assessees – those who volunteer to part with their biometric data and those who do not.
  • A statutory provision that completely takes away the voluntary nature of Aadhar and compels expropriation of a person’s fingerprints and iris scans is per se violative of Article 21. Such coercion cannot be imposed on legitimate tax payers and assessees who are otherwise willing and pay income tax. There is no doctrine of eminent domain qua a person. Further, taking into consideration the “effect test”, Section 139AA is unworkable.
  • Lastly, in a digital world, the concept of “informational self determination” should be made a facet of Articles 21, 14 and 19 of the Constitution.

Mr. Divan is scheduled to conclude his arguments on Thursday, April 28, 2017.