Creamy layer in OBC quota cannot be decided solely on parents' income: SC

Top court says income alone cannot determine OBC creamy layer status; parental post and service category must also be considered

In a significant ruling, the Supreme Court (SC) on Thursday held that the “creamy layer” status for reservation under the Other Backward Classes (OBS) reservation policy cannot be determined solely on the basis of parental income, noting that the status and category of posts held by parents must also be considered.

 

A bench of Justice PS Narasimha and Justice R Mahadevan delivered the ruling while dismissing civil appeals filed by the Union government, the Ministry of Personnel and Training (MoPT). The appeals challenged decisions of the Central Administrative Tribunal (CAT) and various High Courts that had granted relief to certain OBC candidates who had cleared the Union Public Service Commission (UPSC) Civil Services examination, but were denied appointments after being classified under the creamy layer category, reported Live Law.

 

 

The earlier rulings held that candidates could not be excluded from reservation benefits solely because their parents’ salary income exceeded the prescribed limit. The top court upheld these rulings and granted relief to several UPSC candidates.

 

What did the Supreme Court say?

 

The court held that authorities had wrongly applied an income-based test to determine creamy layer status instead of applying the status-based criteria laid down in government policy.

 

“Mere determination of the status of a candidate as to whether he or she falls within the creamy layer or the non-creamy layer of the OBCs cannot be decided solely on the basis of income,” the judgment authored by Justice Mahadevan stated, reported Live Law.

 

The bench emphasised that income should not be treated as the sole criterion and that the nature of the parents’ employment and the category of posts they hold are central to determining whether a candidate belongs to the creamy layer.

 

Dispute over interpretation of 1993 policy

 

At the centre of the case was the interpretation of the Office Memorandum (OM) on OBC creamy layer identification, which laid down the framework for identifying socially advanced sections among OBCs, along with a clarificatory government letter issued on October 14, 2004.

 

The 1993 memorandum created a structured mechanism to identify socially advanced individuals within OBC communities. It excluded from reservation the children of individuals holding high-ranking government posts such as Group A/Class I and certain Group B/Class II positions, treating advancement in the service hierarchy as a sign of social progression.

 

The policy also introduced an income or wealth test as an additional method of exclusion, particularly in cases where equivalence between government posts and positions in other organisations had not been formally established.

 

The dispute arose after authorities treated several candidates as belonging to the creamy layer solely because their parents’ salary income exceeded the prescribed limit. Currently, the income threshold used to determine creamy layer status stands at ₹8 lakh per annum.

 

The Union government argued that a combined reading of the 1993 memorandum and the 2004 clarificatory letter allowed authorities to treat candidates as part of the creamy layer purely on the basis of their parents’ salary income, especially when those parents worked in organisations outside the government service structure.

 

The 2004 letter had explained that where equivalence between PSU posts and government posts had not been determined, authorities could examine salary income and income from other sources separately. It stated that if either the salary income alone or income from other sources exceeded ₹2.5 lakh per year for three consecutive years, the candidate could be treated as belonging to the creamy layer. 

 

Why the court rejected the income-only test

 

Rejecting the government’s interpretation, the SC said the framework established by the 1993 policy was primarily status-based, with income functioning only as a supplementary factor in limited situations. The court observed that interpreting the 2004 letter in isolation would distort the scheme of exclusion envisaged under the original policy.

 

“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 memorandum,” the court noted.

 

It further clarified that income from salary, agriculture or other sources cannot be mechanically aggregated to determine creamy layer status. The court also referred to the constitutional principles articulated in the landmark Indra Sawhney v Union of India judgment, which recognised the concept of excluding the socially advanced sections within OBCs from reservation benefits.

 

Background of the case

 

The dispute arose from several candidates who appeared in the civil services examination and claimed reservation under the OBC non-creamy layer category. During verification, the Department of Personnel and Training (DoPT) classified them as belonging to the creamy layer after considering their parents’ salary income, many of whom were employed in public sector undertakings, banks and similar organisations and hence these candidates were denied the OBC reservation benefits.

 

The candidates challenged the decision before the CAT and later several high courts, which ruled that OBC applicants could not be denied reservation benefits solely because their parents’ salary income crossed the prescribed limit. The Central government subsequently appealed these rulings before the SC.

 

Equality concerns raised by the court

 

The SC also examined whether the government’s interpretation resulted in unequal treatment. It noted that government employees in Group C and Group D posts are not automatically excluded from reservation benefits even if their salaries increase over time. However, under the government’s interpretation, children of employees in PSUs or private organisations could be excluded solely because their parents’ salary crossed the income threshold. The court held that such a distinction would be unconstitutional.

 

Directions issued by the court

 

Dismissing the appeals filed by the Central government, SC directed authorities to reconsider the claims of the affected candidates in accordance with the principles laid down in the judgment.

 

The court asked the authorities to complete the process within six months. It also permitted the creation of supernumerary posts to accommodate candidates who qualify as belonging to the non-creamy layer under the clarified framework.