The FinTech Companies Dependent on Aadhaar Will Fall

According to reports, it appears that the government is considering placing citizens’ Aadhaar data back into private hands. This comes despite the Supreme Court expressly forbidding it while striking down a part of section 57 of the Aadhaar Act yesterday.

The Union Finance Minister Arun Jaitley had informed the press that based on his preliminary reading of the Judgement, private entities cannot use Aadhaar in pursuance of a contract.

Ravishankar Prasad, the Union Minister for Electronics and Information Technology as well as Law and Justice also reiterated that the portion of section 57 that had been struck down related only to contracts.

Section 57 of the Act states:

“Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.”

The majority decision did make an observation at paragraph 367:

“The respondents may be right in their explanation that it [section 57] is only an enabling provision which entitles Aadhaar number holder to take the help of Aadhaar for the purpose of establishing his/her identity. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.”

This implies that using Aadhaar as a proof of identity is left to the choice of the individual concerned.

At paragraph 447(4)(h), the majority decision went into the details regarding striking down a portion of the provision. The portion of the provision that states that establishing a person’s identity using Aadhaar can be done ‘for any purpose’ was read down to limit the purpose to those that are backed by a law. Following from this reasoning, since contracts are not backed by a law, they do not fall within the scope of the section. At the same time, the decision also stated that the law would still be subject to judicial scrutiny.

With regard to the portion talking about ‘any body corporate or person’, the majority opinion was that:

“Even if we presume that legislature did not intend so, the impact of the aforesaid features would be to enable commercial exploitation of an individual biometric and demographic information by the private entities. Thus, this part of the provision which enables body corporate and individuals also

to seek authentication, that too on the basis of a contract between the individual and such body corporate or person, would impinge upon the right to privacy of such individuals. This part of the section, thus, is declared unconstitutional.”

Thus, what transpires is that the Hon’ble Ministers were wrong in their interpretation of yesterday’s Judgement as the words of the majority opinion clearly bars ‘any body corporate or person’ from demanding Aadhaar to establish a person’s identity.