The unanimous ruling by the nine-judge bench will have implications in a number of ongoing cases involving Aadhaar, which means "base" or "foundation" in Hindi.
It could put an end to the government's efforts to make enrollment mandatory. It also guarantees privacy for Indian citizens as an intrinsic right, a move that could have far reaching implications beyond biometric IDs for the daily lives of Indians such as the possible decriminalization of homosexuality.
Activists say the court's message to the government is loud and clear: "This judgment says that the people of this country have rights, in case you've forgotten," said Usha Ramanathan, an independent law researcher and activist.
With the right to privacy now guaranteed, opponents of Aadhaar expect favorable rulings on petitions against the efforts to make enrollment mandatory.
The government says Aadhaar is crucial for better governance and can save Indian taxpayers billions of rupees by reducing welfare and tax fraud.
But at least one government official made a quick turnabout once the court ruled.
Ravi Shankar Prasad, minister of law and justice and information technology, issued a statement saying: "Today's judgment of the Supreme Court is a welcome judgment as it strengthens fundamental rights and personal liberty."
Activists say such an extensive collection of data is vulnerable to leaks and misuse, endangering the privacy of a sixth of the world's population.
In extraordinary hearings, government lawyers dredged up old rulings to argue Indians did not have a fundamental right to privacy. "It's a very dramatic thing when a government goes to court and says that," Ramanathan said. "It sets the government against the people."
In recent months, government notices said as part of the Aadhaar program, Indians would have to use a 12-digit unique identification number, known as the UID, to participate in almost every aspect of civic life — filing income tax returns, applying for railway job s or opening bank accounts.
Government rules especially targeted the poorest and most vulnerable sections of society, Ramanathan said, by restricting access to services such as free midday meals and allowances for tuberculosis patients.
Unlike social security numbers, UIDs would be accessible to various government agencies and private organizations. In recent months, government websites have mistakenly released thousands of UIDs.
"They want a system where you'd have to enter that number to get basic things you were entitled to, where you'd have to give your thumbprint to get your rations, your wages which you'd worked for, or pensions for the elderly," Ramanathan said.
Reetika Khera, an economist at the Indian Institute of Technology Delhi, said the government could potentially use Aadhaar as a surveillance program. "They will be able to say, for example, that I went on the train from Delhi to Jharkhand, where I got off, withdrew so much cash, then went to forest of Mahuadanr and conclude that she must be funding Naxalites [an insurgent rebel group] whereas I've actually gone to supervise research in the forest."
"Even during the Emergency we didn't have that," Ramanathan said, referring to the period from 1975-1977 when the government ruled by decree. "During the Emergency, they took away citizens' ability to defend their right to privacy in court. Here they're trying to take away the right itself."
A spokesman from the Unique Identification Authority of India, which oversees Aadhaar, said the agency would comment only after the full judgment had been released.