Aadhaar: Do You Need It For Government Hospitals, Jobs, EPFO...?

The Supreme Court’s order is not clear about the permitted use of Aadhaar, India’s unique identification number.

8 min read

Could a government hospital insist on Aadhaar identification proof to admit a patient?

Why not? After all treatment there is subsidised by government funds. This should fall squarely within the ambit of Aadhaar as laid down by the Supreme Court this week.

In a majority opinion, the court said Aadhaar enrollment is voluntary. “However, it becomes compulsory for those who seek to receive any subsidy, benefit or service under the welfare scheme of the government expenditure where of is to be met from the Consolidated Fund of India.”

And yet the answer to the question posed upfront is not clear. Because the order is not crystal about the permitted use of Aadhaar, India’s unique identification number.

For instance, the order, authored by Justice Sikri and concurred upon by Chief Justice Misra and Justice Khanwilkar, states Aadhaar would not be compulsory for enrolment of children in government schools.

Because apparently school admissions are neither a service not a subsidy. Besides, the court said children of six to 14 years have a fundamental right to education. Aadhaar can’t come in the way of that.


But isn’t the right to food a fundamental right as well? Or the right to shelter and employment? They all fundamental rights under Article 21 or the right to life, the order itself reiterated. Then why is Aadhaar mandatory for those who want to access government schemes that serve these rights? Such as the Public Distribution System for food or the MGNREGA for jobs?

Because in the case of these and similar welfare schemes the court stands convinced that “Aadhaar enables furtherance of Article 21 by eliminating leakages and ensuring that no deserving individual is denied her/his entitlement.”

The underlying logic in each situation is difficult to fault.

  • No child must be denied education. And privacy of children is paramount.
  • Also the poor must have accurate identification so as to access welfare schemes.
But if Aadhaar shouldn’t stand in the way of right to education, how can it stand in the way of right to life?

People who are poor deserve privacy as much as children and people who are rich, said Apar Gupta in an interview with BloombergQuint. A lawyer who specialises in digital privacy issues, Gupta represented the petitioners who challenged Aadhaar.

Apar: “We can’t make Right to Food a conditional entitlement. Lots of activists working on the Right to Food campaign, which resulted in Right to Food getting statutory recognition through the National Food Security Act, have also made statements and cited concerns on this logic which breaks through the judgment.”

Maybe the salvation lies in two exceptions the order makes, which potentially turn the case on its head.

That, not just education, children should not be denied access to any welfare scheme.

“We also clarify that no child shall be denied benefit of any of these schemes if, for some reasons, she is not able to produce the Aadhaar number and the benefit shall be given by verifying the identity on the basis of any other documents.”

And that, even for adults, authentication failure cannot be the cause for denial of welfare benefits.

“We again emphasise that no person rightfully entitled to the benefits shall be denied the same on such grounds. It would be appropriate if a suitable provision be made in the concerned regulations for establishing an identity by alternate means, in such situations.”

Why Is Aadhaar Mandatory For PAN Card, Tax Filing?

The Permanent Account Number is an identity number issued by the tax department. It is not a government welfare scheme. Neither is the filing of tax returns. And though tax rebates are funded out of the Consolidated Fund of India, the connection to the compulsory Aadhaar test laid down by the Supreme Court is tenuous.

Why then has the court upheld the government decision that makes it mandatory for citizens to quote Aadhaar when filing tax returns or for allotment of Permanent Account Number?

Because it meets the tests laid down by an earlier decision of the apex court to determine permissible limits for invasion of privacy.

Apar: “So, there are three levels. Do you have a law? Does that have a state purpose, is there a reason that the government is bringing it? Is this the best way to achieve this purpose because your privacy is at stake?

“The court always examines the third issue, which is proportionality, by saying that you should use least invasive measure possible to achieve your end because it is impacting people’s privacy.

On proportionality, the (Aadhaar) majority judgement does not reason it enough. Even though it cites a lot of figures which say that ‘people do not quote their PANs for a lot of transactions which are done in cash. There is estimated loss of Rs 33,000 crore even in tax filings. People are misquoting the provision and the forms under which they are filing their taxes’. The order comes up with lot of data, but it does not actually reason that is Aadhaar the best way of making sure that we comply with payment of our taxes?. On 139 AA, the court does not get into the proportionality issue sufficiently.”


Corporate Use Of Aadhaar And Linkage To Bank Accounts And Mobile Numbers

The majority order says use of Aadhaar authentication by corporates is not permitted as it will lead to “commercial exploitation of an individual’s biometric and demographic information by private entities” and is unconstitutional.

It also struck down the mandatory linking of Aadhaar to bank accounts and mobile SIMs, but for very different reasons.

Confused? Don’t be.

Section 57 of the Aadhaar Act permits the use of the Aadhaar number for establishing identity for any purpose, by the state or any corporate or person, pursuant to any law or contract.

The order made two changes to the provision.

1. “any purpose” is susceptible to misuse and can only be a purpose backed by law. Also, any such law is subject to judicial scrutiny.

Hence that portion of the section was read down or diluted.

2. allowing any corporate or person to use Aadhaar for authentication, especially on the basis of a contract between the corporate and an individual, would enable commercial exploitation of private data.


Hence that portion of the section was struck down as unconstitutional. So private sector use of Aadhaar for authentication is no longer permitted.

But that’s not the reason why Aadhaar linkage to bank accounts and mobile numbers has been disallowed by the court.

Yes, both are services provided by the private sector. But Aadhar linkage in these two cases was mandated by the government.

No Law: In the case of mandatory Aadhaar linkage with mobile numbers, this was enforced by a Department of Telecommunications circular in March 2017. The Supreme Court struck it down because the circular was not backed by law and hence unconstitutional.

Violates Right To Privacy: In the case of bank accounts the government amended the Prevention of Money Laundering Rules and issued notifications to mandate the linking of Aadhaar and bank accounts. The route maybe kosher but the substance was not. The order found this mandatory linkage violated the the right to property and hence failed the “test of proportionality”.

Reminder, any limitation to a fundamental right, such as right to privacy, must meet three tests.


Apar: “For the private sector use of Aadhaar, which was permitted under Section 57 purely through contracts by body corporates, we saw that it came to be used for all kind of things like for skating competitions, matrimonial portals, household health verifications. It is gone. The majority order says that it violates the right to privacy. I would have appreciated if the court went little deeper into how and why and reasoned it in greater detail.

“In mobile and bank linkage there are two determinations which are made. Again, it is in the three-part test framework. With mobile phones the order says, the government misinterpreted a previous court order, issued a circular and this does not technically pass the threshold of legality, which means that you didn’t actually make a law.

“Then it goes on to say that the stated purpose of verification can be done in a less invasive form. It has been done in past in a less invasive form through physical visits, other IDs, etc. It says that the basis of linking Aadhaar is disproportionate. Again, a proportionality determination.


“With the bank account-Aadhaar linkage determination, the majority order says that even though you brought it in the PMLA Act, it is not only disproportionate but there is an element of manifest arbitrariness. The stated purpose (by the government) behind the bank linking was that it presumed all of us to be money launderers.

“The majority opinion at one time actually notes and says that the reasoning seems to be erroneous because money launderers do not keep money in banks and they do not disclose it and use it through channels which are open to scrutiny. The court seems to indicate that viewing every potential account holder as a potential money launderer is presuming criminality on part of the entire population.

“It contrasts from Aadhaar-PAN linkage in that the government can’t demonstrate any figures or any kind of empirical data which is comparable to show that the everyday person contemplates money laundering in as much as they did have certain amount of evidence basis to show to court that lot of people don’t pay taxes.

“On mobile and bank account linkage the judgment does a decent job even though it goes through another line of reasoning.”


Can The Government Circumvent Limitations On Aadhaar?

Soon after the Supreme Court verdict on Aadhaar Finance Minister Arun Jaitley said to news agency PTI: “So, let us first read the judgment. There are two-three prohibited areas. Are they because they are totally prohibited or are they because they need legal backing.”

This suggests the government may consider if legislative backing may make the use of Aadhaar permissible in certain cases where the Supreme Court has barred it.

For instance, use of Aadhaar-based authentication of identity by private sector companies, say a payments bank, has been barred by the Supreme Court. One reason is because such a service is based on a contract and not backed by law.

Could a new law change that?

What about mandatory linking of Aadhaar to mobile numbers? That circular was struck down for lack of legislative backing.

Could a legal amendment change that?


Apar: “This is the contentious point, the judgment also indicates that Parliament can make a law and authorise private companies to use Aadhaar under specific purposes. But, not only will there be a requirement for a much more fleshed out legislation, if the government wants Aadhaar to be extended for use by private companies, but it will need to have limitations, safeguards, purposes which was all missing under the Aadhaar Act. Again, I hope the government does not follow through on it. Because it will violate privacy, it will lead to judicial contests because ultimately what happens when a single digital identification firm, which has your biometrics, is used not only by the government but also by the private sector? It leads to complete insight into our life and it leads to profiling.”

So What’s In And What’s Out?

Now that the legal nuances have been explained the use of Aadhaar should be clear.

Not quite.

It is clear that Aadhaar-based authentication cannot be used by any private sector company. So the pesky messages from banks, mutual funds, insurance companies, telecom service providers and the like will stop.

Citizens who want to use Aadhaar because it offered a fast e-KYC or know your customer process, to subscribe to a digital payment product or buy a SIM card, can no longer do so.

What about government services or schemes such as Employee Provident Fund, government hospitals, government jobs, property registrars and more?

(The story was first published by BloombergQuint and has been republished with permission.)

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