Aadhaar Not Mandatory for Bank Operations: Supreme Court

In a significant ruling, the Aadhaar Not Mandatory for Bank Operations stance was reinforced by the Supreme Court in the 2025 case MC Mehta v. Union of India. The Court questioned the Delhi Government for denying subsistence allowances to workers due to non-Aadhaar-linked accounts, asking, “Which law says bank accounts can’t be operated without Aadhaar?” This blog explores the Aadhaar Not Mandatory for Bank Operations ruling, its background, and implications for Judiciary, APO, and JLO aspirants preparing for 2025 exams.

Introduction

On April 2, 2025, the Supreme Court of India made a significant observation in the case MC Mehta v. Union of India & Ors., reinforcing that Aadhaar Not Mandatory for Bank Operations. The Court questioned the Delhi Government for denying subsistence allowances to 5,907 eligible workers affected by Graded Response Action Plan (GRAP) restrictions, solely because their bank accounts were not linked to Aadhaar. A bench comprising Justices Abhay Oka and Ujjal Bhuyan challenged the Delhi Government’s stance, asking, “Is there any such law that says bank accounts cannot be operated without Aadhaar?”

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This ruling is a critical development in the ongoing debate over Aadhaar’s mandatory use in non-welfare schemes. For Judiciary, APO, and JLO aspirants, understanding the Aadhaar Not Mandatory for Bank Operations ruling and its implications is essential for 2025 exams. This blog delves into the case background, the Court’s observations, and its relevance for your preparation.

Background: MC Mehta v. Union of India (2025 SC)

The Aadhaar Not Mandatory for Bank Operations ruling emerged from the ongoing case MC Mehta v. Union of India & Ors., a long-standing public interest litigation (PIL) concerning pollution management in the Delhi-NCR region. Initiated in 1985 by environmentalist and lawyer M.C. Mehta, the case has addressed various environmental issues over the decades, including air pollution and industrial hazards.

Case Context

GRAP Restrictions and Labour Welfare: The Graded Response Action Plan (GRAP) imposes restrictions, such as construction bans, to combat air pollution in Delhi-NCR, often affecting construction workers’ livelihoods. To mitigate this, the Supreme Court had previously directed NCR states to pay subsistence allowances to affected workers using labour cess funds, as per its orders on November 24, 2021, and February 28, 2025.
Delhi Government’s Affidavit: On April 2, 2025, the Delhi Government submitted an affidavit detailing the status of these payments. The Delhi Building and Other Construction Workers Welfare (DBOCWW) Board had resolved on December 3, 2024, to pay Rs. 8,000 to each eligible worker. It disbursed Rs. 74,61,76,000 to 93,272 workers with Aadhaar-seeded bank accounts.
Non-Payment Issue: Despite efforts, 5,907 eligible workers did not receive payments as of March 25, 2025, because their bank accounts were not linked to Aadhaar. The government attempted to notify these workers via SMS and IVR messages, urging them to link their accounts, but the payments remained pending.

Efforts to Identify Affected Workers

The Delhi Environment Department sent letters to 15 government departments and agencies to identify affected workers. Six departments reported no affected workers, while nine did not respond despite follow-ups.
District labour officers identified 505 workers through registered contractors, and their payments were processed.
Additionally, 36 trade unions were contacted, with three responding about 82 workers, of whom 14 were found eligible and paid on March 25 and 27, 2025.

The Supreme Court’s Observations: Aadhaar Not Mandatory for Bank Operations

During the April 2, 2025, hearing, the Supreme Court bench, led by Justice Abhay Oka, scrutinized the Delhi Government’s justification for denying payments to workers without Aadhaar-linked accounts.

Key Observations

Questioning the Legal Basis: Justice Oka directly challenged the Delhi Government’s counsel, asking, “Is there any such law that says bank accounts cannot be operated without Aadhaar? What law provides this?” The counsel conceded, “There is no such law,” confirming that no legal provision mandates Aadhaar linkage for bank operations.
Court’s Directive: The bench directed the Delhi Government to address whether verified workers can be denied payments solely because their accounts are not Aadhaar-seeded. The Court stated, “Delhi government will also address the court on the question whether verified workers can be denied amount payable on the ground that their accounts are not seeded with Aadhaar. This aspect to be considered on the next date.”
Centre for Holistic Development’s Role: The Court also directed the Centre for Holistic Development, an NGO involved in the case, to file an affidavit responding to the Delhi Government’s claims, ensuring a comprehensive review of the issue.

Previous Supreme Court Stance on Aadhaar

The Supreme Court has consistently ruled that Aadhaar cannot be made mandatory for non-welfare schemes. In Justice K.S. Puttaswamy v. Union of India (2018), a 4:1 majority upheld the Aadhaar Act’s constitutional validity but struck down provisions making Aadhaar mandatory for bank accounts, mobile connections, and school admissions. The Court ruled that Aadhaar is voluntary for such purposes unless linked to government subsidies under Section 7 of the Aadhaar Act.
In 2017, the Court reiterated in Lokniti Foundation v. Union of India that Aadhaar is not mandatory for obtaining a new telephone connection, emphasizing its voluntary nature for non-welfare activities.
The 2015 order in Puttaswamy v. Union of India further clarified that no person should be denied benefits for lack of Aadhaar if otherwise eligible, a principle the Delhi Government appears to have overlooked in this case.

Understanding the Legal Framework: Aadhaar and Bank Operations

The Aadhaar Not Mandatory for Bank Operations ruling aligns with the Supreme Court’s broader jurisprudence on Aadhaar’s use, particularly in non-welfare contexts.

Aadhaar Act, 2016

The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, aims to provide efficient delivery of subsidies and benefits by assigning a 12-digit unique identity number (Aadhaar) to residents.
Section 7 of the Act allows the government to require Aadhaar for availing subsidies, benefits, or services funded by the Consolidated Fund of India. However, this does not extend to non-welfare activities like bank operations unless explicitly linked to subsidies.
The Supreme Court in 2018 struck down Section 57 of the Aadhaar Act, which permitted private entities (e.g., banks) to use Aadhaar for identity verification, reinforcing that Aadhaar cannot be mandatory for opening bank accounts or other non-subsidy services.

Banking Regulations and KYC Norms

The Reserve Bank of India (RBI) mandates Know Your Customer (KYC) norms for opening bank accounts, requiring proof of identity and address. Acceptable documents include passports, voter IDs, and driving licenses, in addition to Aadhaar.
Despite the Supreme Court’s 2018 ruling, some banks continue to insist on Aadhaar for KYC, citing outdated systems or auditor requirements, as noted in a 2022 investigation by Moneycontrol. This practice contradicts the Court’s directive and highlights a gap in implementation.

Constitutional Implications

Right to Equality (Article 14): Denying payments to workers for lack of Aadhaar linkage may violate Article 14, as it creates an arbitrary distinction between Aadhaar-linked and non-linked account holders, despite their eligibility.
Right to Life and Dignity (Article 21): The denial of subsistence allowances to construction workers, who rely on these funds for survival, infringes on their right to live with dignity, a core component of Article 21.
Right to Privacy: The mandatory linking of Aadhaar to bank accounts raises privacy concerns, as Aadhaar involves biometric data collection. The Supreme Court in Puttaswamy v. Union of India (2017) recognized privacy as a fundamental right, limiting the state’s ability to mandate Aadhaar for non-essential services.

Critical Analysis: Implications of the Aadhaar Not Mandatory for Bank Operations Ruling

The Aadhaar Not Mandatory for Bank Operations ruling in MC Mehta v. Union of India (2025) has significant implications for labour welfare, Aadhaar policy, and judicial oversight.

Strengths

Reinforcement of Voluntary Aadhaar Use: The ruling reaffirms the Supreme Court’s consistent stance that Aadhaar is not mandatory for non-welfare activities, protecting citizens’ rights to access services without compromising privacy.
Protection of Labour Rights: By questioning the denial of subsistence allowances, the Court upholds the right to dignity under Article 21, ensuring that workers affected by GRAP restrictions are not unfairly deprived of their entitlements.
Judicial Oversight on Policy Implementation: The Court’s directive to the Delhi Government to justify its stance highlights the judiciary’s role in holding governments accountable, particularly when policies infringe on fundamental rights.
Focus on Access to Justice: The involvement of the Centre for Holistic Development and the Court’s emphasis on labour cess funds reflect a commitment to ensuring access to justice for marginalized workers.

Challenges and Concerns

Implementation Gaps: Despite the Supreme Court’s rulings since 2015, the Delhi Government’s insistence on Aadhaar-linked accounts shows a persistent gap in policy implementation, potentially due to bureaucratic inertia or lack of awareness.
Exclusion of Eligible Workers: The non-payment to 5,907 workers due to Aadhaar linkage issues highlights the risk of exclusion, particularly for vulnerable populations who may lack access to Aadhaar or face technical issues in linking accounts.
Privacy Concerns: The mandatory Aadhaar linkage for payments raises privacy concerns, as biometric data collection can lead to profiling or misuse, a risk the Supreme Court has previously flagged in Puttaswamy v. Union of India (2018).
Systemic Issues in Labour Welfare: The Delhi Government’s failure to gather comprehensive data from departments and trade unions indicates systemic inefficiencies in identifying and supporting affected workers, which the Court’s directive alone may not fully address.

Critical Perspective

The Aadhaar Not Mandatory for Bank Operations ruling is a crucial step toward protecting fundamental rights, particularly for marginalized workers affected by GRAP restrictions. The Supreme Court’s questioning of the Delhi Government’s policy aligns with its broader jurisprudence on Aadhaar, emphasizing that it cannot be a prerequisite for non-welfare services. However, the ruling exposes deeper systemic issues, such as the government’s over-reliance on Aadhaar for administrative convenience, which often excludes eligible beneficiaries and infringes on their rights.

While the Court’s directive to revisit the issue on the next hearing date is commendable, it does not address the root cause: the lack of alternative mechanisms for disbursing payments to non-Aadhaar holders. Moreover, the Delhi Government’s failure to gather comprehensive data on affected workers reflects a broader inefficiency in labour welfare systems, which requires structural reforms beyond judicial intervention. The ruling also raises questions about the balance between technological efficiency and privacy rights, a debate that remains unresolved despite the Court’s 2018 Aadhaar verdict. Aspirants must critically analyze these issues to understand the interplay between policy, law, and justice delivery in India.

Relevance for Judiciary, APO, and JLO Aspirants

The Aadhaar Not Mandatory for Bank Operations ruling in MC Mehta v. Union of India (2025) is highly relevant for Judiciary, APO, and JLO aspirants preparing for 2025 exams:

Prelims: Expect questions on Aadhaar-related rulings (Puttaswamy v. Union of India, 2018), Article 21 (right to life and dignity), Article 14 (right to equality), and recent Supreme Court cases like MC Mehta v. Union of India (2025).
Mains: Write essays on topics like “Aadhaar Not Mandatory for Bank Operations: Balancing Privacy and Welfare” or “Role of Judiciary in Protecting Labour Rights in India.” Discuss Aadhaar Act Section 7, fundamental rights, labour welfare, and judicial oversight, referencing MC Mehta v. Union of India (2025) and Puttaswamy v. Union of India (2018).
Interviews: Discuss the implications of the Aadhaar Not Mandatory for Bank Operations ruling for labour welfare, the balance between Aadhaar’s use and privacy rights, and the judiciary’s role in ensuring access to justice, showcasing your understanding of current legal trends.

Conclusion

The Aadhaar Not Mandatory for Bank Operations ruling in MC Mehta v. Union of India (2025) reaffirms the Supreme Court’s commitment to protecting fundamental rights, particularly for marginalized workers affected by GRAP restrictions in Delhi-NCR. By questioning the Delhi Government’s denial of subsistence allowances to 5,907 workers due to non-Aadhaar-linked accounts, the Court has highlighted the voluntary nature of Aadhaar for non-welfare activities, as established in prior rulings like Puttaswamy v. Union of India (2018).

The Aadhaar Not Mandatory for Bank Operations stance underscores the need for inclusive policies that do not exclude eligible beneficiaries, while also raising critical questions about privacy and administrative efficiency. For Judiciary, APO, and JLO aspirants, this ruling is a must-know for 2025 exams, offering insights into labour welfare, Aadhaar policy, and judicial oversight. By integrating the Aadhaar Not Mandatory for Bank Operations ruling into your preparation, you can enhance your understanding of constitutional law and current affairs, paving the way for success in 2025.

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FAQs

What did the Supreme Court rule in the Aadhaar Not Mandatory for Bank Operations case?
The Court questioned the Delhi Government for denying subsistence allowances to workers without Aadhaar-linked accounts, asking if any law mandates Aadhaar for bank operations.
What was the case title of the Aadhaar Not Mandatory for Bank Operations ruling?
The case was MC Mehta v. Union of India & Ors., decided on April 2, 2025.
Why did the Supreme Court question the Delhi Government in the Aadhaar Not Mandatory for Bank Operations ruling?
The Court questioned the denial of payments to 5,907 workers affected by GRAP restrictions, as their bank accounts were not Aadhaar-seeded, despite no legal mandate for such linkage.
What did Justice Abhay Oka ask in the Aadhaar Not Mandatory for Bank Operations hearing?
Justice Oka asked, “Is there any such law that says bank accounts cannot be operated without Aadhaar? What law provides this?”
What was the Delhi Government’s response in the Aadhaar Not Mandatory for Bank Operations case?
The counsel conceded, “There is no such law,” admitting that no legal provision mandates Aadhaar linkage for bank operations.
How many workers were affected in the Aadhaar Not Mandatory for Bank Operations case?
As of March 25, 2025, 5,907 eligible workers had not received their subsistence allowances due to non-Aadhaar-seeded accounts.
What was the subsistence allowance amount in the Aadhaar Not Mandatory for Bank Operations case?
The Delhi Building and Other Construction Workers Welfare Board resolved to pay Rs. 8,000 to each eligible worker.
What did the Supreme Court direct in the Aadhaar Not Mandatory for Bank Operations ruling?
The Court directed the Delhi Government to address whether verified workers can be denied payments for lack of Aadhaar linkage, to be considered on the next hearing date.
What is the broader context of the Aadhaar Not Mandatory for Bank Operations ruling?
The ruling is part of MC Mehta v. Union of India, a PIL addressing pollution management in Delhi-NCR, focusing on labour welfare under GRAP restrictions.
Why is the Aadhaar Not Mandatory for Bank Operations ruling important for Judiciary aspirants?
It clarifies Aadhaar’s voluntary use, impacts labour welfare, and is a key topic for prelims, mains, and interviews in 2025 exams, covering constitutional law and current affairs.