The Supreme Court has ruled that salary income of parents working in Public Sector Undertakings (PSUs) cannot be used to determine whether a candidate belongs to the OBC creamy layer. Delivering a detailed judgment, the Court held that a 2004 clarification issued by the government cannot override the 1993 Office Memorandum (OM) that lays down the rules for identifying creamy layer status.
The decision came while hearing a batch of appeals filed by the Union of India against judgments of the Madras, Delhi and Kerala High Courts that had ruled in favour of candidates seeking OBC (Non-Creamy Layer) benefits in the Civil Services Examination.
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Background of the Case
The dispute arose from multiple cases where candidates who appeared in the Civil Services Examination claimed reservation under the OBC (Non-Creamy Layer) category.
In several instances, the Department of Personnel and Training (DoPT) treated these candidates as belonging to the creamy layer because their parents - employed in PSUs, banks or private organizations - earned salaries above the prescribed income limit.
For example, in one case, a candidate who secured a high rank in the Civil Services Examination sought allocation to the Indian Foreign Service under the OBC category. However, authorities classified him as belonging to the creamy layer because his father’s salary exceeded the prescribed limit.
Similarly, other candidates were denied OBC reservation benefits after the government counted their parents’ salary income while applying the “income/wealth test”.
Aggrieved candidates approached the Central Administrative Tribunal (CAT), which ruled in their favour. The High Courts of Madras, Delhi and Kerala later upheld those decisions, prompting the Union of India to approach the Supreme Court.
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Key Legal Issue
The central question before the Supreme Court was whether the government’s clarificatory letter dated 14 October 2004 could be used to include parental salary income while determining creamy layer status.
The candidates argued that the original Office Memorandum dated 8 September 1993, which implemented the creamy layer principle after the Mandal judgment, clearly excluded salary and agricultural income while applying the income test.
According to them, the 2004 clarification altered this framework without proper authority and created discrimination between children of government employees and those of PSU employees.
Court’s Observations
The Supreme Court examined the constitutional framework governing reservations and the evolution of the creamy layer principle.
The Court noted that the concept of excluding the creamy layer was crystallised in the landmark Mandal judgment, which aimed to ensure that reservation benefits reach the truly backward sections of society.
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It observed that the 1993 Office Memorandum was issued after extensive deliberations and was based on recommendations of an expert committee formed following that judgment.
Significantly, the Court pointed out that the 1993 OM excluded income derived from salary and agricultural land while applying the income or wealth test for determining creamy layer status.
The bench also examined the government’s 2004 clarification, which had directed authorities to include salary income in certain situations, particularly for employees of PSUs or similar organizations.
On this point, the Court observed:
“A clarificatory letter cannot override or dilute the provisions contained in the Office Memorandum which lays down the criteria for identifying the creamy layer.”
The Court further noted that applying different criteria to children of PSU employees and government employees could result in hostile discrimination, which would be inconsistent with the constitutional guarantee of equality.
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Court’s Decision
After examining the legal framework and previous judgments, the Supreme Court dismissed the appeals filed by the Union of India.
The Court held that the 1993 Office Memorandum governing creamy layer determination must prevail, and the clarificatory letter dated 14 October 2004 cannot override it.
Consequently, the Court upheld the judgments of the Madras, Delhi and Kerala High Courts that had ruled in favour of the candidates.
The ruling effectively means that the salary income of parents working in PSUs or similar institutions cannot be used as a decisive factor to deny OBC (Non-Creamy Layer) reservation benefits in such cases.
Case Title: Union of India & Others v. Rohith Nathan & Others (and connected matters)
Case No.: 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
Decision Date: 11 March 2026
