Aadhaar for e-KYC: A few firms believe there is some scope for interpretation

Even as Supreme Court’s (SC) Aadhaar verdict is being digested by all, there is utter confusion over how the striking down of Section 57 can be read and whether there was still hope for private companies to use Aadhaar for electronic-know your customer (e-KYC).

Rahul Narayan, SC lawyer, claimed that even though the judgement clearly bars the use of Aadhaar by private firms, few sections of the corporate and legal sectors believe there was some scope for interpretation.

“People are saying there is some scope for interpretation. The government is trying to do something to see how companies can do e-KYC again. It (government) is evaluating, and fintech companies are also talking to it to see whether something can be done to revive the use (of Aadhaar for customer verification),” he told DNA Money.

Narayan, however, was very sure that any legislation or guidelines brought out by the government would not survive the Constitutional challenge.  

The Section 57 of the Aadhaar Act allowed private entities, in addition to the state, to use the 12-digit unique ID under Aadhaar for “establishing the identity of an individual for any purpose”, pursuant to law or any contract to this effect, subject to the requirement of informed consent under Section 8 and protection of information under chapter VI of the Act.

Now that this section of the Act has been struck down by the apex court, private companies will not be able to use the unique ID number for customer authentication.

Nayaran, along with his colleague Brinda Bhandari, is very clear that enactment of any law to resume usage of Aadhaar by private sector would be seen as “unconstitutional” in the light of last week’s court order.

“While there has been some speculation about whether a new law could be enacted to allow use of Aadhaar by private players again, we believe that on a holistic reading of the judgment, it is clear that all five judges agree that the use of Aadhaar authentication by private entities (“body corporate or person”) is now unconstitutional. Hence, it cannot be resurrected through legislation,” the duo wrote in an article for an online news portal.

According to the two advocates, some private parties could hope for the observations of justice Sikri in para 367 of the majority opinion coming to their rescue, “and that a new law could permit private persons to use Aadhaar authentication to establish identity”.

Both saw some scope for interpretation in Justice Sikri’s comments in para 367: “respondents may be right in their explanation that it is only an enabling provision….. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.”

“The parliament may enact a law specifying the purposes for which Aadhaar numbers may be used by the state, which will be subject to judicial scrutiny. However, for the reasons elaborated below, any law extending this facility to private persons would be tantamount to re-enacting a law that has been struck down, and would be held to be unconstitutional,” said Narayan and Bhandari in their write-up.

Khushroo Panthaky, senior partner, Walker Chandiok & Co LLP, said while the Aadhaar was economical and efficiency driven means of ID verification, it will not be difficult for companies to switch over to alternative methods with so many other documents for authentication available - 10-digit Permanent Account Number (PAN) card, passport, driving license, voter ID and others.

He said companies may also have to incur the cost for deleting Aadhaar details with them if they were mandated to do so. 

“Banks (and others companies with Aadhaar data) are also supposed to erase this (Aadhaar) information. That could be a cost too. I don’t know how much it would be but I’m sure it’ll be tedious process,” he said.

Rajan S Mathews, director general, Cellular Operators Association of India (COAI), said operators were looking to the department of telecom (DoT), along with the Ministry of Home Affairs (MHA), to define secure ways to do KYC that can deal with counterfeit documents, high operational costs, customer privacy, etc.

“This is how Aadhaar-based e-KYC came about. Now that the SC has issued its order on Aadhaar, the operators will await new instructions from the DoT. The industry is reviewing the order but believes Aadhaar based e-KYC is the best method to ensure security, avoid counterfeiting and provide ease of doing business,” he told DNA Money.

He dismissed any concern over sensitive Aadhaar data with telecom companies.

Source: DNA Money