HC Rejects Odisha Ex-MP’s Plea Against Mandatory PAN-Aadhaar Linkage For Demat Accounts

Cuttack: The Orissa High Court has dismissed former MP Tathagata Satapathy’s plea, challenging the mandatory Aadhaar-PAN linkage for operating demat accounts.

The single bench of Justice S K Panigrahi observed that the provision stands on firm constitutional and legal footing. “The mandatory linking of Aadhaar with PAN and Demat accounts under Section 139AA of the Income Tax Act aligns with the constitutional principles laid down in Puttaswamy and its triple test: legality, necessity, and proportionality. Section 139AA satisfies this test as it is backed by a valid legislative mandate, serves a legitimate state interest,” he said, while ruling that the requirement was a reasonable restriction on ‘right to privacy’.

“By linking Aadhaar, a unique biometric-based identity, with PAN, the authorities can effectively track income, detect discrepancies, and curb tax evasion within the securities market… The linkage requirement, coupled with strict enforcement by regulatory bodies like SEBI and NSDL, ensures that Demat accounts remain a legitimate channel for investment rather than a tool for illicit financial activities.”

While acknowledging privacy concerns, the court noted, “While concerns regarding data security and privacy are acknowledged, they do not outweigh the compelling need for regulatory oversight in the securities market. Adequate safeguards have been implemented to mitigate risks, and the measure remains a proportionate and reasonable restriction on privacy.”

The Judge further emphasised on implementation of advanced encryption, multi-layered authentication protocols and stringent access controls for the Aadhaar system. “Without these measures, the very objective of Aadhaar-PAN linkage, i.e. (that is), to ensure financial transparency and curb fraud, may be undermined by the risk of data breaches and privacy violations,” he stated in his February 14 order.

Satapathy had approached the high court after his savings-cum-demat account at a private bank in Bhubaneswar became dormant in July 2023 for non-linking of Aadhaar-PAN. The account has since been reactivated following a SEBI circular on June 3, 2024.