SC doesn’t agree with govt on Aadhaar

Court says it’s ‘ not a catch for all frauds’

New Delhi: The Centre’s argument that Aadhaar would help curb ills like terrorism and banking frauds on Thursday did not find favour with the Supreme Court which said bank officials were “hand- in- glove” with fraudsters and scams do not happen because the culprits are unknown.

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 no 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.”

The 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,” he said

“We understand these benefits reach the poor. Money laundering has to be curbed,” he added. and the collection of taxes has to be protected.”