If Supreme Court made PAN-Aadhaar partly optional, how can a bank-Aadhaar link be mandatory?

The rules were notified on June 1, but have only become news a week after the SC’s PAN-Aadhaar judgment.

Exactly a week after the Supreme Court gave some concessions to people who choose not to get Aadhaar, a 12-digit biometric identity number, news has emerged of the government making the unique identity mandatory for all bank accounts. The PTI reported on Friday that new rules issued by the finance ministry require existing bank account holders to submit Aadhaar details to banks by December 31, 2017, failing which the accounts will “cease to be operational”. Immediate comments online saw this as a way for the government to get around the Supreme Court’s order, which stopped the government from canceling the Permanent Account Numbers of those without Aadhaar.

Except it cannot possibly be. Even though the news about the bank account linking mandate emerged on June 16, a week after the Supreme Court’s order, the rules themselves were notified on June 1. The gazette notification referring to it confirms that the rules were issued a whole week before the Supreme Court’s judgment in the PAN-Aadhaar case.

So, while the order may certainly be seen as a cynical attempt by the government to force Aadhaar on unwilling residents, even as the Supreme Court is set to hear challenges regarding the right to privacy, it cannot have been so prescient as to predict the June 9 judgment eight days prior.

When were the rules issued?

The very first question to ask is not about the content of the rules, but the timing. It seems extremely odd that rules forcing a large section of the population to link their Aadhaar to bank accounts, or risk losing those accounts altogether, would go unnoticed for more than 15 days. Indeed, it says more about the messaging efforts of the Indian government that important rules notified on June 1 would only be noticed on June 16. This is not one of those industry-specific notifications that only needs to go out to stakeholders. The new rules could potentially aftect huge numbers of people and ought to have been clearly and cogently publicised.

Of course, one could also ask if this was deliberate. News of the rules, which were promulgated on June 1, did not come out until exactly a week after the Supreme Court judgment. Why wait so long?

Does this violate fundamental rights?

The Supreme Court’s judgment covered the question of whether the government can mandate a linking of Aadhaar to PAN, at the risk of having the PAN deactivated for those who do not link the two. The Court decided the government was in its rights to ask for an Aadhaar-PAN link, but the proposed punishment of deactivating PANs for those who don’t link was too harsh. The linking had been challenged on a number of questions, including whether cancelling PAN goes afoul of the fundamental right protecting our freedom to carry out any occupation.

The court concluded that, since it is deeply difficult to carry out any transaction without a PAN card, any punishment involving canceling of PANs would violate that fundamental right, which comes under Article 19(1)(g) of the constitution.

“For doing many activities of day to day nature, including in the course of business, PAN is to be given. Pithily put, in the absence of PAN, it will not be possible to undertake any of the aforesaid activities though this requirement is aimed at curbing the tax evasion. Thus, if the PAN of a person is withdrawn or is nullified, it definitely amounts to placing restrictions on the right to do business.”    

The Supreme Court issued a stay on the PAN-Aadhaar linking requirement for those who do not have and do not want Aadhaar, saying it was too harsh a punishment, accepting the argument that it amounted to “civil death”.

Now if canceling PAN amounts to “civil death” and is a violation of Article 19(1)(g), wouldn’t the effective deletion of a bank account be at least equal?

To what end?

The Supreme Court established in the PAN-Aadhaar judgment that the need to weed out fake PANs was a strong enough reason to suspend a fundamental right. But that only came after several days of hearing and a concerted effort by the government to portray PAN-Aadhaar linking as a panacea for the menace of fake PAN cards.

Clearly, the government sees the new Aadhaar notifications as being useful to battle money laundering, which is the Act under which the rules have been issued. Authorities will presumably point to the ability to track large transactions as being a key way of following money no matter where it goes.

Leave aside the matter of privacy, which forms the base of the petitions by the Supreme Court when it set up a bench. The question that arises from these notifications is the same as those that were not even really answered by the Supreme Court in the PAN-Aadhaar case: Is the punishment – making a bank account non-operational – proportional to achieve the gains that come from Aadhaar-bank linking, especially when a fundamental right is violated?

Parliament vs executive

Another question that comes up, based on the Supreme Court order, is whether the executive has the power to make decisions like this. The government has for some time now insisted that Aadhaar is voluntary for residents, and the Aadhaar Act says so too. The Income Tax rules that were put into the Finance Bill earlier this year made Aadhaar mandatory for filing returns, meaning it was voluntary for some and mandatory for others.

The Supreme Court concluded that this was not a contradiction, in part because Parliament is empowered to make laws that control different things. In the Aadhaar Act, it is clear that the UID is voluntary for welfare, but the I-T rules make it mandatory for income tax returns. In this case, however, it is the executive promulgating rules based on a law that was passed by Parliament. Aadhaar is not mentioned as mandatory in the text of the law that made its way through Parliament. Does the executive have the power to bypass the legislature this way?

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