Category Archives: Judicial Process

The Aadhaar/PAN Judgment: Decoding the “Partial Stay”

In an article published today on, Apar Gupta makes an important point about the Supreme Court’s Aadhaar/PAN judgment: even as it upheld the constitutional validity of S. 139AA of the Income Tax Act against challenges based on Articles 14 (equal protection) and 19(1)(g) (freedom of trade), the Court nevertheless noted that 139AA would yet have to pass a “more stringent test” under Article 21 (right to life and personal liberty) of the Constitution. He makes the further point that the judgment “also reinforces the spirit of [the Court’s] earlier orders limiting the Aadhaar scheme by giving a limited stay on Section 139AA(2).

What is crucial to note is that the Court’s “limited stay” is itself based on the view that S. 139AA – and more broadly, Aadhaar – potentially violates Article 21 of the Constitution. The Court notes, in paragraph 125:

“At the same time, as far as existing PAN holders are concerned, since the impugned provisions are yet to be considered on the touchstone of Article 21 of the Constitution, including on the debate around Right to Privacy and human dignity, etc. as limbs of Article 21, we are of the opinion that till the aforesaid aspect of Article 21 is decided by the Constitution Bench a partial stay of the aforesaid proviso is necessary. Those who have already enrolled themselves under Aadhaar scheme would comply with the requirement of sub-section (2) of Section 139AA of the Act. Those who still want to enrol are free to do so. However, those assessees who are not Aadhaar card holders and do not comply with the provision of Section 139(2), their PAN cards be not treated as invalid for the time being. It is only to facilitate other transactions which are mentioned in Rule 114B of the Rules. We are adopting this course of action for more than one reason. We are saying so because of very severe consequences that entail in not adhering to the requirement of sub-section (2) of Section 139AA of the Act. A person who is holder of PAN and if his PAN is invalidated, he is bound to suffer immensely in his day to day dealings, which situation should be avoided till the Constitution Bench authoritatively determines the argument of Article 21 of the Constitution.”

There has been a fair amount of debate about what this paragraph actually means for taxpayers who do not yet have an Aadhaar number; for the moment, the debate appears to have been settled by a CBDT circular stating that all persons paying their taxes after July 1 must link Aadhaar and PAN. In my view, however, the importance of paragraph 125 lies not so much in the limited relief that it grants taxpayers in this specific litigation, but what it means for the larger Aadhaar challenges presently pending before various benches of the Supreme Court. What has not yet been noticed – or discussed – is that paragraph 125 will have a significant ripple affect on numerous other cases, starting with the hearing scheduled for June 27, where the question of making Aadhaar mandatory for seventeen social welfare schemes is due to be heard. In this essay, I will attempt to explain how.

When does the Court grant a “Stay”? 

A “stay”, as the word suggests, refers to a situation where a Court temporarily restrains one (or both) parties to a legal proceeding from taking certain actions until the case is heard and decided in full (a “stay” also refers to a situation where a higher Court halts the operation of the order of a lower Court, but we are not concerned with that here). Before granting or refusing a stay (or an “injunction”, as the case may be), a Court is supposed to carefully consider the pros and cons of the case before it. The traditional test for a stay is three-pronged: the Court must be convinced that the party asking for a stay has a “prima facie” good case; that the refusal to grant a stay will cause “irreparable harm“; and that the “balance of convenience” between the parties weighs in favour of a stay.

However, when the Court is faced with a request to stay a statutory provision (as opposed to private conduct or executive action), the test is much more rigorous. This is because laws, which emanate from the parliamentary-democratic-deliberative process, have a deep, presumptive legitimacy; and furthermore, their wide reach means that a stay will have broad and far-reaching consequences. For instance, in Bhavesh Parish vs Union of India, the Supreme Court held:

“When considering an application for staying the operation of a piece of legislation, and that too pertaining to economic reform or change then the courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the courts must show judicial restrain in staying the applicability of the same. Merely because a statute comes up for examination and some arguable point is raised, which persuades the courts to consider the controversy, the legislative will should not normally be put under suspension pending such consideration. It is now well- settled that there is always a presumption in favour of the constitutional validity of any legislation, unless the same is set – aside after final hearing and, therefore, the tendency to grant stay of legislation relating to economic reform, at the interim stage, cannot be understood. The system of checks and balances has to be utilised in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itself.”

Consequently, when considering a constitutional challenge to a law (which is what the Court was doing in Aadhaar/PAN), a “stay” can be granted only if the provision is “manifestly unjust or glaringly unconstitutional“. The Court cannot grant a stay simply because, on balance, it would be the right or just thing to do.

The “Stay” in the Aadhaar/PAN Case

It is important to note that in the Aadhaar/PAN case, the Court could have granted the partial stay that it did, only if it was convinced that the proviso to S. 139AA(2) (cancellation of PAN if not linked with Aadhaar for paying taxes) was “manifestly unjust” or “glaringly unconstitutional”. Indeed, Mr Arvind Datar, senior counsel for the Petitioners, made the specific argument that the proviso was unconstitutional because it amounted to a disproportionate interference with the Petitioners’ fundamental right to trade and commerce under Article 19(1)(g): to deprive a person of a PAN card was effectively to shut them out of the formal economy, leading to effective “civil death”.

As I have argued in my previous post, ultimately, the Court failed to return a specific finding on the Article 19(1)(g) issue. However, as paragraph 125 demonstrates, the Court did agree with Mr Datar that the consequences of the proviso were “very severe“, and specifically cited the various transactions for which a PAN Card is compulsory as the reason why it was granting a stay, while the overall Article 21 challenge to Aadhaar remained pending before the larger bench.

Since there are no observations on “glaring unconstitutionality” – in fact, the Court categorically refused to express an opinion on the pending Article 21 challenge – it would be fair to assume, therefore, that the Court considered the draconian step of cancelling PAN Cards to be “manifestly unjust”.

The Consequences

We may now note that in the other pending Aadhaar-related challenges, the “consequences” of not having an Aadhaar Number are at least as severe as the consequences of PAN cancellation, if not more so. One of the Executive notifications under S. 7 of the Aadhaar Act, for instance, makes midday meals at schools conditional upon the production of an Aadhaar Number. No PAN Card means civil death; but midday meals can be about life and death – or at the very least, about basic health, itself a right under Article 21. The same goes for a number of other Executive notifications, where Aadhaar is linked to social welfare schemes, all of which provide crucial life support to the most vulnerable and marginalised individuals in our society.

In the Aadhaar/PAN case, the Supreme Court had occasion to carefully consider a legislation that made Aadhaar compulsory for filing IT returns, at the cost of cancelation of PAN cards. Applying its judicial mind, the Court found that the pending Article 21 challenge was credible enough, and the consequences of PAN cancellation severe enough, for the rigorous standards for granting a stay on legislation (“manifest injustice”) to be met.

Admittedly, a stay has no precedential value, and does not bind any future bench. However, once a two-judge bench of the Supreme Court has applied its mind to the merits of the case, should a different, coordinate bench of the same Court re-open the issue, consider it afresh, and refuse to grant a stay, even when the consequences in that case are even more severe than canceled PANs?

I submit that judicial discipline precludes future coordinate benches from doing so. The Aadhaar/PAN case has established two very important provisions: first, that notwithstanding the pending Constitution Bench challenge, specific piecemeal challenges to Aadhaar can be heard and decided by two-judge benches on issues outside the remit of the Constitution Bench, and that those benches can grant appropriate relief; and secondly, visiting severe consequences upon people for not possessing an Aadhaar is “manifestly unjust” – unjust enough for the Court to grant a stay.

Consequently, when a different bench of the Court hears the petitions on June 27, regarding compulsory Aadhaar for social welfare schemes, it should grant a stay without any further need for argument (note that the challenge in that case is to Government notifications, which occupy a level of sanctity lower than legislation). And this should be the course of action adopted by the Court in all future proceedings where the Petitioners can show that the consequences of not having an Aadhaar, for X or Y government notification or law, are at least as severe as the consequences of getting your PAN canceled.


I understand that, technically, this is not a legal argument for stay. However, it needs to be noted that in its Aadhaar/PAN judgment, the Court repeatedly invokes judicial discipline in deciding not to consider a whole range of issues that might overlap with the issues before the pending Constitution Bench. It is respectfully submitted that judicial discipline demands that judicial discipline be applied consistently. It is as much an issue of discipline not to reopen a question on which a coordinate bench has applied its mind and come to a conclusion, as it is not to interfere with the (possible) workings of a (potential) Constitution Bench. For that reason, in all future challenges before the Court, until the Constitution Bench decides the overall challenge, two-judge benches should grant stays and ensure – in the words of the original Supreme Court order that began all of this – that nobody is made to “suffer” for not possessing an Aadhaar.



Filed under Article 21 and the Right to Life, Bodily Integrity, Judicial Process, Stays and Injunctions