Aadhaar not a solution for all frauds, says Supreme Court

New Delhi: Rejecting the Centre’s argument that Aadhaar identity has ensured detection and prevention of bank frauds, the Supreme Court on Thursday orally observed that “Aadhaar is not a catch for all frauds.”

A Constitution Bench of the Chief Justice Dipak Misra and Justices A K Sikri, A M Kanwilkar, D Y Chandrachud and Ashok Bhushan is hearing a batch of petitions challenging the legal validity of Aadhaar law.

When Attorney General K K Venugopal asserted that Aadhaar had resulted in identification and detection of fraud to the tune of thousands of crores of rupees by banks and shell companies through benami transactions, Justice Chandrachud said Aadhaar is not a catch for all frauds and may not be a solution to all the ills, and, in particular, Bank frauds.

Referring to large number of bank frauds being reported said, he said, “Aadhaar cannot stop such frauds. Same person starting different companies is not per se illegal. The problem arises when the credit is extended by the bank for each transaction by multiple entities.”

Justice Chandrachud added, “there is nothing in Aadhaar which prevents individuals from carrying out a chain of commercial activities for series of transactions. We don't see how Aadhaar can prevent or detect bank frauds in such cases. We can understand when you talk about frauds in welfare schemes but in case of bank frauds, we don't see what Aadhaar can do."

Justice Sikri said, “Here banks know the identity of fraudsters. It is not that identities are not known when loans etc are granted. But frauds take place because bank officials are hand-in-glove with the fraudster. Aadhaar can do little to stop it. When loans are given by the bank you know the person. The loan doesn’t become NPA if due diligence is followed in granting the loan. NPAs occur because banks have not taken due diligence, which ought to have been carried out by the banks.”

AG agreed with this and said, “If there has been due diligence at the bank level incidents like Nirav Modi would not have happened.”

The AG said, “If Aadhaar is linked to the bank accounts whenever there is a transaction it will be revealed.  To this extent Aadhaar is useful.”

Justice Chandrachud observed, “one area which is worrying us is no doubt there are legitimate state interests and lakhs of rupees are spent on benefits. We understand these benefits reach the poor. Money laundering has to be curbed and the collection of taxes has to be protected but can you extend Aadhaar for every transaction? Whether this will meet the test of proportionality. There comes the problem.”

Justice Sikri asked the AG “why do You (Centre) want Aadhaar for each and every activity.  You have issued 144 notifications. Why do you want cell phone to be linked to Aadhaar?  Do you consider every individual in the population as a terrorist or a violator?”

The AG said, “it was the apex court which directed the Centre to link Aadhaar with mobile numbers to check terrorists in Jammu and Kashmir do not easily get SIM Cards, which they were able to get. To prevent this Aadhaar is linked. During violence we stopped internet so that messages do not spread.”

Justice Chandrachud said “we are not questioning the wisdom of Government to stop internet, but I don’t think terrorist go to get SIM cards. They use satellite phones.”

Justice Sikri said though Central government may project Aadhaar as an effective tool to bridge inequalities in the society but the fact of the matter remains that inequalities have only been on the rise. "There is no question of India having bridged the inequalities. Over 67 per cent of wealth is concentrated on one per cent of the population."

Defending Aadhaar law, the AG said “There is minimal invasion of privacy in Aadhaar. it is not violating right to privacy as such invasion is permissible. What’s the use of fundamental right of privacy when people are starving?”

Justice Sikri said, “Article 21 guarantees food, clothing and shelter as well as right to privacy. In the name of balancing rights how can a person give up one right for availing benefit of other right.  If we go by your logic then can a poor person say give me food, clothing and shelter and I will be your slave?”

AG said slavery has been abolished long ago. The Aadhaar scheme was meant to provide benefits to marginalised sections of society.

At this juncture Justice Chandrachud drew AG’s attention to the fact that unbridled power has been vested with the Unique Identity Authority of India (UIDAI) to decide what biometric information should be collected and the method in which it should be collected.

“Tomorrow it may even say give your blood sample for doing DNA test or urine and semen. Is this not an excessive delegation of power and violation of right to privacy.”

He said Aadhaar is an “enabler for millions of residents”, and added that it enabled their right to food, livelihood and pensions.

He said the Aadhaar is a serious attempt on the part of the government for insulating people from poverty as several countries have adopted similar systems of identification. The failure to establish identity of an individual has proved to be a major hindrance for successful implementation of social security benefits.

The AG said no stigma is attached to parting with fingerprints as it is done worldwide to establish identity of an individual. Arguments will continue on April 10.