The Constitutional Challenge to S. 139AA of the IT Act (Aadhaar/PAN): Petitioners’ Arguments

Last month, through an amendment to the Income Tax Act, Parliament made it compulsory for all taxpayers to quote their Aadhaar numbers while filing their return of income (or while applying for a new PAN number). Under the new Section 139AA of the IT Act, the consequence of not complying with this was an invalidation of the individual’s PAN number. This, in turn, would have a number of serious consequences, affecting an individual’s ability to pay her taxes, as well as being blocked from undertaking a number of transactions (such as buying a motor vehicle, or opening a bank account), all of which require a PAN number. In short, Section 139AA effectively required tax-paying individuals to get an Aadhaar Card, on the pain of visiting severe disabilities upon them in case of non-compliance.

On this blog, we have covered some of the constitutional problems with the Aadhaar scheme (which involves the taking of an individual’s biometric details, iris scan, and demographic information, ostensibly for the purpose of better authentication), the government’s conduct in having the Aadhaar Act passed as a money bill, and the Supreme Court’s continuous evasion of the issue by refusing to hear the pending constitutional challenges. Readers will recall the following facts: on 11th August 2015, when Aadhaar was still an executive scheme, three judges of the Supreme Court had referred the constitutional challenge to a larger bench, on the basis that the constitutional status of the fundamental right to privacy was in some doubt; in the meantime, the Court stipulated that Aadhaar could not be made mandatory for welfare schemes. The Constitution Bench assembled once more in October 2015 to modify that order in some respects. After that, the case has not been heard. In the meantime, Parliament passed the Aadhaar Act, which authorised the State to make Aadhaar mandatory for availing of certain benefits or subsidies. Since the passage of the Aadhaar Act, Aadhaar has been made mandatory for a wide range of goods and services, including midday meals. It is in this context that Section 139AA of the IT Act came into being: a statutory amendment that sought to (effectively) make Aadhaar compulsory for taxpayers.

Section 139AA was challenged before the Supreme Court. The Petitioners, led by senior counsel Arvind P. Datar and Shyam Divan, argued their case before a two-judge bench, over three days, followed by two days of arguments by the Union of India. Mr Datar is due to reply tomorrow, after which the hearing will conclude.

In this post, I will attempt to summarise and contextualise the key points of challenge.

Privacy Not Argued

If a case comes to the Supreme Court where the issues involved are substantially similar to another case that is already pending, the Court “tags” the latter case with the former, and hears the two together. This created a threshold problem for the Petitioners. The constitutional problems with Aadhaar remained the same, whether it was a challenge to the Aadhaar Act itself, or to the Income Tax Act making Aadhaar mandatory to file returns: basically, an alleged violation of the right to privacy. However, that question had been referred to a larger bench on 11th August 2015, and had not yet been heard. Consequently, it was a “pending case”, and according to convention, the Court hearing the challenge to the Income Tax Act would be obliged to “tag” it with the pending proceedings before the larger bench. So Petitioners had a choice: insist on their right to argue privacy, and have the case “tagged” with the pending challenge; or give up the argument on privacy, and attempt to convince the Court that Section 139AA was unconstitutional on other grounds.

Perhaps in view of the fact that the Supreme Court has effectively buried the Aadhaar challenge (three successive Chief Justices have refused to list it for hearing, despite multiple “oral mentionings” asking them to do so), Petitioners chose to go ahead with the challenge to S. 139AA without arguing privacy. This was made clear at the beginning of the hearing by Justice Sikri, who pointed out that there was no stay on Aadhaar in the case pending before the larger bench; at this, both Mr Datar and Mr Divan agreed that they would only argue the 139AA challenge on other grounds.

While Justice Sikri, sitting as part of a two-judge bench, was entirely correct in what he said (indeed, there was nothing else he could have said), the Supreme Court’s institutional disingenuousness here needs to be called out very clearly: as I have detailed in my post on judicial evasion, the constitutional challenge to Aadhaar Act has been pending for one year and eight months, with the Court – or rather, the Chief Justice – simply refusing to constitute the bench to hear it. In the meantime, the government has gone full steam ahead to create a fait accompli situation where the challenge becomes academic. Section 139AA is part of that broader program. By not allowing Petitioners to argue privacy on the ground that it was part of a pending challenge in which no stay had been granted because it had simply never been heard, the Court was – effectively – using its own refusal to hear the case as a reason to make the Petitioners fight this battle with one arm tied behind their backs!

The Arguments of Mr Arvind P. Datar

No Indirect Overruling of Judicial Orders

Mr. Arvind Datar’s first argument was that Section 139AA of the Income Tax Act amounted to an indirect legislative overruling of prior judicial orders stipulating that Aadhaar could only be voluntary. While Mr Datar conceded that Parliament was entitled to overrule a judicial decision or order by legislating to take away its very basis, he drew a distinction between direct overruling (by taking away the basis of a court order), and indirect overruling (the latter, he argued, was impermissible). Relying upon the judgments of the Supreme Court in Madan Mohan Pathak vs Union of India, Indian Aluminium Co vs State of Kerala, and Janapada Sabha Chindwara vs Central Provinces Syndicate Ltd, he argued that, in the present case, had Parliament simply passed a law mandating that every individual must have an Aadhaar Number, that would have been a legitimate response to the Court’s orders; however, while the Aadhaar Act continued to insist that getting Aadhaar was voluntary, Parliament had chosen to make it mandatory in a backdoor fashion, by inserting penal consequences for not having Aadhaar in the Income Tax Act. And in case of any doubt, “we should adopt an interpretation which upholds… rights.”

Article 14

Mr Datar argued that Section 139AA violated Article 14 of the Constitution because it drew an arbitrary distinction between assessees who were individuals (and therefore compelled to get an Aadhaar Card), and non-individual assessees (such as an HUF, or a company). If the objective of introducing Section 139AA was to use Aadhaar to check black money and fraud (which the Union claimed that it was), then the distinction between individual and non-individual taxpayers bore no rational nexus to the objective, and fell foul of Article 14. T

The bench asked the natural question: given that non-individuals could not, by definition, obtain Aadhaar cards, wasn’t an Article 14 challenge misconceived to start with? In other words, the Aadhaar Card requirement was a way to check black money and fraud specifically by individual assessees. To this, Mr Datar responded by arguing that there were twelve categories of assessees under the Income Tax Act. Section 139AA picked out one class (individuals), and imposed a burden upon them. This act of disadvantaging one class could only be justified under Article 14 if it had a rational nexus with a legitimate goal; but given that black money and fraudulent transactions were not only crimes committed by individuals, there was no rational nexus between the objective and the act of singling out individuals and making them suffer.

Mr Datar also argued that there was no evidence to show that compulsory Aadhaar would actually fulfil the goal of eliminating black money and preventing fraud (or “shell companies”). In fact, the UIDAI’s own statistics showed that there were likely many duplicate Aadhaar Cards; on the other hand, only 0.4% of all PAN Cards had been shown to be duplicate. Consequently, the State had no evidence to show that a shift from PAN to PAN + Aadhaar would actually serve the goal of eliminating black money and fraud.

Article 19(1)(g) 

Mr Datar argued that an individual without a PAN Card was prohibited from engaging in many transactions that were absolutely basic to life in contemporary society. These included buying or selling a motor vehicle and opening a bank account. A cancelled PAN effectively amounted to a “civil death”. It was, therefore, a violation of the freedom “to practise any profession, or to carry on any occupation, trade or business”, guaranteed by Article 19(1)(g) of the Constitution.

Once it was established that Article 19(1)(g) had been infringed, the burden shifted to the State to show that, under Article 19(6) of the Constitution, the restriction was reasonable, and in the public interest. In Modern Dental College vs State of M.P., a Constitution Bench of the Supreme Court had held that the correct test to apply under Article 19(6) was the test of proportionality. In a judgment authored by Justice Sikri himself, the Court held that “proportionality” involved a showing that the means chosen to achieve the “public interest” goal were themselves narrowly tailored; that is, Article 19(6) could not save a statute if it could be shown that some other method, which infringed rights to a lesser degree, could achieve the same goal. Mr Datar argued that – once again – in view of the fact that only 0.4% of all PAN Cards were found to be duplicate, and in view of Aadhaar’s own, widely publicised failings (using the UIDAI’s own data), it could not be argued that compulsory Aadhaar was a “proportionate” restriction upon the right under Article 19(1)(g).

Colourable Exercise of Power

Mr Datar concluded by arguing that Section 139AA amounted to a colourable exercise of legislative power. Solemn undertakings had been given by the Union of India to the Supreme Court that Aadhaar would remain voluntary. Aadhaar remained voluntary under the parent statute (the Aadhaar Act), but there was now a back-door attempt to make it mandatory through the Income Tax Act. In fact, the Statement of Objects and Reasons of the Aadhaar Act themselves made no mention of black money or fraud; Mr Datar argued that if Aadhaar was to be used for that purpose, then surely there would have been some indication of that in the parent statute. All these factors combined pointed to a clear colourable exercise of power. Mr Datar submitted that Section 139AA should accordingly be struck down as unconstitutional.

The Arguments of Mr Shyam Divan

Collision Between the Aadhaar Act and the Income Tax Act

Mr Shyam Divan argued that there was a “collision” between the Aadhaar Act and the Income Tax Act. The former made it clear that Aadhaar was to be a voluntary scheme. While the Government could make it mandatory for the purposes of availing of subsidies, it could not compel people to get an Aadhaar Number, simpliciter. The Income Tax Amendment, however, effectively compelled people to part with their biometric information and iris scans, on the pain of penal consequences. In other words, Section 139AA made mandatory what the Aadhaar Act guaranteed would be voluntary.

In response to the Bench’s observation, that surely it was open to Parliament to create two different statutory regimes – one in which Aadhaar was voluntary, and the other in which it was made mandatory for the purposes of paying Income Tax – Mr Divan argued that the Aadhaar Act and Section 139AA could not be viewed in isolation in such a manner. The Aadhaar Act was the parent statute: and everything in the Aadhaar Act suggested that, from the moment of enrolment, it was a purely voluntary exercise. Now, you could not engraft a scheme whose very basis was voluntariness and free consent, into the Income Tax Act, and make it mandatory. It was in that sense that the procedures under the Aadhaar Act and the Income Tax Act were “in collision”.  Mr Divan therefore invited the Bench to read down Section 139AA of the IT Act by interpreting the word “shall” as “may”; or, in other words, convert the mandatory requirement under 139AA into voluntariness, in order to bring the Aadhaar Act and Section 139AA into harmony.

Article 14

Mr Divan’s case under Article 14 was different in important respects from Mr Datar’s. While Mr Datar had drawn a distinction between individual and non-individual assessees, Mr Divan drew a distinction between individual assessees who consented to getting an Aadhaar Card, and other individual assessees who didn’t. He argued that Section 139AA drew a distinction within this homogenous class of persons, and disadvantaged the latter. Now, in view of his previous submission – that the parent Aadhaar Act made it clear that Aadhaar was voluntary – drawing a distinction between those who had chosen to get an Aadhaar Card, and those who would now be required to get an Aadhaar Card to pay their taxes, and placing a burden upon the latter – constituted ex facie discrimination. In other words, the statute’s very purpose was discriminatory, on its face (which, according to the judgment of the Supreme Court striking down S. 6 of the DSPE Act, was impermissible). Hence, there was no need to go into questions of classification and nexus: the amendment was presumptively unconstitutional under Article 14.

Bodily Integrity

Mr Divan argued that biometric information and iris scans belonged to the individual. They were, effectively, part of the individual’s body. He cited a range of thinkers, from Hobbes and Locke on the one hand, to Salmond and Rawls on the other, to argue for the individual’s absolute ownership of her body, and her right to bodily integrity under Article 21 of the Constitution. What, he asked, did Article 21 protect, if it did not protect the body?

Justice Bhushan pointed out that at the time of issuing a passport, similar information was taken from the individual. Mr Divan argued, however, that while it was permissible to take such information for limited and narrow purposes (for instance, for the purposes of identifying an individual in case of an emergency while she was abroad), and where there was a compelling State interest, those conditions were not satisfied in the present case. Mr Divan also invoked the 1920 Identification of Prisoners Act to argue that even in pre-Constitutional, colonial statutes, information that had to do with the body was collected only in very specific circumstances, and only for a very narrow set of purposes, where it was absolutely necessary to do so. Even a refusal would only lead to an adverse inference. That manner of necessity had not been demonstrated in the present case – especially in light of the fact that Aadhaar was suffering from numerous problems of duplication and public leakages (instances of which were cited to the Court).

In sum, Mr Divan argued that fingerprints and iris scans belonged to the individual, as integral parts of her body. They could not be “nationalised” or “expropriated” by the State without express consent, unless there was a compelling State interest, and the infringement was narrowly tailored. The argument of compelling State interest and narrow tailoring may justify, for instance, the taking of DNA or blood samples in certain limited circumstances (this was in response to a question from Justice Bhushan), but certainly did not permit the kind of 24/7 tracking system established by Aadhaar. What Aadhaar was doing, Mr Divan argued, was fundamentally changing the nature of the relationship between the individual and the State; it was shifting the balance of power between individual and State to the extent that it ended up betraying the promise of the Constitution to establish “limited government”. The Constitution, he argued, was not a “charter of servitude“; it envisaged free individuals, whose bodies could not be invaded without their express consent. He relied upon the judgments of the Supreme Court in Sunil Batra vs Delhi Administration, NALSA vs Union of India and Aruna Shanbaug vs Union of India, to highlight the importance of bodily integrity under Article 21 and the constitutional scheme.

Personal Autonomy and Informational Self-Determination

Mr Divan argued that in the digital age, the right to informational self-determination had become a crucial facet of the right to personal autonomy, and was protected under Articles 14, 19, and 21 of the Constitution. The principle of informational self-determination – which had its origins in German constitutional doctrine, with the Population Census Case, and had now been accepted in both Canadian and South African Constitutional law – stipulated that an individual had the right to limit what she put out to the world about herself. Its basis was not privacy, but the principles of dignity and personal autonomy, both of which were long recognised under Indian constitutional doctrine. Informational self-determination was essential for the free development of the individual. Moreover, it was not simply an individual right: likewise, the free development of the individual was essential to constitute a free and democratic society, and a free and democratic communicative order.

In the case of Aadhaar, Mr Divan argued, the principle of informational self-determination was specifically compromised because data was required to be handed over to private parties. These private parties’ only accountability was in the form of a “Memorandum of Understanding” with the government; there were minimal data protection safeguards imposed upon them, and indeed, 34,000 such independent operators had been blacklisted by the government. In fact, the MoU’s allowed the registrars of these entities to retain biometric data with them, something that could have potentially devastating consequences. In sum, compelling the handing over of personal data to private parties with such minimal safeguards over their functioning amounted to “a complete destruction of personal autonomy [and] a debasement of… [the] right to informational self-determination.”

Compelled Speech

Mr Divan then argued that compelled extraction of demographic information in Aadhaar – and even more, compelled extraction of biometric data and iris scans – effectively amounted to compelled speech, which was an infringement of Article 19(1)(a) of the Constitution. In the case of Bijoe Emmanuel vs State of Kerala, the Article 19(1)(a) rights of Jehovahs Witnesses to not be compelled to sing the national anthem had been recognised by the Supreme Court. The Jehovahs’ Witnesses, argued Mr Divan, were willing to stand up and respect the national anthem, but not to sing it; similarly, non-Aadhaar tax payers were willing to respect the law of the land and pay their taxes – only not by parting with their biometric and demographic information.

Proportionality

Mr Divan reiterated Mr Datar’s argument that, in view of the Government’s own data that only 0.4% of PAN Cards were duplicates, this move was simply disproportionate.

Legislative Competence 

Mr Divan argued that there was no legislative entry in the Seventh Schedule that allowed for a right of “eminent domain” over the individual body. Consequently, the State was barred from “nationalising” the individual’s fingerprints and biometric data, except in the narrowest of circumstances. At best, the State could act as a “trustee”, or a “fiduciary”, of a person’s property in themselves. It could not compel beneficiaries to permanently part with it, especially in view of the fact that giving up one’s fingerprints and iris scans was a permanent act. Under the Constitution, the State could not simply take that data and store it in a centralised database.

Conclusion

Mr Divan ended by arguing that Section 139AA had serious impacts on the freedom of trade and commerce, the freedom of speech and expression, and the freedom of association (one could hardly form associations without a bank account). He argued that what the Union of India was doing was effectively a bait-and-swith, in the mould of Humpty Dumpty in Alice Through the Looking Glass, who had stated that a word meant exactly what he said it meant: the Union was doing something similar with the “mandatory voluntary” nature of Aadhaar.

In view of all of that, he requested the Court to strike down or read down the Section. However, he had an alternative prayer as well: in case the Court felt that the privacy and non-privacy issues in the case were inseparable, then they could refer and “tag” the case with the pending hearing; however, in view of the fact that the situation would become irreversible after July 1 (the day the amendment would come into effect), at the very least, he requested the Court to stay the provision, or prohibit coercive action by the State to implement it, until the final decision. All the previous orders of the Court had recognised the gravity of the situation, and protected status quo.

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(Disclosure: The author assisted Mr Datar in the constitutional challenge before the Court.)