In the context of 'promoting ease of living of residents' of India, “India Digital Financial Inclusion: Journey Map Report” (March 2019) by Mobile Solutions Technical Assistance and Research (mSTAR) project of United States Agency for International Development (USAID) refers to the Aadhaar and the India Stack, Aadhaar-enabled payment system (AEPS) and Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme, Aadhaar and Mobile (J-A-M) for e-governance. There are 38 references to Aadhaar number in its 54-page long report.
Unmindful of the 26 September 2018 judgement of the Supreme Court (SC) of India, it states: “By linking bank accounts to biometric identification (through the Aadhaar scheme) and to mobile numbers, the aim is to leapfrog more traditional models of financial access.” The judgement makes nine references to ‘census’.
The 1,448-page long judgement mentions ‘surveillance’ on 110 occasions. In its 547-page long unanimous verdict dated 24 August 2017 in the same case, the Court observed: “Every individual is entitled to perform his actions in private. In other words, she is entitled to be in a state of repose and to work without being disturbed, or otherwise observed or spied upon. The entitlement to such a condition is not confined only to intimate spaces such as the bedroom or the washroom but goes with a person wherever he is, even in a public place.”
It makes three references to ‘census’.
The linking of a banking account to Aadhaar number was challenged in the Court as violative of Articles 14, 19(1)(g) and 21 of the Constitution of India and also of Prevention of Money Laundering Act (PMLA), 2002 because in case a person fails to link Aadhaar with the bank account, such a person would be rendered ineligible to operate the bank account, which would amount to forfeiting her money lying in the account which belongs to her. This amounts to depriving the person of her property and is, therefore, violative of Article 300A of the Constitution as such a deprivation can take place only by primary legislation and not by subordinate legislation in the form of Rules. It was also challenged because it did not pass the proportionality test.
The Court observed: "Our considered opinion is that it does not meet the test of proportionality and is also violative of right to privacy of a person which extends to banking details."
It observed: "Under the garb of prevention of money laundering or black money, there cannot be such a sweeping provision which targets every resident of the country as a suspicious person. Presumption of criminality is treated as disproportionate and arbitrary....there cannot be a mandatory provision for linking of every bank account."
It concluded: "We, thus, hold the amendment to Rule 9, by the Seventh Amendment Rules, 2017, in the present form, to be unconstitutional" referring to Rule 9 of the Prevention of Money Laundering Maintenance of Records) Rules, 2005, which was amended by Prevention of Money Laundering (Maintenance of Records) Seventh Amendment Rules, 2017, which made linking of Aadhaar with the bank account now mandatory. It applied not only to those bank accounts which would be opened after bringing into force the amendment but even the existing accounts as well. (paras 429-431, 436 in 567-page long the majority judgement)
The USAID’s report feigns as if the SC has not declared the provision of linking of Aadhaar number with bank accounts unconstitutional.
With regard to linking of mobile number with Aadhaar too, the SC had taken note of the ‘disproportionate and unreasonable’ circular dated 23 March 2017 issued by the department of telecommunications (DoT), ministry of communications, government of India (GOI) whereby it had directed that all licensees shall re-verify the existing mobile subscribers (pre-paid and post-paid) through Aadhaar based e-KYC process. It amounted to mandatory linking of mobile connections with Aadhaar, which requirement was not only in respect of those individuals who would be becoming mobile subscribers, but applies to existing subscribers as well.
The Court concluded: "We, therefore, have no hesitation in declaring the (DoT) Circular dated 23 March 2017 as unconstitutional."
The USAID’s report pretended as if the SC has not declared the provision of linking of Aadhaar number with mobile numbers unconstitutional.
Notably, the footnote in the report stated: “As of the date drafting of this report was completed, the GOI had passed a law in March 2019 that Aadhaar can be used voluntarily to open a bank account and get a new SIM card. This contradicts multiple regulations and an earlier Supreme court judgement that disallows the use and authentication of Aadhaar for account opening. UIDAI (the authority issuing Aadhaar) is not taking a stand. This has caused confusion by service providers and a reluctance to open accounts using Aadhaar. Further clarification is still required.” It is not clear what clarification was required after the unambiguous judgement of the Court.
Despite taking note of the March 2019 law, which was enacted in compliance with the SC’s directions, the USAID report proceeded as if these directions were irrelevant. It states: “The linkage of a person’s mobile phone number with their Aadhaar number and their bank account completes the J-A-M (Jandhan-Aadhaar-Mobile) trinity and provides the foundational digital infrastructure not just for identification and e-KYC but for a broader array of personalised digital services and use cases.”
The India Stack, an initiative of iSPIRT, has brought these use cases together by providing application programming interface (APIs) that allow customers to store means of identity (e.g., Aadhaar) and consent (e.g., e-signature) in a digital locker, opening up the opportunity for financial service providers to deliver services digitally, remotely and at minimal cost riding on these established digital rails.” The impudence of the report writers is illustrated by its footnote which reads: “Cost and time associated with customer acquisition could well increase again if the Supreme Court’s ruling on Aadhaar is upheld.” The authors seemed to be unaware of the fact that the judgement of the Court is the law of the land.
In spite of the judgement, the USAID’s report claimed that “with the linkages between mobile, Aadhaar and banking services, using digital financial services has become a compelling use case of this technological advance.”
As part of its recommendations, the report underlined regulatory challenges and friction in compliance. It referred to regulatory changes in the storage of Aadhaar information as a setback for the incubatees working on India Stack due to the delays associated with digitally transacting.
USAID felt that this increased transaction time made the entire process less convenient for customers as they are required to provide their Aadhaar number every time they make a purchase, while earlier they only needed it for their first transaction.
The enormity of USAID’s influence over the Union government can be fathomed from the fact that it issued draft amendments to the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Rules, 2020 to allow non-government entities to carry out Aadhaar authentication, which was restricted to government actors only. The final Rules were published on 5 August 2020, in the Gazette of India.
The use of Aadhaar number authentication by private entities under these Rules goes against the SC’s judgement on Aadhaar number and the Aadhaar Act which “limited the use of Aadhaar authentication, for a limited set of purposes, and only by the government.”
The apex court had declared Section 57 of the Aadhaar Act which allowed private entities to carry out Aadhaar number authentication to be unconstitutional. The Rules are in violation of Section 7 of the Aadhaar Act which allows the use of Aadhaar number for services funded by the 'Consolidated Fund of India/ States' and other purposes 'allowed by a law'.
Rule 3 of the Rules, in the name of “promoting ease of living of residents and enabling better access of services,” undermines the provisions of the Aadhaar Act under the influence of entities like USAID and its collaborators.
After the Union Budget and unmindful of the new US government’s approach towards the USAID, Bhuvnesh Kumar, additional secretary, ministry of electronics and information technology (MeitY) has amended the 2020 Rules and notified the Aadhaar Authentication for Good Governance (Social Welfare, Innovation, Knowledge) Amendment Rules, 2025 under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 on 31 January 2025.
Notably, it omits the words “in the interest of good governance, preventing leakage of public funds, promoting ease of living of residents and enabling better access to services for them” from the 2020 Rules which had limited purpose and inserts the words “promoting ease of living of residents and enabling better access to services for them” for an inexplicable wider purpose.
Not only that, it makes provision for “Any entity other than the Ministry or Department….which is desirous of utilising Aadhaar authentication.”
This provision echoes the omitted unconstitutional provision of Section 57 of the Aadhaar Act which reads: "Nothing contained in this act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect.”
The 2025 amendment to the Rules is an exercise in colourable subordinate legislation. Like the USAID’s report. It ignores the fact that the constitutionality of enactment of the Aadhaar Act as Money Bill and Finance Act 2017 is pending before the seven-judge constitutional bench headed by the chief justice of India since 13 November 2019 after a five-judge bench found the Aadhaar Act is not a Money Bill in Rojer Mathew vs South Indian Bank Ltd.
Subsequently, besides Rojer Mathew, Madras Bar Association, Kudrat Sandhu, Social Action for Forest and Environment, Jairam Ramesh, Navdeep Singh, Central Administrative Tribunal, Revenue Bar Association, Pankhuri Shrivastava, Sale Tax Bar Association, National Green Tribunal Bar Association, Gokul Patnaik, Jyoti Ojha, Navit Seth, Gopal Chandra Mishra, Employees Provident Fund Tribunal Bar Association, All India Federation of Tax Practitioners, Income Tax Appellate Tribunal Bar Association, Jinofer Kawasji Bhujwala, Rishabh Jain, Sujay Desai, K Liyakath Ali, Sweta Mangal, L Ponnammal, Charudatt Changdeo Pawar and Thomas Franco Rajendra Dev have filed their petitions in the matter.
On 12 October 2023, the seven-judge bench had appointed Srishti Agnihotri and Zoheb Hossain to act as the nodal counsel to put together a common compilation of the submissions, pleadings, documents and precedents. The registry was asked to provide the updated soft copy of the paper books to all AORs and nodal counsel on or before 21 October 2023. The nodal counsel was asked to prepare the soft copies of the common compilations by 20 November 2023 which were to be made available to all the parties. The written submissions were required to be furnished to the nodal counsel by 4 December 2023. It was supposed to be listed on 30 January 2024 but it has not been listed as yet.
The new provisions of the Rules under the Aadhaar Act disregard the judgement of the five-judge constitution bench of the Supreme Court and the pending status of the related legislations.
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(Dr Gopal Krishna is a lawyer and a researcher of philosophy and law. His current work is focused on the philosophy of digital totalitarianism and the monetisation of nature. He has appeared before the Supreme Court's Committees, Parliamentary Committees of Europe, Germany and India and UN agencies on the subject of national and international legislation. He is the co-founder of the East India Research Council (EIRC). He is the convener of the Citizens Forum for Civil Liberties (CFCL) which has been campaigning for freedom from UID/Aadhaar/NPR and DNA profiling through criminal identification procedures since 2010. He had appeared before the Parliamentary Standing Committee on Finance that questioned and trashed the biometric identification of Indians through UID/Aadhaar Number. He is an ex-Fellow, Berlin-based International Research Group on Authoritarianism and Counter Strategies (IRGAC). He is also the editor of www.toxicswatch.org.)
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