Parental Salary Alone Can't Decide OBC Creamy Layer Status : Supreme Court

In an important judgment, the Supreme Court has held that 'creamy layer' status for reservation under the Other Backward Classes (OBC) category cannot be determined solely on the basis of parental income, without reference to the posts and status held by the parents in their organisations.Dismissing a batch of appeals filed by the Union of India, a bench comprising Justice PS Narasimha and Justice R Mahadevan granted relief to several UPSC candidates, who were denied appointments despite clearing the Civil Service Examinations, as they were wrongly included in the creamy layer category.The Court held that the authorities had incorrectly applied an income/wealth-based test to exclude them from the non-creamy layer, instead of applying the prescribed status-based criteria to determine whether the candidate falls within the OBC Creamy Layer."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 judgment authored by Justice Mahadevan stated.Background of the CaseThe dispute arose from several Civil Services Examination candidates who claimed reservation under the OBC Non-Creamy Layer category.While verifying their eligibility, the Department of Personnel and Training (DoPT) treated them as belonging to the creamy layer after considering their parents' salary income. Many of these parents were employees of public sector undertakings (PSUs), banks or similar organisations.The government relied on a 14 October 2004 clarificatory letter, which stated that where equivalence between PSU posts and government posts had not been determined, salary income could be separately considered under the income/wealth test.On this basis, candidates whose parents earned above the prescribed income threshold were denied OBC reservation benefits.Several candidates challenged the decision before the Central Administrative Tribunal, and the Madras, Delhi and Kerala High Courts. They argued that the sole application of income test was against the 1993 Office Memorandum, which excluded the inclusion of parental salary to determine creamy layer status. The High Courts ruled in their favour. The Union government appealed those rulings before the Supreme Court.What did 1993 OM say?The 1993 OM was formulated in pursuance of the landmark Indira Sawhney judgment. It provided that certain socially advanced sections within OBCs would be excluded from reservation benefits based primarily on the status of the parents' posts. For instance, children of Group A (Class I) officers and certain Group B officers who are promoted to Group A before the age of 40 are treated as belonging to the creamy layer. The OM also extended similar exclusion to children of persons holding equivalent or comparable positions in public sector undertakings, banks, universities and private employment, once such equivalence with government posts is determined.The OM also introduced a residual “Income/Wealth Test” (Category VI) to identify creamy layer cases where status-based criteria do not apply. Under this test, families whose gross annual income from sources other than salary and agricultural land exceeded the prescribed ceiling for three consecutive years would be treated as creamy layer. Crucially, the OM clarified that income from salary and agricultural land should not be clubbed with income from other sources while applying this test. Thus, the 1993 policy treated status or position of the parent as the primary indicator of social advancement, while income served only as a secondary filter in limited situations.Regarding the 1993 OM, the Supreme Court observed, " 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."What did 2004 Clarification say?Para 9 of the 14 October 2004 clarification deals with cases where the parent of an OBC candidate works in organisations such as PSUs, banks, universities or private entities, and the government has not yet determined whether the parent's post is equivalent to a government post (such as Group A or Group B). It states that in such situations, the creamy layer status should be determined using an income test. Under this test, the parents' salary income and income from other sources (excluding salary and agricultural income) must be assessed separately. If either the salary income alone or the income from other sources alone exceeds ₹2.5 lakh per year for three consecutive years, the candidate will be treated as belonging to the creamy layer.The Court found fault with this approach of the 2004 clarification. The judgment observed :"Thus, 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."The ...

Parental Salary Alone Can't Decide OBC Creamy Layer Status : Supreme Court

Yash Mittal

The status as well as the category of post to which a candidate's parent or parents belong is essential, the Court noted.

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