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Government allows Aadhaar e-KYC for Telecoms despite Supreme Court judgement striking down Section 57 of Aadhaar Act 2016

The government’s attempt to re-introduce private access to Aadhaar has been called into question on constitutional grounds.

Aadhaar, PAN Card

Telecom operators will be allowed to issue new SIM cards using Aadhaar-based e-KYC and convert prepaid connections to postpaid using just OTP verification, the Department of Telecommunications (DoT) announced on September 21 in the Telecom Reforms 2021 booklet. “Contactless services in the COVID era needs to be promoted for subscriber convenience and also for ease of doing business.” the Ministry of Communications said in a press release announcing the reforms.

Allowing private firms to conduct Aadhaar-based KYC was declared unconstitutional by the Supreme Court in 2018 when it struck down Section 57 of the Aadhaar Act 2016. The government’s decision to re-introduce Aadhaar based verifications for private telecom firms appears to be side-stepping the Supreme Court’s judgement.

DoT allows telecom companies to use Aadhaar for KYC: Key Points

The DoT has announced several telecom sector reforms with immediate effect:

  • Self KYC: To complete their KYC online, customers can submit documents for verification through DigiLocker, a web-based verification platform, or allow UIDAI to share their information with telecom companies. If customers use Aadhaar numbers for verification, they must declare to telecom providers that:
    1. They are voluntarily using Aadhaar based authentication to get a SIM card
    2. They consent to UIDAI sharing their KYC details with the telecom operator
  • Point-of-sale Aadhaar KYC: If a customer opts for Aadhaar-based KYC when acquiring a SIM through a physical agent, the agent must record their biometrics to get access to their Aadhaar details from UIDAI. Customers must make two additional declarations in such cases:
    1. They have been informed about alternate processes of acquiring a SIM (paper based and direct KYC)
    2. Their biometric information can be treated as their signature
  • OTP-based prepaid and postpaid conversions: When customers request conversion from prepaid to postpaid (or vice-versa), telecom companies can verify the request through an OTP. Such conversions are not allowed in Jammu and Kashmir.

Why did the Supreme Court disallow corporates to use Aadhaar based e-KYC?

In 2018, the Supreme Court took issue with the government’s decision to allow corporates to access Aadhaar data for verification. Corporates had been permitted to use Aadhaar in Section 57 of the Aadhaar Act 2016:

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… – Section 57, Aadhaar Act 2016

A Supreme Court bench led by Chief Justice Dipak Misra read down the section of the Aadhaar Act on 26 September 2018, arguing that such access given to private players was unconstitutional. In the majority judgement authored by Justice A.K. Sikri, the Supreme Court said:

Even if we presume that legislature did not intend so, the impact of the aforesaid features would be to enable commercial exploitation of an individual biometric and demographic information by the private entities. Thus, this part of the provision which enables body corporate and individuals also to seek authentication, that too on the basis of a contract between the individual and such body corporate or person, would impinge upon the right to privacy of such individuals. This part of the section, thus, is declared unconstitutional.” – Page 560, Majority Judgement by Justice A.K Sikri (emphasis added)

On What Basis Did the government re-introduce private access to Aadhaar, And Is It Constitutional?

The Centre issued the Aadhaar and Other Laws (Amendment) Ordinance, 2019 on 28 February 2019. The ordinance struck down Section 57 of the Aadhaar Act, but allowed private players to use Aadhaar for verification if UIDAI is satisfied that such entities are:

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  1. compliant with certain standards of privacy and security, or
  2. permitted by law, or
  3. seeking authentication for a purpose specified by the central government in the interest of the State

The validity of this amendment has been challenged by petitioners in the Supreme Court arguing that it violates the Court’s 2018 judgement, The Leaflet has reported. In the latest “reforms”, however, telecom companies have been allowed to use Aadhaar-based e-KYC on the basis of the 2019 ordinance amending the Aadhaar Act, the booklet released by the DoT mentions.

Prasanna S, a Delhi-based lawyer who assisted petitioners in challenging the Aadhaar Act 2016 and the amendment passed in 2019, told MediaNama that the DoT’s move is a violation of the Supreme Court’s 2018 judgement:

This is a serious misadventure and in violation of the Supreme Court’s September 2018 judgment. The logic of Supreme Court having struck down (the then) Section 57 of the Aadhaar Act 2016 is a prohibition against private commercial profiteering over Aadhaar. Trying to reintroduce it now as if the Supreme Court judgment didn’t exist (even assuming it is done under the amended Act, which is also under challenge), shows scant respect for the court. – Prasanna S

e-KYC for private players: A timeline of events

  • 2016 – Aadhaar Act: The Aadhaar Act was passed, including Section 57, which allowed corporates to verify the identity of individuals using their Aadhaar number.
  • 2018 – Supreme Court Judgement: The Supreme Court struck down Section 57, declaring private companies’ ability to verify identity using Aadhaar unconstitutional.
  • 2019 – New Aadhaar Ordinance: The central government revived the commercial use of Aadhaar in 2019 with the Aadhaar and Other Laws (Amendment) Ordinance, 2019.
  • 2021 – Telecom Reforms: The Department of Telecommunications allows private companies to use Aadhaar for KYC on the basis of the 2019 amendments to the Aadhaar Act.

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