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Section 57: Why Aadhaar can’t be used as authentication by private companies

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By Prasanna S

Among people who are trying to decode the 1448-page long Aadhaar judgment delivered recently, there has been some debate over what the majority judgment says about Section 57.  Section 57 of the Aadhaar Act is the provision in the Act that allowed for use of Aadhaar authentication and E-KYC by private companies. As someone who followed the Aadhaar case, the arguments and the judgment closely, this is my two paise.  

Section 57 of the Act says this:

“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.”

Here is what the majority judgment says in Page 560 of the judgment on Section 57:

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“(a) It can be used for establishing the identity of an individual ‘for any purpose’. We read down this provision to mean that such a purpose has to be backed by law. Further, whenever any such “law” is made, it would be subject to judicial scrutiny.”

(b) Such purpose is not limited pursuant to any law alone but can be done pursuant to ‘any contract to this effect’ as well. This is clearly impermissible as a contractual provision is not backed by a law and, therefore, first requirement of proportionality test is not met.”

“(c) Apart from authorising the State, even ‘any body corporate or person’ is authorised to avail authentication services which can be on the basis of purported agreement between an individual and such body corporate or person. 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.”

Four conclusions emerge

  • There cannot be any use of Aadhaar authentication unless it is for a service, subsidy or benefit and a notification has been duly issued under the Section 7 of the Act.
  • There cannot be any use of Aadhaar authentication or E-KYC for any purpose unless such purpose has been validly legislatively provided for – for example Section 139AA of the Act. (Such legislation may also be subject to scrutiny for proportionality, reasonableness and manifest arbitrariness if it is so passed.)
  • There cannot be any use of Aadhaar authentication or E-KYC by private companies for any purpose whatsoever.
  • Private companies cannot become be requesting entities to use Aadhaar authentication services under any circumstance.  

Some FAQs

1. Is use of Aadhaar authentication by private companies permitted on a voluntary basis?

One question that has often been asked is that whether private companies can allow for voluntary E-KYC. The answer is an unequivocal “No”. If voluntary use was permitted, the portion relating to “contract” needn’t have been struck down. Contract is by definition a voluntary creation.  Further, the reason about commercial exploitation of personal information would be valid even for voluntary use and when that has been cited as a factor in striking down the provision in Section 57 relating to “Body Corporates,” one cannot just wish it away and act like that reasoning is not present in the judgment.   

2. Is the use of Aadhaar authentication permissible by private companies after a legislation provides for the same?

Another question that is on many people’s minds is whether private companies can use Aadhaar E-KYC if a law provides for such purpose. The answer is again a ‘No.’ The factor of probable commercial exploitation would affect the proportionality of such a law too.

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One must also keep in mind that one of the reasons that the majority opinion upheld the Aadhaar Act as a Money Bill was that it did not feel the need to deal at length with the objection of Section 57 and body corporates not having any nexus with consolidated fund and Section 7 of the Act, because it had already struck it down on that aspect. It is therefore rather clear that it did mean that there be a blanket prohibition on private companies using Aadhaar authentication. There has been some suggestion that private companies use may be legislatively provided for by bringing in a slew of new laws, each tailored for specific purposes. The judgment certainly does not allow for it, and all such laws are sure to be struck down on the test of proportionality as long as the findings in and the precedent of this judgment holds.

***

About the author: Prasanna S is a Delhi based advocate who assisted the Petitioners in the Aadhaar case. Tweets at @prasanna_s

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