This is a record of the proceedings in the Supreme Court bench hearings on the Constitutional validity of Aadhaar, which began on Feb 13, 2018. You may read the previous days’ proceedings here: Day 1Day 2Day 3Day 4Day 5Day 6Day 7Day 8Day 9, Day 10, Day 11, Day 12, Day 13.

Senior Advocate Arvind Datar to commence his arguments.

Senior Advocate Shyam Divan brought the attention to the court to the order passed on 15th December, 2017 regarding clarity on the deadline of 31st March for linking. Both Mr Divan and Mr. Datar urged the Court for interim directions. The Chief Justice promised to hear them when the Attorney General arrived.

Mr. Datar resumed his arguments, saying no counter has been filed in the case of his petition. He listed his arguments beginning with the Aadhaar Act being passed as a Money Bill.

Mr. Datar argued that amended PMLA rules- rule 9 are violative of Article 14 of Constitution. Mr. Datar said he challenged the bank-aadhaar linking. He said he challenged all notifications under Section 7, Prevention of Money Laundering Act (PMLA) Rules, Section 139AA of IT Act. He read out RBI’s Master directions on KYC from 2016. He argued that the new PMLA rules are contrary to RBI circulars issued earlier. He submitted that the RBI circular is a complete circular passed under the PMLA act itself wherein you can open accounts using any of the 6 IDs given in the circular. However, the new PMLA rules make it mandatory to use only Aadhaar.

Justice Bhushan wanted to know how that makes the circular bad in law. Justice Chandrachud asked if the RBI was present before the Court. Mr. Datar answered in the affirmative.

Mr. Datar referred to the logic of the previous RBI master circular and said that it occupies the field in relation to KYC.He asked that when the option to use any of the 6 IDs is already there, can only one ID be made compulsory under other rules?

Mr. Datar read the PMLA rules. He said that Aadhaar and PAN or Form 60 are necessary to be provided for bank accounts. He read the PMLA Rule that makes Aadhaar mandatory to be linked to the bank account and a mandatory prerequisite for opening a new account. He said that Aadhaar is only required to establish the identity of the individuals, not the companies. Aadhaar could not be asked for the individuals in the company.

Mr. Datar pointed to how Rule also makes it mandatory to collect Aadhaar numbers of managing personnel of companies and trusts.

(The bench rose for Lunch)

Session 2

Mr. Datar continued saying the impugned rules say that if the Aadhaar number is not provided then the accounts will stop operating. He called the provision making account inoperational as draconian. He said that as per the rules if a person is holding a bank account, he’ll have to submit Aadhaar. If he doesn’t, his account will become inoperational till such time the person submits Aadhaar.

Mr. Datar stated the grounds of his challenge:

  • It is in violation of SC order which made Aadhaar voluntary and limited to only specific schemes.
  • Violates Article 300 of the Constitution. Deprives a person of his property.

Justice Chandrachud remarked that they are not forfeiting the property. The amount in the account will not get forfeited. Mr. Datar argued that they are depriving him of the property- deprivation maybe temporary or permanent.

Mr. Datar said that even if Aadhaar Act is assumed valid, the enrolment form says that Aadhaar is free and voluntary. But now Aadhaar has been made mandatory for everything. He provided examples and argued that the Rule is ultra vires (beyond the authority of) of Aadhaar Act, which is completely a voluntary scheme. He also referenced the Supreme Court orders.

Mr. Datar talked of the “delivery to deliverance” aspect of Aadhaar – how it is necessary from cradle to grave. Justice Chandrachud referred to Aadhaar being required for marriage certificates. Mr. Datar again refers to the Rule being ultra vires Aadhaar act. Mr. Datar said that Aadhaar is entitlement. “I am entitled to passport. I may or may not obtain a passport.”

Mr. Datar argued that the Aadhaar Act gives a choice of Aadhaar, whereas the PMLA rule unconstitutionally classifies people based their legitimate choice and discriminates between them. That is impermissible under the law. He said that there is a class of people who don’t need an Aadhaar. The Law recognises two categories of people – who want an Aadhaar and who do not want an Aadhaar. There’s a choice. But not so in case of PMLA rules. A person runs a risk of getting his bank account closed.

Mr. Datar describes how by exercising a perfectly statutorily valid choice of not taking Aadhaar, he runs the risk of his bank account becoming inoperable.

Mr. Datar remarked that it was rare to find a statute that violates every possible facet of article 14 of the Constitution and said that this PMLA rule is one such because of classification, lack of equal treatment and manifest arbitrariness tests.

Justice Chandrachud said that the disability to be able to operate bank accounts doesn’t occur from Aadhaar Act. It does in case of PMLA rules.

Mr. Datar said that Aadhaar is supposed to be ‘some kind of national detergent’ which will get rid of the fake PAN cards and fake bank accounts. Elaborating his objections based on Article 14 of the Indian Constitution further, he begins by pointing out the absurdity in saying everyone in India is a sea of fakes but for Aadhaar!

He read from the case of Lal Babu Hussein & Others vs Electrol Registration Officer &  Others in which the Supreme Court said that the Electoral officer asking residents of a particular area en masse to prove their identity was unconstitutional. In that case, the EO went on the assumption that all inhabitants of a particular area were foreigners, notwithstanding their name appearing in earlier electoral rolls.

Mr. Datar argued that a group cannot be made suspects. He questioned the reason behind linking Aadhaar with bank accounts.

The Chief Justice paraphrased Mr. Datar’s argument to ask if the entire argument is just about not needing an additional process of identification in light of there already existing an identification norm such as the KYC norm.

Mr. Datar said that there was no reason why one billion people were being asked to link their accounts to Aadhaar. There must be some purpose.

Justice Chandrachud had wanted Mr. Datar to refer to Section 73 of PMLA and wanted to know whether the Rules are intra vires that provision.

Describing the PMLA Act and its objective, Mr. Datar said the rule had no nexus with the Act. PMLA has nexus with bank accounts only for the purpose of “proceeds of crime”. He said that any rule made must have a nexus with the Act. He said that as far as Rule 9 regarding Aadhaar was concerned, it has no nexus with the Act. He said that it is not the intention of the government of India that every transaction from every account should be reported. It is only in connection with the money laundering that the Act has nexus with accounts.

Mr. Datar then read Justice Nariman’s judgment in Cellular Operators Association vs TRAI (call drops case) and how the Supreme Court struck down call drop charges because that regulation was inconsistent with the basis of an earlier regulation that recognised call drops to not be always an operator fault.

Justice Chandrachud responded saying that that judgment arose in the context of two delegated legislations under the same power, but in this case, there was one circular under Banking Regulation act, the other under PMLA and still another under the Aadhaar act.

Mr. Datar cited another precedent the Lord Krishna Sugar Mills & Another vs The Union of India & Another in which two different laws were involved.

Mr. Datar said that the RBI circular, in this case, refers to section 73 and Rule 9 of the PMLA maintenance of record Rules. He said that the cellular operators judgment is squarely applicable in this case. He asked the court to look at the source of power. He said that the circular derives its authority from both PMLA rules and Section 73 of the Aadhaar Act.

Justice Chandrachud said that in the case of the RBI releasing the circular, the objective was not money laundering but that RBI wanted to establish the identity of clients and monitor the accounts. He pointed out how under 2017 Rules authority to regulate banking records is taken away from RBI and assumed by the central government.

Mr. Datar said that he would finish his arguments by lunch on the next day. He requested the Court to consider the interim order. The Attorney General asked the Court to consider it in the last week of March.

The bench rose for the day. Arguments would commence on the 7th of March 2018.

Summary of hearing based on tweets by Prasanna S and SFLC