OBC Reservation: Supreme Court Says Salary Alone Not Enough To Determine Creamy Layer

The Supreme Court, in Union of India and Others v. Rohith Nathan and Another, has clarified that determining the “creamy layer” status under the OBC reservation category cannot be based only on parental salary. The Court held that the status and nature of the parents’ posts must also be considered.

A Bench comprising Justice PS Narasimha and Justice R Mahadevan delivered the judgement while dismissing appeals filed by the Union government. The case involved several candidates who cleared the Civil Services Examination but were denied appointment after being treated as belonging to the OBC creamy layer.

The dispute arose when the Department of Personnel and Training (DoPT) classified certain candidates as creamy layer based on their parents’ salary income. Many of the parents worked in public sector undertakings, banks and similar organisations.

Because their salaries crossed the prescribed income limit, authorities excluded the candidates from OBC reservation benefits. The affected candidates challenged the decision before the Central Administrative Tribunal and later before the Madras, Delhi and Kerala High Courts.

The High Courts ruled in favour of the candidates. They held that applying the income test alone was contrary to the policy framework laid down by the Government in 1993. The Union government then approached the Supreme Court against these rulings.

The Court examined the 1993 Office Memorandum (OM) issued after the landmark Indira Sawhney judgement. This policy established that creamy layer exclusion should primarily depend on the status and category of posts held by the parents.

For example, children of Group A officers and certain Group B officers promoted before the age of forty are treated as belonging to the creamy layer. Similar rules apply to comparable positions in PSUs, banks, universities and private organisations once equivalence with government posts is determined.

The policy also introduced a separate “Income/Wealth Test” to identify creamy layer cases in limited situations. Importantly, it clarified that salary income and agricultural income should not be combined with income from other sources while applying this test.

However, the government relied on a 2004 clarificatory letter, which allowed authorities to determine creamy layer status using salary income when equivalence between PSU posts and government posts had not been established.

The Supreme Court held that this approach was legally incorrect. It observed that creamy layer determination cannot rely solely on income brackets while ignoring the status and service category of parents.

The Court stated, “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.”

It further clarified that salary income cannot be mechanically aggregated in a way that undermines the constitutional objective of reservation policies.

Another concern raised by the Court was the risk of unequal treatment. If salary alone became the test, children of PSU or private employees could lose reservation benefits, while children of government employees with similar positions might still remain eligible.

The Court said such an interpretation would violate the equality principle under Articles 14 and 16 of the Constitution by treating similarly placed individuals differently.

“A clarificatory instruction cannot introduce a substantive condition that does not exist in the parent policy,” the Court emphasised while examining the 2004 letter.

The Court ultimately upheld the High Courts’ decisions and dismissed the Union government’s appeals.

Authorities have now been directed to reconsider the affected candidates’ claims in line with the principles laid down in the judgement and complete the process within six months.

The Court also noted that supernumerary posts may be created where necessary to accommodate candidates who were wrongly denied appointments.