Aadhar-PAN Judgment – Of Judicial Evasion, Unchallenged Assumptions and Non-Engagements

The Supreme court in a bench comprising of Justice A.K. Sikri and Ashok Bhusan, in matter of Binoy Viswam v UOI upheld the constitutional validity of Section 139AA of the Income-Tax Act, 1961 (IT Act), which makes it mandatory to link an individual assessee’s Aadhaar number with his/her PAN number. To the partial relief of petitioners, the court also held that the assessees who are not Aadhaar card holders need not comply with the said provision. This case, being the only Aadhar challenge which has been decided gives an insight into court’s mindset on the Aadhar project and also, the likely outcomes of the numerous Aadhar challenges. Sadly, this case fails to meet the standards of judicial reasonings expected of the Indian Supreme Court with the judgment being marred by judicial evasions, unchallenged assumptions and selective non-engagements with constitutional questions.


Judicial Evasion – On Right to Life

The case began with judicial evasion of petitioners’ claim at pre-hearing stage. The petitioners’ were faced with a difficult choice – to argue without raising privacy claims or argue on Right to privacy and face the prospect of the petition being tagged with the pending Aadhar case (K.S. Puttuswamy v UOI) where the constitution bench is yet to be formed. Sr. Advs, Arvind Datar and Shyam Divan chose the latter option of arguing with one hand tied to their back!.

So, the petitioners’ emphasized on other facets of Right to Life – Informational Self-Determination, Right to live with dignity – which are infringed by Sec 139AA. Mr. Divan argued that Right to Informational Self-determination – which gives individuals the right to decide what information about oneself should be communicated to others and under what circumstances – is violated as Aadhar data is collected by third parties and there are evidences of data leak from private third parties. While, Mr Khurshid, argued that a person may not have a Right to privacy but dignity being an inherent possession of every individual, regardless of circumstance was violated when Aadhar is made mandatory through Income Tax Act.

However, the court expanded the ambit of judicial evasion to post-hearing submissions also by deferring decision on all other facets of Right to Life – Informational Self determination, Right to live with dignity – till it is heard by the mythical constitutional bench. Thus, the pre and post hearing evasion on Right to Life submissions significantly weakened the petitioners’ grounds of challenge.


Weak Reasoning – On Legislative Competence

The petitioners challenged the competence of Legislature to enact Sec139AA – which made Aadhar mandatory for paying income tax. It was challenged on two grounds: first, it led to indirect over-ruling of

judicial orders which had held Aadhar to be voluntary and secondly, Sec.139AA collides with the Aadhar Act as obtaining and enrolling for Aadhar is voluntary under the core legislation but is made mandatory through Sec.139AA of Income Tax Act.

The Court accepted the petitioners’ argument that enrollment under Aadhar Act 2016 is voluntary but still rejected the twin challenges to legislative competency in enacting Sec 139 AA. The court decided that the interim orders of August and October 2015 which held Aadhar to be voluntary were in applicable after passing of the Aadhar Act in 2016. The court observed that these orders that held Aadhar to be voluntary only held ground only till Aadhar had executive/administrative sanction (pre 2016). So, after enactment of Aadhar Act, there is no legal obstacle in making it compulsory through the concomitant Income Tax provision of Sec 139AA. The judicial reasoning is weak in this instance; the legislative over-ruling of court’s orders can be done only by taking away the basis of the past orders – which is by making Aadhar mandatory through the legislation. But, since Aadhar’s status remains voluntary even after the legislative enactment, so the basis of court order still holds good and it can’t be overturned indirectly through Sec 139AA.

The court also held that there is no collision between both statutes – Aadhar Act and Sec 139AA (IT Act) – as they operate in different fields. The court observed that while, Aadhar is voluntary for getting subsidies under the Aadhar Act but it can be made mandatory under Income Tax Act for the purpose of tackling black money, money laundering etc. This reasoning will pave way for the government in circumventing future challenges to Aadhar. On strength of this reasoning, the State can now make Aadhar compulsory for Mid Day Meal Schemes, Pension Schemes, PDS, by just adding a mandatory clause in respective statutes or notifications while speciously maintaining the voluntary nature of Aadhar in the parent Act.


Unchallenged Assumptions– On Art 14 and Art 19(1)(g)

The petitioners challenged the constitutionality of Sec 139AA for infringing upon Right to equality under Art 14 and Freedom of trade and profession under Art 19(1)(g) of the Constitution. The court dismissed the challenge on both counts but the analysis of court’s reasoning make it appear that the Attorney General was arguing before an already converted judiciary.

Arguing right to equality violation, Mr Datar’s contention was that Sec139AA unreasonably targets individuals by excluding juristic persons like companies, partnerships, and trusts. Hence, there is no rational nexus between this classification and the objective of curbing black money or fake PAN cards since nefarious activities by juristic persons have been left outside the ambit of Sec. 139AA. The facts marshalled by Mr. Datar that a miniscule fraction (0.04%) of PAN are fake; neither the statement of Objects and Reasons of Aadhar Act nor the Income Tax Act mention “tackling black money”, were ignored or given short shrift by the court. The court, on the other hand repeated the State’s claim sans scrutiny about Aadhar-PAN seeding being the panacea for tackling black money by making reference to biometric identification being the “best method”, Aadhar seeding as “only robust method” to prevent PAN database duplication. Thus, the court showed great reluctance in examining the State’s claims in effectuating a policy decision and consequently, held that Sec 139AA as not violating Art 14.

Arguments on how Sec 139AA violates Art. 19(1)(g) by taking away an individual’s right to do business met similar fate. The petitioners claimed that Sec 139AA along with Sec 139AA(2) which invalidates PAN Card, which is essential for conducting financial transactions besides paying Income Tax are unreasonable restriction on freedom of trade. It was contended that the provisions does not satisfy the ‘proportionality test’, required for the restriction on fundamental right to be permissible. It is a four step test first laid down in Modern Dental College v MP, which apart from ‘proper purpose’ and ‘rational connection with purpose’ also requires one to show ‘narrow tailoring’ of restriction along with ‘balancing of interest’ between public interest and individual’s fundamental right, to be held as reasonable restriction on freedom of trade.

There were good grounds for assuming that Sec 139AA and Sec139AA(2) does not satisfy the narrow tailoring and balancing of interest part of the test but the court did not go into the scrutinyThe test of ‘narrow tailoring’ is difficult to meet considering that it makes Aadhar compulsory for 99.6% Indians for addressing miniscule duplication (0.04%) of PAN. Also, the test of ‘balancing of interest’ is not satisfied because invalidation of PAN which is necessary for doing multiple financial transactions besides paying Income Tax is akin to ‘civil death’ and is a vastly disproportionate to the objective of tackling black money through Aadhar-PAN seeding. However, the court while laying down the test of ‘proportionality’ did not apply it and surprisingly, upheld the constitutionality of Sec 139AA and Sec 139AA(2).

In deciding if Sec 139AA violated any of the fundamental rights guaranteed under Part III of the Constitution, the court got blinsided by the policy promises or the desirabilability of mandatory Aadhar regime. Either way, the court would have done well to remember that to hold something desirable or part of policy process is not to hold it constitutional also.


Judicial Non-Engagements – On Compelled Speech and Colourable Legislation

This judgement was also marked by complete non-engagement with some of the contentions raised during the oral hearings. This is worrisome indication for the adversarial tradition where judgment is given only on the basis of legal arguments, facts presented by both parties. This judicial non-engagement was with petitioners’ argument on ‘compelled speech’ and ‘colourable exercise of power’. Drawing parallel with Bijoi Emmanuel case ,the petitioner argued that compelled extraction of biometrics in Aadhar effectively amounted to compelled speech, which is a violtion of Art 19(1)(a).

“Also, the government’s act of making Aadhar mandatory through backdoor while it remains voluntary under the core legislation is a colourable exercise of power. This approach of non-engagement reflects the tradition of judicial laxity at best and complete non-accountability at worst where presumably valid arguments were ignored in aid of court reaching its judgment.”

This case is a big win for the State and the pro-Aadhar group as it made Aadhar mandatory for the purpose of Income Tax regime but the nature of judcial reasoning applied will also have significant impact on other challenges to Aadhar regime. Regardless of the side that won the case, this judgment is worrisome for the way the court reached its judgment. In a case, where one side was restricted from arguing, their claims dissected, while the other side’s words were taken as gospel truths, it seems that the judiciary failed to act as neutral umpire.



Satya Prasoon is a lawyer with the Centre for Law and Policy Research, Bengaluru and the image credits to Mr. Hemant Morporia