The Supreme Court on Wednesday upheld the constitutional validity of Aadhaar, but with conditions.
Justice A.K. Sikri pronounced the majority judgment on behalf of himself, Chief Justice of India Dipak Misra and Justices A.M. Khanwilkar and Ashok Bhushan. However, Justice D.Y. Chandrachud gave a dissenting judgment.
READ MORE | Justice Chandrachud: The lone dissenting voice in Aadhaar judgment
The following are the reactions from exerts from various sectors:
Aarthy Venkat, LegalDesk.com
“While the Aadhaar Act has been upheld to be constitutional, the striking down of Section 57 comes as a blow to private organisations and entities. We are awaiting notification from UIDAI. The impact of the judgment is massive,” remarked Aarthy Venkat of the Bengaluru-based startup LegalDesk.com. Venkat added that the judgment of the Supreme Court raises concerns for startup ecosystems which derive their core strength from the UIDAI.
Alok Shende, Ascentius Consulting
“For the designated financial institutions, Aadhaar-based authentication process made instantaneous loan approval or account opening possible and thus Aadhaar circumvented the traditional paper trail based authentication process that took on an average, 2-3 days to complete. With the promulgation of this Supreme Court judgment, the old paper-based process will be back in vogue, thus causing delays and inconvenience to the users and longer latency for banks and fintech players,” said Alok Shende.
READ MORE | Centre welcomes SC verdict on Aadhaar; Jaitley says 'you cannot defy technology'
Shende observed that the Supreme Court judgment on Aadhaar, while being recognised as fairly balanced and judicious, is likely to adversely affect fintech startups and banks owing to the striking down of the Section 57 of Aadhaar Act.
Ajay Bhargava, Khaitan and Co.
Ajay Bhargava opined that by striking down Section 57 of the Aadhaar Act, the Supreme Court has highlighted the urgent need for a robust proper data protection law in the country. “Such observation coincides with the introduction of the Personal Data Protection Bill, 2018. This means that Indian companies may have to revise standard operating procedures in the near future,” said Bhargava.
Gopal Bohra, N. A. Shah Associates LLP
“The apex court has applied a balanced approach, making it mandatory to use Aadhaar at certain places such as filing of income tax returns, atleast for those individuals who are eligible to obtain Aadhaar numbers and also restricting the data sharing with private parties. This ruling, which makes the linking of Aadhaar with PAN mandatory, will help government in curbing tax evasion,” observed Gopal Bohra.
READ MORE | Aadhaar valid for welfare, but not safe with corporates, says SC
Bohra said the judgment will set the guidelines to resolve various ongoing controversies, where the use of Aadhaar was made mandatory and the resultant concerns over data privacy.
Ramesh Mamgain, Commvault
“This (verdict) will go a long way in protecting user data, ensuring that there are fewer risks in data leakages. However, private enterprises will need to get their act together quickly to migrate to GDPR (General Data Protection Regulation) norms and ensure that secondary data is managed securely across locations,” pointed out Ramesh Mamgain.
READ MORE | Political parties welcome Aadhaar verdict
Commvault, which is into data protection and information management software, has welcomed the verdict. Mamgain added that the SC has made the right decision by de-linking Aadhaar data from mobile phone and bank accounts.
Bhavin Patel, LenDenClub
“This step may affect the fintech as well as other financial companies which use only Aadhaar as their identity verification mechanism. Though the verdict is not affecting us, we believe that this will be a regressive move for fintech companies as they will eventually move to the traditional mode of verifying individuals and thereby the turnaround time for processing loans will increase considerably,” said Bhavin Patel.
Patel said the Supreme Court upheld Aadhaar’s constitutional validity at a time when there has been many questions regarding data security, surveillance state and privacy problem, and added that the verdict has cleared many doubts.
Patel also pointed out that the SC highlighted some of the flaws in Aadhaar law due to which private companies have been barred from using Aadhaar for identity verification.
Amit More, Finzy
“Today’s verdict has upheld most of the provisions in the Aadhaar Act and ruled that it does not breach privacy. Simultaneously, a few provisions have been struck down since the honourable court concluded that they could have infringed into privacy or exposed personal information. Most significant from fintech industry perspective is the Section 57 of the Aadhaar Act, which provides that private companies could ask consumers for Aadhaar details for identification purposes." said Amit More.
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According to More, "a lot of fintech companies (including P2P lending platforms), digital banks, NBFCs, mobile companies and others rely heavily on Aadhaar based eKYC verification and eSign for digital signature of documents. Cognisant of the privacy concerns around Aadhaar number, UIDAI had introduced Aadhaar Virtual ID and UID Token earlier this year. Virtual ID gives an Aadhaar holder an option of not sharing his/her Aadhaar number, while UID Token system avoids creation of parallel databases of people by companies and government departments. We need to see the bearing of today’s Supreme Court verdict on these additional security layers of Aadhaar Virtual ID and UID Token. Fine print of the 1,448-page verdict and how the ecosystem adapts itself to the new rules would be key to the ongoing evolution of Indian digital economy."
Finzy, a peer-to-peer lending platform, has also hailed the verdict as it has cleared a lot of uncertainties around Aadhaar.
Dhiren Makhija, Cashkumar
"The verdict has forbidden private companies from actively seeking or storing Aadhaar information. We believe this is certainly the right step if you take into account legitimate concerns highlighted by various people. Unless privacy concerns are properly addressed with watertight solutions, it seems prudent to contain usage. With time, and as the system advances with proper safeguards in place, it can be opened further to wider practices. As a company, we have never insisted on Aadhaar as an essential pre-requisite to apply for a loan,” said Dhiren Makhija.
READ MORE | SC not in favour of private companies collecting Aadhaar data
“Aadhaar works as a proof of identity or address proof which is submitted voluntarily by a loan seeker. It might become useful and necessary in the future, if the laws mandate it as the sole proof of identity. In an ideal world, with a single number, a social security identity is essential while reporting loan defaults as compared to the current system of PAN number. The system has a long path of evolution ahead and we are eagerly waiting to see future developments,” added Makhija.
Makhija further said that the industry should not be affected significantly by this judgment as most companies might not be insisting on Aadhaar. Cashkumar is a fintech company.
Harshil Mathur, Razorpay
“The move helps to provide more clarity and eliminates confusion encircling what can and cannot be done around implementing Aadhaar. Private companies cannot mandate customers to provide Aadhaar for onboarding, they must provide alternate ways such as passport, voters ID or driver’s license. On the other hand, the move will increase the cost of doing business for merchants, as until now an eKYC verification and onboarding costs Rs 15 per person, but soon the same verification will cost Rs 100 for a physical KYC,” said Mathur.
Razorpay is a converged payments solution company.