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.

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.

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. 

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.