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All Posts | Apr 15,2018

Updates on Aadhaar Final Hearing: Day 28

On day 28 of the final Aadhaar hearing, Additional Solicitor General, Tushar Mehta resumed his submission on the defence of Prevention of Money Laundering Act (PMLA) and the Prevention of Money Laundering (Maintenance of Records) Rules. He contended that the new rule that mandates furnishing of Aadhaar number to open a bank account is not ultra vires the Aadhaar Act. Also, there is no challenge with respect to the PMLA rules being ultra vires the PMLA. To this, Justice Sikri remarked that Rule 9(4) [where the client is an individual, he shall for the purpose of sub-rule (1),submit to the reporting entity, one certified copy of an ‘officially valid document’ containing details of his identity and address, one recent photograph and such other documents including in respect of the nature of business and financial status of the client as may be required by the reporting entity] is challenged on the ground of proportionality. He asked what is the the need to make Aadhaar compulsory for operating a bank account when there are other officially valid documents available as mentioned in the Rules. Mr. Mehta said it was done to prevent impersonation.

Further, J. Chandrachud asked Mr. Mehta to respond to Mr. Datar’s contentions: PMLA rules are ultra vires the Act; there is no provision under PMLA to render a validly opened account non operational; why is Aadhaar linking extended to mutual funds and insurance policies as well. Justice Sikri commented, “Anyone can become a reporting entity under the PMLA, not just banks. How is this proportional?” Mr. Mehta answered that the State follows zero tolerance policy when it comes to money laundering and that public interest is interest of the nation in this case.

Next, J. Chandrachud questioned the rule that an existing bank account will become non operational if Aadhaar is not linked within six months. Mr. Mehta in reply said that the bank account will not permanently close but will be non operational till Aadhaar is linked. Chief Justice of India (CJI), Dipak Misra and J. Bhushan at this point ask how is blocking an individual’s bank account not in violation article 300A of the Constitution. Mr. Mehta answered that it is a reasonable restriction. J. Chandrachud remarked that the penal consequence of not linking Aadhaar with bank account is not authorized under PMLA and the Act only talks about verification of bank accounts. Therefore, this might be an overreach. Mr. Mehta replied that the rules are part of the Act and the penal consequence is just an ancillary provision which can be provided by the rules. He contended that not only the plenary law is considered with resect to “procedure established by law” under Article 21 of the Constitution but also the rules. He also asserted that freezing of bank account is not a penalty but just a consequence. The point of such a consequence is so that money launderers render their account non operational. J. Sikri disagreed with Mr. Mehta’s argument and remarked that the consequence is in the nature of a penalty as it leads to deprivation of one’s property. CJI Dipak Misra commented that the bench is only interested in knowing whether the consequence is mandated under law or is it an overreach. Senior Advocate Rakesh Dwivedi interjected and said that Aadhaar is just a condition for opening a bank account and the continuance of it and given the problems the nation is facing, it is important to re-verify existing bank accounts.

Mr. Mehta then stated that terror financing destroys the root of our democracy and threatens national security. Furthermore, there are huge cross border implications and such menaces happens both in India and outside India. Accordingly, it was important to link bank accounts with Aadhaar. In this regard, Mr. Mehta mentioned that the scheme of the PMLA is three fold: (a) zero tolerance towards money laundering; (b) curbing black money; and (c) for money to reach actual beneficiaries; and that while there would be minor inconveniences to some citizens, it was ultimately in the best interest of the nation. Mr. Mehta concluded his arguments by asking the bench to weigh public interest and ‘perceived privacy’ before taking a decision.

Senior advocate Rakesh Dwivedi began his submissions by admitting that he hasn’t felt like he’s being surveilled and that people have voluntarily signed up for Aadhaar. Mr. Dwivedi also mentioned that while lawyers may not qualify for targeted delivery of benefits, they have nevertheless signed up for Aadhaar for the sake of having a single identity.

Mr. Dwivedi then stated that the government has ample means to conduct surveillance and did not need Aadhaar for this purpose. In this regard, Mr. Dwivedi cited the example of the master circular of the CBI which allowed for monitoring of bank accounts. Mr. Dwivedi went on to state that the petitioners are using rhetorics to rubbish Aadhaar and further emphasized that Aadhaar was not required for conducting surveillance. To this, J. Chandrachud replied that technology was a very powerful enabler of mass surveillance and that elections in countries are being swayed wit the use of data and technology. In reply, Mr. Dwivedi stated that we can’t compare the algorithims of Google and Facebook with the technology of UIDAI. While J. Chandrachud mentioned that the Aadhaar Act does not preclude UIDAI to acquire such technology, Mr. Dwivedi replied that this would be an offence under Section 33 of the Aadhaar Act.

Mr. Dwivedi went on to state that the only purpose of Aadhaar is authentication and nothing else, and that there is no power provided under the Aadhaar Act to analyze date. Even meta data is limited, but such meta data is of authentication records and it does not reveal anything about an individual. Mr. Dwivedi explained that meta data consists of the authentication request, the result of the authentication and the time of authentication only. To this, J. Sikri replied that such data is enough to reveal a lot about an individual. However, Mr. Dwivedi answered that the authentication request will show from where the authentication request came but there would be no way to know the location from where it came. Also, the identity of the person requesting such authentication would not be revealed.

J. Chandrachud then explained that the requesting entity can store the data in view of the fact that there is no robust data protection law. Furthermore, commercial information about an individual is a gold mine and hence, surveillance doesn’t have to be interpreted in the traditional sense. To this, Mr. Dwivedi replied that millions like himself did not care about privacy. However, J. Chandrachud replied that while giving fingerprints for a limited purpose is okay, storing fingerprints in a central database for the purposes of authentication is a problem. Mr. Dwivedi explained that biometrics are encrypted and such data is not shared with anyone, and that even the EU data protection law did not have the kind of protection that the Aadhaar Act has. Accordingly, there is no reasonable expectation of privacy with respect to demographic information since most of that information is already in the public domain.

Mr. Dwivedi then went on to state that he understands if people have a problem with the implementation and enforcement of the Aadhaar Act but there is no problem with the law and technology. To this, J. Chandrachud explained that the problem lies in Section 29(b) of the Aadhaar Act which allowed sharing of daata with third parties by the requesting entities. To this, Mr. Dwivedi replied that Section 29(1) bars the sharing of core biometrics completely and therefore, Section 29(b) should be read in the context of Section 29(1). J. Chandrachud answered by saying that the Aadhaar Act has gone beyond the Section 7 benefits which was a major concern. Furthermore, Section 29(3) uses the word ‘identity information’ which seemed to suggest that even biometrics could be transferred.

With this, the bench rose for the day with arguments to continue on 17th April 2018.

All Posts | Apr 14,2018

Updates on Aadhaar Final Hearing: Day 27

On Day 27 of the final Aadhaar hearing, Additional Solicitor General, Mr. Tushar Mehta resumed his submissions for UIDAI.

He began by explaining that the argument that the Aadhaar act was made in violation of interim orders of the Supreme Court has already been refuted in the case of Binoy Visam v. Union of India (Aadhaar PAN linkage case) and reasserted that only the challenge to Article 21 is open with respect to Aadhaar as all other aspects have been dealt with in the Binoy Visam v. Union of India case. Mr. Mehta further explained that it has already been provided that Aadhaar linking with PAN will help curb money laundering, tax evasion and black money and therefore, this question was not open to challenge anymore.

With regard to the above, Mr. Mehta quoted paragraphs 103 and 104 of the Binoy Visam v. Union of India case which held that there was a rational nexus between Section 139AA of the Income Tax Act, 1961 and the object sought to be achieved and that such rationale nexus is a facet of proportionality. He further emphasized that biometrics will help prevent the growth of shell companies and then read out further portions of the Binoy Visam v. Union of India judgment on reasonable classification and mentioned that the balancing of interests is also a fact of proportionality which was propounded in the judgment of Modern Dental College v. State of Madhya Pradesh.

Mr. Mehta than quoted Aharon Barak’s (Israeli jurist) definition of proportionality which held there must be: (a) a public purpose; (b) a rational nexus; (c) a necessity of the measure; and (d) no other available alternative means. In this regard, he quoted paragraphs 124 and 125 of the Binoy Visam v. Union of India case which addressed the issue of whether Aadhaar PAN linking is in public interest and therefore satisfies the test of proportionality and reasonableness.

Mr. Mehta quoted portions of the Binoy Visam v. Union of India judgment which highlighted inequality and corruption in India that prevents benefits from reaching the rightful beneficiaries and stated that India is far behind in sustainable development when compared to China and other South Asian nations. He further mentioned that Aadhaar PAN linking will also help law enforcement agencies check terrorism.

Mr. Mehta then expressed his desire to answer the question on whether the entire population of a country can be treated as criminals for the purposes of Aadhaar and in this regard, quoted an American judgment which held that the screening of airline passengers was an administrative service undertaken to safeguard the larger public interest and not to treat everyone as a terrorist. To this point, J. Sikri stated that the facts of the American judgment cannot be compared to the facts in relation to the Aadhaar case. In reply, Mr. Mehta quoted additional American judgments on the fourth amendment to the American constitution (i.e. in relation to search and seizure).

J. Chandrachud also stated that he was not convinced about the relevance of the American cases quoted by Mr. Mehta for the Aadhaar case. In reply. Mr. Mehta stated that his intention was to show the court that whenever there is a statutorily allowed intrusion of privacy, it does not mean that there is a presumption of guilt. He further stated that no random scrutiny was being conducted in the name of Aadhaar and that the exercise of linking Aadhaar with bank and phone records was only being carried out to weed out fake/ duplicate profiles.

Next, Mr. Mehta stated that Rule 114B of the Income Tax Act requires quoting of PAN to file returns. An individual can easily evade taxes by saying that they do not have a PAN, he argued. Aadhaar-PAN linkage will prevent such tax evasion according to him. Mr. Mehta contended that a statutory measure should not be excessive with respect to the object it seeks to achieve and the court will not look into the legislature’s wisdom unless the measure is shockingly disproportionate to the object it seeks to achieve. He reiterated that the three prong test laid down in Puttaswamy judgment has already been applied, examined and recorded in Binoy Viswam. Mr. Mehta then quoted PUCL v. Union of India and said that if there's a competition between right to privacy and the right to information of a citizen, the former has to be subordinated with the latter for the sake of larger public interest. He also cited the case of Narayan Dutt Tiwari v. Rohit Shekhar and X v. Hospital Z wherein it was held that privacy is not absolute and can be invaded if there’s a larger medical interest. Mr. Mehta also quoted from the Subramanian Swamy judgment on criminal defamation, “The fair needs of the society and the nature of social control has to be kept in mind when enforcing reasonable restrictions.” He then cited Om Kumar v. Union of India that held that limitations on fundamental rights are constitutional if the measures taken are necessary and proportional.

From the perspective of American jurisprudence, Mr. Mehta quoted the case of Vernonia School District 47J v. Acton and stated that the Fourth Amendment does not safeguard all expectations of privacy but only the ones that are reasonable. He then quoted James v UK in the context of property rights with respect to privacy and also said that the right to privacy in the European Convention of Human Rights is not absolute and can be curtailed for the purpose of national security. Justice Sikri disagreed and stated that the doctrine of proportionality in the context of property law is not relevant in the present case.

Citing the Puttaswamy judgment, Mr. Mehta mentioned that it is enough to show that the State has a legitimate interest in implementing Aadhaar and there’s no need to prove “compelling state interest.” He also asserted that the word “necessary” is not synonymous with “indispensable.” It only has to be proved that a particular action is necessary for the larger public interest. Mr. Mehta contended that if there’s an overwhelming public interest for undertaking a particular action, then there’s no need to apply the “least intrusive” test.

Mr. Mehta moved to his last contention on money laundering and stated that the Prevention of Money Laundering Act (PMLA) has become a stringent law since 2013 and the amended rules under PMLA mandate providing of Aadhaar to open a bank account. Mr. Mehta pointed out that money laundering and hawala transactions are matters of global concern. He quoted the Basel Committee report and said that many international organizations have formulated strategies to prevent money laundering. Justice Sikri interjected and said that there’s no doubt that money laudering is an issue but the question that needs to be answered is how Aadhaar will solve the problem. Mr. Mehta then explained the scheme of the PMLA and how it operates.

He will continue his submissions tomorrow (April 12).

All Posts | Apr 13,2018

Updates on Aadhaar Final Hearing: Day 26

On Day 26 of the final Aadhaar hearing, Attorney General, Mr. K.K Venugopal resumed his submissions for the State. He began by explaining retrospective saving of Acts/statutes and cited cases to show that past actions can be validated by a subsequent Act. He stated that Section 59 of the Aadhaar Act provided retrospective application of the Act.

Mr. Venugopal, next read out the third version of the Aadhaar enrolment form and asserted that enrolment is free and voluntary and the form has provisions to take informed consent. Justice Chandrachud interjected and said that the first two forms did not have any reference to biometrics and that it was only inserted in the third form, to which Mr. Venugopal replied that the first two forms were hardly used because in the initial phase of enrolment, the government had only mandated enroling one crore individuals. He also stated that the Central Bureau of Investigation (CBI) had gone to Bombay High Court to obtain biomterics from the Aadhaar database in connection of a rape case since UIDAI had refused to part with biometric information of individuals without their consent.

Thereafter, Mr. Venugopal read out Justice Chandrachud’s part of the K.S Puttaswamy judgment about “reasonable expectation of privacy” and emphasized that the State has no interest in collection of biometrics except for the benefit of the individual himself.

Mr. Venugopal contended that before the right to privacy was recognized by the Supreme Court, the government acted in a bonafide manner when they launched the Aadhaar project and such action cannot be said to be void by retrospective action. Justice Chandrachud at this point highlighted that the question of privacy was irrelevant in M.P Sharma as the case concerned Article 20(3). Only the first part of Kharak Singh affirmed the right to privacy and the subsequent judgments that recognized privacy relied on this first part. Mr. Venugopal disagreed with this interpretation. He finished his arguments with a brief discussion on what would constitute as “excessive delegation.” Justice Chandrachud remarked that Section 2(g) of the Aadhaar Act that defines ‘biological attributes’ is not so much a question of delegation of legislative power but proportionality.

Additional Solicitor General, Tushar Mehta, began his arguments on behalf of Unique Identification Authority of India (UIDAI). He mentioned that his contentions would comprise of:

1. Challenge to S. 139AA of the Income Tax Act (IT Act) from the right to privacy angle.

2. How Aadhaar helps in prevent money laundering, black money and tax evasion.

3. Aadhaar- Mobile number linking

4. Scope of judicial review in the area of technology

He submitted that in the case of Binoy Viswam v. Union of India wherein Section 139AA of the Income Tax Act was challenged, the court had examined all aspects of Aadhaar apart from the test of right to privacy. He stated that all nine judges in the case of Puttaswamy affirmed that the right to privacy is not absolute. Mr. Mehta pointed out that a legislation has to pass the three tests laid down under Puttaswamy and also the test of manifest arbitrariness laid down in the Shayara Bano v. Union of India judgment. All four tests were examined in Binoy Viswam although in the context of Article 19, he stated. According to Mr. Mehta, all the demographic information that is required under Aadhaar was already being taken under Section 139A of the Income Tax Act for obtaining PAN along with the left hand thumb impression of individuals who cannot sign. Justice Chandrachud commented that there was no collection of biometrics and there was no authentication taking place. Mr. Mehta remarked that those who have obtained PAN previously do not have any legitimate interest in withholding information that they have already provided.

Mr. Mehta submitted that 11.3 lakh cases of duplicate PAN were found and that PAN can be misused for the purpose of tax evasion, black money, setting up shell companies, among other things. Aadhaar will ensure that one person has only one PAN by interconnecting the PAN-Aadhaar database as recommended by the Shah Committee SIT on black money. He mentioned that even companies require PAN cards and the documents used for obtaining PAN can easily be forged. Biometrics, he stated will prevent that. Mr. Mehta emphasized that India is a largely tax non-compliant country and the burden of people who evade taxes falls on honest tax paying citizens. He also stated that the tax collection is very low with respect to our GDP ratio.

Lastly, Mr. Mehta talked about India’s international obligations under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS). He concluded by saying that Section 139AA has already been tested on the basis of the four tests mentioned earlier, to which Justice Bhushan commented that the Sate will have to prove that there is no violation of privacy under Aadhaar.

All Posts | Jun 28,2017

Hearing Update: Shantha Sinha & Anr. v. Union of India; June 27th, 2017

The Supreme Court on Tuesday, June 27, 2017, heard the petition against notifications making Aadhaar mandatory for social welfare schemes [Shantha Sinha & Anr. v. Union of India (W.P. (C) 342/2017)] for the grant of interim relief. You can read the summary from the previous hearing here.

The hearing started with the Additional Solicitor General seeking an adjournment of the matter for responding to the rejoinder filed by the petitioners. Referring to an Office Memorandum issued by the Ministry of Electronics and Information Technology on June 22, 2017, which extended the deadline to enroll for Aadhaar for availing various benefits till September 30, 2017, he argued that there was no burning urgency anymore to hear the matter.

The counsel for petitioners, Mr. Shyam Divan,did not oppose the request for adjournment, however, he contended that the said memorandum extended the deadlines only for those beneficiaries who did not have Aadhaar. Those having an Aadhaar number are still required to furnish it after June 30th in order to avail benefits of the schemes. Therefore, he requested that, an order be passed to the effect that no one would be deprived of the benefits of the schemes for non-production of Aadhaar number till the next date of hearing.

However, the court said that it cannot issue any interim order or mandamus on mere apprehensions. It asked the petitioners if they had any evidence to show that such exclusions had taken place since the issue of the notifications, where people were deprived of the benefits to which they were entitled. The court said that it would take such evidence as a test for urgency. To this, Mr. Divan replied that such exclusions would took place only after the deadline of June 30th, and that it is imperative for all the beneficiaries to be protected irrespective of whether they possess an Aadhaar number or not.

The court, in its order, noted that in view of paragraph 90 of the judgment in Aadhaar-PAN case, which categorically states that enrolment to the Aadhaar is not compulsory, no further observation is required.

The court directed the respondent to file its response to the rejoinder within a week and listed the matter on July 7th, 2017 for further hearing.