Even before the dust has settled on the Aadhaar judgment, questions have arisen on the interpretation and the implication of the Supreme Court striking down section 57 of the Act, insofar as it applies to private entities.

While there has been some speculation about whether a new law could be enacted to allow use of Aadhaar by private players again, we believe that on a holistic reading of the judgment, it is clear that all five judges agree that the use of Aadhaar authentication by private entities (“body corporate or person”) is now unconstitutional; and hence, it cannot be resurrected through legislation.

Section 57 permitted private entities, in addition to the state, to use Aadhaar numbers for “establishing the identity of an individual for any purpose”, pursuant to law or any contract to this effect, subject to the requirement of informed consent under section 8 and protection of information under chapter VI of the Act.

The petitioners specifically challenged the idea of authentication by private persons; authentication pursuant to contract; and authentication for “any purpose”. In turn, the respondents argued that section 57 was an enabling provision, expanding the choice for Aadhaar number holders.

However, on each of the three grounds, the challenge by the petitioners succeeded, with the majority reading down/striking down section 57 as unconstitutional.

More importantly, the court has been unanimous in reaching this conclusion. The constitutionality of section 57 was strenuously argued during the 38 days of hearing, and each of the three opinions gives findings regarding the same.

The majority opinion authored by justice Sikri, specifically holds that the use of authentication by private persons is disproportionate, in part because it “enables commercial exploitation” of biometric and demographic information by private entities (para 447(4)(h) at page 560).

In his opinion, justice Chandrachud strikes down section 57 as being too broad and manifestly arbitrary, apart from leading to commercial exploitation of an individual’s data and possible profiling of the individuals themselves (paras 241-245). He thus holds it to be in violation of Articles 14 and 21 of the Constitution. Justice Bhushan, in his separate opinion, strikes down section 57 to the extent it permits use of Aadhaar by the state or private entity pursuant to a contract (para 284).

It is thus clear that the court ruled that, (a) identity may only be established by Aadhaar-authentication for a purpose authorised by law; (b) not by contract; and (c) any authentication by body corporate or person is unconstitutional.

Private parties may find hope in justice Sikri’s opinion

Some private parties may hope that the observations of justice Sikri in para 367 of the majority opinion comes to their rescue, and that a new law could permit private persons to use Aadhaar authentication to establish identity. In para 367, justice Sikri comments, “Respondents may be right in their explanation that it is only an enabling provision….. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.”

The parliament may enact a law specifying the purposes for which Aadhaar numbers may be used by the state, which will be subject to judicial scrutiny. However, for the reasons elaborated below, any law extending this facility to private persons would be tantamount to re-enacting a law that has been struck down, and would be held to be unconstitutional.

First, there is less to the somewhat equivocal carve-out in para 367 than meets the eye. For instance, it is not mentioned whether the authenticating agency to whom an individual is voluntarily offering Aadhaar for identification, is part of the state or not.

Second, and more importantly, justice Sikri’s observations in para 367 have to be read in context. While noting that at first blush, section 57 may appear innocuous and even empowering for individuals, the majority opinion clearly holds a part of section 57 to be disproportionate (para 366).

After analysing the parties’ contentions, it holds, “that portion of section 57…which enables body corporate and individual to seek authentication is held to be unconstitutional.” (paras 219(e) and 447(1)(d)). This is further clarified in para 412, where it reiterates that a part of section 57 has already been declared unconstitutional, “whereby even a body corporate in private sector or person may seek authentication from the Authority for establishing the identity of an individual.”

Third, it would appear unlikely that after conclusively holding that the use of Aadhaar by private parties is unconstitutional, the court would leave open a window to render its holding completely nugatory. If individuals could voluntarily give Aadhaar numbers to private parties – which was the existing situation under contracts – why would section 57 be struck down in the first place? After all, the majority upholds the Aadhaar Act on the premise that authentication is proportional only when used for state purposes to deliver services socio-economic benefits that are linked to human dignity. This analogy does not extend to private/commercial interests.

Finally, the majority’s conclusion that Aadhaar is not a Money Bill is fundamentally premised on the finding that section 57 does not represent an extension beyond the parliament’s stated objective of ensuring targeted delivery of social welfare benefits under section 7. If the role of private parties within the Aadhaar infrastructure can be re-introduced through a law, then the basis of the court’s findings on Money Bill will fall.

Aadhaar use by private entities cannot be cured by legislation

Thus, unlike the court’s proposed way out to amend the regulations pertaining to metadata or its exhortation to the government to amend section 47, the use of Aadhaar by private entities does not appear to be a defect that can be cured by legislation. The court has not stated that private parties, subject to rigorous regulation, may be permitted to use Aadhaar authentication.

Needless to say, a lot of private companies that had built business models over the last couple of years based on Aadhaar authentication will suffer some short term pain in adjusting to the brave new world where the Constitution prevails over business interest. In fact, the very financial future and “function creep” of the Aadhaar Project will be substantially curtailed.

However, businesses should consider this an opportunity to innovate and welcome “creative destruction”, instead of trying to lobby to re-introduce section 57 through a backdoor. Meanwhile, they should delete all Aadhaar related data that is being held by them, in line with the court’s judgment.

Vrinda Bhandari and Rahul Narayan are advocates who appeared for some of the petitioners in the Aadhaar case.