Kiran Raj

The Supreme Court Division Bench of Justice P.S. Narasimha and Justice R. Mahadevan held that the creamy layer status of candidates seeking OBC reservation cannot be decided solely on the basis of parental salary income, without regard to the category or grade of post held by the parent. Dismissing a batch of appeals filed by the Union of India, the Court granted relief to several UPSC civil services candidates who had been denied reservation benefits after being classified as falling within the creamy layer on the basis of their parents' salary drawn from Public Sector Undertakings.

The dispute arose from the denial of OBC Non-Creamy Layer reservation benefits to several candidates who had qualified the Union Public Service Commission Civil Services Examinations across different years. The parents of these candidates were employed in Public Sector Undertakings, state PSUs, or private organisations. Since formal equivalence of their parents' posts with corresponding Government service posts had not been established, the Department of Personnel and Training applied the Income/Wealth Test under Category VI of the Office Memorandum dated 08.09.1993, read with a clarificatory letter dated 14.10.2004. As parental salary income exceeded the prescribed threshold, the candidates were classified as falling within the creamy layer.

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The Union of India contended that the 2004 letter validly clarified the 1993 Office Memorandum, and that salary income was a relevant criterion where post-equivalence remained undetermined. The candidates countered that the 1993 Office Memorandum expressly excluded salary income from the Income/Wealth Test, and that the 2004 letter, issued without proper authority or consultation, could not override it. They further argued that treating PSU employees' wards differently from Government servants' wards constituted hostile discrimination under Articles 14, 15, and 16 of the Constitution.

The Court observed that a mere government letter cannot override or supersede an Office Memorandum issued in exercise of executive power, stating that "a clarificatory instruction cannot introduce a substantive condition that does not exist in the parent policy. If it travels beyond explanation and alters rights or liabilities, it ceases to be clarificatory and assumes the character of an amendment."

The Court recorded that the 1993 Office Memorandum's plain language kept salary income and agricultural income consciously outside the common pool, noting that "the plain language of these explanations makes it clear that salary income and agricultural income are consciously kept outside the common pool while determining exclusion under the Income/Wealth Test."

The Court further stated that "it is also evident from a comprehensive reading of the 1993 OM along with the clarificatory letter dated 14.10.2004 that income from salaries alone cannot be the sole criterion to decide whether a candidate falls within the creamy layer. The status as well as the category of post to which a candidate's parent or parents belong is essential." It added that "mere determination of the status of a candidate as to whether he/she falls within the creamy layer or the non-creamy layer of the OBCs cannot be decided solely on the basis of the income."

The Court observed that "salary income cannot be mechanically aggregated in a manner that defeats the constitutional objective articulated in Indra Sawhney."

On the architecture of the 2004 letter, the Court observed that "the entire architecture of paragraph 9 of the 2004 Letter is premised on a prior determination of equivalence. Income is intended to operate only as a surrogate measure in the absence of such equivalence; it cannot supplant the primary status-based framework embodied in the 1993 OM."

The Court further observed that "any attempt to read paragraph 9 of the 2004 Letter in isolation, so as to dilute or override the substantive scheme of the 1993 OM would be legally untenable. Overemphasis on the 2004 Letter to the extent of making income alone determinative without regard to parental status or category of service would defeat the structural framework of exclusion envisaged under the 1993 OM."

The Court stated that "determination of creamy layer status solely on the basis of income brackets, without reference to the categories of posts and status parameters enunciated in the 1993 OM is clearly unsustainable in law."

On the question of hostile discrimination, the Court observed that treating children of PSU employees differently from those of Government servants, solely on the basis of salary income and without reference to the grade or category of post held, "would certainly lead to hostile discrimination between parties who are similarly placed and would amount to equals being treated unequally, thereby attracting the rigour of the equality doctrine under Articles 14, 15 and 16, of which reservation is a facet."

The Court observed that "the object of excluding the creamy layer is to ensure that socially advanced sections within the OBCs do not appropriate benefits meant for the genuinely backward; it is not to create artificial distinctions between equally placed members of the same social class."

The Court also observed that "any interpretation of the 1993 OM or the 2004 Letter that results in unequal treatment of similarly placed OBC candidates would not only be legally erroneous but constitutionally impermissible."

Referring to the 21st Report of the Parliamentary Committee on Welfare of Other Backward Classes, the Court recorded that the Committee had observed that the 2004 letter "has done more to confuse the position than to clarify it" and that determining exclusion solely on the basis of salary income would not be consistent with the original framework of the 1993 Office Memorandum.

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The Court directed: "All the Civil Appeals are dismissed. The appellants are directed to consider the claims of the respondent candidates and intervenors in accordance with the principles laid down in this judgment, and to implement the same within a period of six months from the date of this judgment. There shall be no order as to costs. Pending application(s) including Intervention Applications, stand disposed of accordingly."

Case Title: Union of India and Others v. Rohith Nathan and Another, Etc.

Neutral Citation: 2026 INSC 230

Case Number: Civil Appeal Nos. 2827–2829 of 2018, Civil Appeal Nos. 3130–3141 of 2024, Civil Appeal arising out of SLP (C) No. 17651 of 2022

Bench: Justice P.S Narasimha and Justice R. Mahadevan