Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
2026 INSC 230
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 2827 – 2829 of 2018
UNION OF INDIA AND OTHERS … APPELLANT(S)
VERSUS
ROHITH NATHAN AND ANOTHER, ETC. … RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). 3130 – 3141 of 2024
UNION OF INDIA … APPELLANT(S)
VERSUS
KETAN AND OTHERS, ETC. … RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). OF 2026
[Arising out of SLP (C) NO. 17651 of 2022
UNION OF INDIA & ANOTHER … APPELLANT(S)
VERSUS
Signature Not Verified
Digitally signed by
SAPNA BISHT
Date: 2026.03.11
18:32:36 IST
Reason:
DR. IBSON SHAH. I. AND ANOTHER … RESPONDENT(S)
2
J U D G M E N T
R. MAHADEVAN, J.
Leave granted in SLP (C) No. 17651 of 2022.
2. This judgment deals with three matters arising out of separate orders
passed by different High Courts. Since the questions of law involved in all the
cases are substantially identical and common, they were heard together and are
being decided by this common judgment.
FACTUAL BACKGROUND
3. The facts giving rise to the respective appeals are set out below.
C.A. No(s). 2827 – 2829 of 2018 [Union of India & Ors. v. Rohith Nathan and
Anr. Etc.]
4. The present Civil Appeals have been filed against the common judgment
dated 31.08.2017 passed by the High Court of Judicature at Madras in W.P.
Nos. 6387, 6388 and 6389 of 2017, whereby the High Court dismissed the writ
petitions filed by the appellants and affirmed the common order dated
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12.01.2017 passed by the Central Administrative Tribunal , Chennai Bench in
O.A. Nos. 1133, 1132 and 1375 of 2014.
4.1. Respondent No. 1 in CA. Nos. 2827 and 2828 of 2018, Rohith Nathan,
secured All India Rank 174 in the Civil Services Examination, 2012 under the
OBC category. His father was employed in a private organisation namely M/s.
1
For short, “CAT”
3
HCL Technologies Ltd., and was drawing a salary exceeding the prescribed
creamy layer limit under the extant guidelines. On that basis, he was treated as
falling within the creamy layer. Though he was recommended by the UPSC as a
General Merit candidate and allocated to the Indian Police Service against an
unreserved vacancy, Respondent No. 1 sought benefit of OBC reservation and
allocation to the Indian Foreign Service against the vacancy reserved for OBC
candidates by treating him as OBC (Non-Creamy Layer) candidate. He
accordingly filed O.A. No. 1132 of 2014 before the CAT, Chennai seeking a
direction for allotment to the Indian Foreign Service as per his OBC rank in the
Civil Services Examination, 2012. He also filed O.A. No. 1133 of 2014 seeking
to quash the portion relating to Category II(C) in the Schedule to the Office
Memorandum dated 08.09.1993 (O.M. No. 36012/22/93-Estt (SCT)).
4.2. Respondent No. 1 in C.A. No. 2829 of 2018, G. Babu, appeared in the
Civil Services Examination, 2013 under the OBC category and secured Rank
629. His father was employed in a Public Sector Undertaking namely Neyveli
Lignite Corporation, as a Senior Executive Engineer. As his father’s salary
income exceeded the prescribed limit, he was also treated as falling within the
creamy layer under the applicable guidelines. To claim the benefit of OBC
reservation for allocation to a service against a vacancy reserved for OBC
candidates, Respondent No. 1 filed O.A. No. 1375 of 2014 before the CAT,
Chennai Bench seeking reallocation to the Indian Police Service or any other
service as per his OBC rank.
4
4.3. The CAT, having heard the parties, held that under the Office
Memorandum dated 08.09.1993, income from salary and agricultural income
stood excluded from the Income / Wealth Test for determination of creamy layer
status. It further held that paragraph 9 of the clarificatory letter dated
14.10.2004, insofar as it directed inclusion of salary income of PSU and private
sector employees under Category II(C), resulted in hostile discrimination
between the wards of Government servants and those of PSU/private sector
employees. By its common order dated 12.01.2017, the CAT allowed all three
Original Applications and directed as follows:
"We direct the DoPT to withdraw the clarification in para 9 of the OM dated
14.10.2004 to the extent it is made applicable to II-C and reformulate it
appropriately in the light of the observations made herein within a period of
three months. The respondents are also directed to reallocate the service of the
two applicants on the basis of their OBC status within a period of three months
from the date of receipt of a copy of this order."
4.4. Aggrieved, the Union of India and others filed W.P. (C) Nos. 6387, 6388
and 6389 of 2017 before the High Court of Madras. By common judgment dated
31.08.2017, the High Court dismissed all three writ petitions primarily on two
grounds:
(i) The failure of the Union of India to formulate an equivalence /
comparability test resulted in placing the sons and daughters of PSU
employees at a disadvantage compared to similarly placed
Government servants; and
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(ii) When salary income of parents serving in State/Central Government in
Group C and D posts, or those entering Group B and A posts, after
attaining the age of 40 years, was not considered for creamy layer
determination, inclusion of salary income of PSU employees under
Category II-C introduced an element of hostile discrimination.
4.5. Challenging the aforesaid common judgment, the appellants have
preferred the present Civil Appeals.
C.A. No(s). 3130 – 3141 of 2024 [Union of India v. Ketan and others etc.]
5. The present batch of Civil Appeals has been preferred against the
common judgment dated 22.03.2018 passed by the High Court of Delhi at New
Delhi in W.P. Nos. 3073 – 3084 of 2017. By the said judgment, the High Court
disposed of the writ petitions, set aside Letter No. 36033/5/2004- Estt. (Res.)
dated 14.10.2004, and directed the appellants to verify the creamy layer status of
the respondent candidates (except Sagar Chourasia, who had already been
selected) strictly in terms of Office Memorandum dated 08.09.1993.
5.1. According to the appellants, the respondents had appeared in the Civil
Services Examination, 2015 claiming reservation under the OBC (non-creamy
layer) category. The parents of all respondent candidates were PSU employees,
bank employees or otherwise fell under Category II(C) of the Schedule to the
2
Office Memorandum dated 08.09.1993 . The candidates were recommended by
2
For short, “1993 OM”
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the UPSC for service allocation. While forwarding their dossiers, UPSC
requested verification of their creamy layer status.
5.2. Upon verification, it was found that equivalence of their parents’ posts
qua Government posts had not been established. Accordingly, applying the
1993 OM read with the clarificatory letter dated 14.10.2004, the department
applied the “income / wealth test” under Category VI and computed the parents’
salary income for the preceding three years. Since the income exceeded the
prescribed ceiling, the respondents were treated as falling within the creamy
layer. Consequently, by publication dated 22.06.2016, the respondents were
denied allocation under the OBC category.
5.3. Challenging the same, the respondent candidates filed W.P. Nos. 3073 –
3084 of 2017 before the Delhi High Court inter alia seeking quashment of the
clarificatory letter dated 14.10.2004 and issuance of a direction for allocation of
services treating them as OBC (Non-Creamy Layer) candidates.
5.4. During the pendency of the matter, the Union of India issued Office
Memorandum No. DPE-GM-/0020/2014-GM-FTS-1740 dated 25.10.2017,
clarifying gradation and creamy layer criteria in Central Public Sectors
Enterprises, indicating that Board level and Managerial-level posts (below
Board level) subject to the proviso that executives whose annual income as per
1993 OM was less than Rs. 8 lakhs, would not fall under the creamy layer.
5.5. By the impugned judgment dated 22.03.2018, the Delhi High Court
disposed of the writ petitions, by holding that the 1993 OM contemplated
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consideration only of income from “other sources” for applying the Income /
Wealth Test where equivalence had not been established. It further held that the
clarificatory letter dated 14.10.2004 impermissibly introduced salary income as
a determinative factor and lacked rational basis. Consequently, the High Court
set aside the letter dated 14.10.2004 and directed re-verification strictly in
accordance with the 1993 OM.
5.6. Pursuant thereto, the appellants issued a speaking order dated 22.05.2018
reconsidering the matter under the 1993 OM, but again rejected the claim of
Non-Creamy Layer status by taking into account parental salary. Certain
respondents thereafter filed Contempt Petition (C) Nos. 684/2018, 972/2018 and
973/2018 before the Delhi High Court, in which notices were issued.
5.7. Apprehending coercive proceedings, the appellants have preferred the
present appeals.
Civil Appeal @ SLP (C) No. 17651 of 2022 [Union of India & Anr. v. DR.
Ibson Shah. I. and Anr.]
6. This Civil Appeal challenges the final judgment dated 25.02.2022 passed
by the High Court of Kerala at Ernakulam in OP (CAT) No. 94 of 2021,
whereby the High Court declined to interfere with the order dated 13.10.2020
passed by the Central Administrative Tribunal, Ernakulam Bench in O.A. No.
718 of 2018.
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6.1. The UPSC had issued notification for the Civil Services Examination,
3
2016 and the Department of Personnel and Training notified the detailed rules
vide Gazette Notification dated 27.04.2016. Rule 24 required candidates to
possess requisite certificates in the prescribed format for OBC reservation. Rule
25 stipulated that OBC status, including creamy layer determination would be
reckoned as on the closing date of applications.
6.2. Respondent No. 1 appeared in the Civil Services Examination, 2016 and
the Civil Services Examination, 2017 under the OBC category and secured
Rank 540 (2016) and Rank 620 (2017). His father had been directly recruited as
a Lower Division Clerk (Group C) in the Legal Metrology Department,
Government of Kerala, and died in 2012. His mother was directly recruited as
Junior Assistant (Group C clerical cadre) in Kerala State Financial Enterprises
(KSFE), a State PSU.
6.3. Upon verification, DoPT found that the mother, being employed in a PSU
under Category II(C), earned salary exceeding Rs. 6 lakhs per annum for three
consecutive years (as revised by the Office Memorandum dated 27.05.2013).
Accordingly, Respondent No. 1 was treated as falling within the creamy layer.
In CSE-2017 he was denied allocation; in CSE-2016 he was treated as a General
Merit candidate and allocated Indian Defence Accounts Service (IDAS) vide
letter dated 21.08.2017.
3
For short, “DoPT”
9
6.4. Aggrieved, Respondent No. 1 filed O.A. No. 718/2018 before the CAT,
Ernakulam, which ruled in his favour on 13.10.2020. The High Court of Kerala
affirmed the same and dismissed OP(CAT) No. 94/2021 filed by the appellants,
on 25.02.2022, inter alia holding that:
• The respondent possessed a valid OBC-NCL certificate before the cut-off
date;
• Both parents were Group C entrants (clerical cadre) below Group A and
B;
• Under Category II of the 1993 OM, mere parental service in a PSU could
not lead to creamy layer exclusion;
• The comparability exercise under Category II(C) was transitional;
• The Government’s failure to determine equivalence could not prejudice
candidates; and
• Denial of OBC-NCL status to wards of PSU employees, while granting it
to similarly placed Government servants, would constitute hostile
discrimination.
Therefore, the appellant, Union of India, is before this Court with the present
appeal.
SUBMISSIONS OF THE PARTIES
7. The learned Additional Solicitor General of India appearing for the
appellant in CA Nos. 2827 – 2829 of 2018 / Union of India submitted that the
impugned judgment dated 31.08.2017 passed by the High Court of Madras in
W.P. Nos. 6387, 6388 and 6389 of 2017 is ex facie unsustainable in law and
10
deserves to be set aside. It was urged that the exclusion of persons falling within
the Creamy Layer is aimed at ensuring that reservation benefits are not extended
to those who are no longer backward. Any legislative or executive action to
remove such persons, individually or collectively, cannot be constitutionally
invalid but is in consonance with the principle laid down by this Court in Indra
4
Sawhney v. Union of India and others . This Court in Indra Sawhney v. Union
5
of India and others , explained the rationale underlying the rule of exclusion of
the Creamy Layer, holding that non-exclusion thereof would amount to
discrimination and violation of Articles 14 and 16, inasmuch as unequals cannot
be treated as equals. It was further submitted that the Union of India was fully
competent and empowered to issue the clarificatory letter dated 14.10.2004 in
order to ensure that the intended benefits of reservation reach the truly deserving
candidates among the backward classes. To sustain the spirit of the
constitutional provisions of equality, it is obligatory on the State to identify the
most deserving candidates, as the State is obliged to remove inequalities and
backwardness from society. If non-deserving candidates are given the benefit of
reservation, it would breach the spirit of the constitutional provision. Reliance
6
was also placed on the decision in Ashok Kumar Thakur v. Union of India ,
wherein this Court held that the Government should not proceed on the basis
4
1992 Supp (3) SCC 217
5
(2000) 1 SCC 168
6
(2008) 6 SCC 1
11
that once a class is considered backward, it should continue to be backward for
all times, as such an approach would defeat the very purpose of reservation.
7.1. The learned counsel further submitted that the respondents have reached a
comparatively higher level of social advancement and economic status, and
therefore, as a matter of law, the declaration of such persons as being
non-entitled to be treated as backward is sustainable. The Department has
rightly considered the respondents as falling under the Creamy Layer, and
vacancies reserved for OBC candidates are earmarked and allocated to other
non-Creamy Layer candidates who are eligible and entitled.
7.2. It was contended that the High Court erred in dismissing the writ petitions
solely on the ground of alleged discrimination between wards of PSU
employees and wards of Government employees, without examining the merits
of the individual cases decided by the Tribunal. The income from the salary of
the parents of the respondents was not considered by the High Court while
deciding the case. The delay in determination of equivalence between PSU
employees and Government employees should not result in providing an undue
advantage to the respondent candidates who belong to a comparatively higher
strata of the OBC category by virtue of their parents’ salary income as this
would deny the benefit of reservation to deserving candidates.
7.3. It was further contended that the 1993 OM has been upheld by this Court
in Ashok Kumar Thakur (supra) , and the High Court erred in holding that the
1993 OM and the clarificatory letter dated 14.10.2004 bring about hostile
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discrimination. Clause II-C of the Schedule to the 1993 OM clearly states that
employees in PSUs, banks, insurance organisations, universities etc. are to be
treated on the same footing as Government employees, and pending evaluation
of equivalence, the criteria specified in Category VI would apply. All candidates
producing certificates for claiming the benefit of reservation under the OBC
Non-Creamy Layer category must undergo all six tests given in the Schedule to
the 1993 OM to determine their Creamy Layer status. The service status of the
parents of persons employed in PSUs or private enterprises, in which
equivalence has not been established vis-à-vis Government services is
determined by the quantum of salary that they receive.
7.4. It was submitted that the clarificatory letter dated 14.10.2004 was issued
only to clarify the procedure to be adopted for applying the income / wealth test
in the case of sons and daughters of parents employed in PSUs, etc., where
equivalence has not been established. The High Court erred in holding that para
9 of the letter was not in consonance with the 1993 OM. The timely rise in the
income of Government servants through successive Pay Commissions has not
erased the importance of the social status criteria to be adopted in their case. For
determining Creamy Layer status, the sons and daughters of Government
servants undergo both social and economic tests, whereas those of PSU and
private employees undergo only the economic test.
7.5. The learned counsel further contended that an appointment given to a
non-eligible candidate deprives an eligible Non-Creamy Layer OBC candidate
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of appointment. The judgment of the High Court is contrary to the established
policy of the Government. This Court has held that it is not within the domain of
the courts to embark upon an inquiry as to whether a particular public policy is
wise or acceptable, or whether a better policy could be evolved. Such a policy
decision would normally not be interfered with unless it is capricious, arbitrary,
or offends Article 14.
7.6. It was thus submitted that the 1993 OM and the letter dated 14.10.2004
form part of a consistent and constitutionally sound framework for the
identification of the creamy layer, and that the inclusion of salary in gross
annual income aligns with the principle of substantive equality and prevents
distortion of the reservation system. Further, it was contended that the exclusion
of salary would subvert the constitutional goal of social justice, lead to reverse
discrimination, and create administrative chaos, thereby undermining the rights
of genuinely backward OBC candidates.
7.7. On these grounds, the learned counsel prays that the impugned judgment
of the High Court dated 31.08.2017 deserves to be quashed and that the
respondents be declared as falling within the Creamy Layer and not entitled to
reservation benefits under the OBC category.
8. The learned senior counsel appearing for Respondent No.1
(Rohith Nathan) submitted that the 1993 OM carries the authority of law, having
been issued pursuant to the directions in Indra Sawhney and others v. Union of
14
7
India and others after due deliberation by an Expert Committee, parliamentary
scrutiny, and inter-ministerial consultation. He pointed out that the Expert
Committee had evolved criteria for the exclusion of socially advanced persons
from the benefit of reservation for OBCs, with emphasis on social status and
high income from business, profession, or other sources, while expressly
excluding income derived from salary and agricultural land. The report of the
Committee was laid before both Houses of Parliament and formally accepted by
the Government, and the 1993 OM was issued after vetting by the Law Ministry
and consultation with the Ministry of Social Justice & Empowerment.
8.1. In contrast, the learned senior counsel submitted that the clarificatory
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letter dated 14.10.2004 was issued without consultation, deliberation, or any
traceable administrative record, and by the DoPT, which was not the competent
authority under the Allocation of Business Rules, 1961. He referred to RTI
responses confirming that no consultation with the Ministry of Social Justice &
Empowerment preceded the issuance of the 2004 letter, and that the file notings
were not traceable. He therefore contended that the 2004 Letter is non est in law
and cannot override or dilute the binding effect of the 1993 OM.
8.2. The learned senior counsel further submitted that the implementation of
the 1993 OM itself demonstrates that salary and agricultural income are
excluded from the income/wealth test. He referred to the DoPT’s Office
7
1992 Supp (3) SCC 217
8
For short, “2004 Letter”
15
Memorandum dated 15.11.1993 annexing a model application form which
expressly excluded salary and agricultural income, and pointed out that various
State Governments such as Andhra Pradesh, Telangana, and Tamil Nadu, as
well as statutory bodies including the National Commission for Backward
Classes and the Ministry of Social Justice & Empowerment, have consistently
followed this principle.
8.3. The learned senior counsel contended that it is incorrect for the
Government to submit that OBCs belonging to Category IIC of the 1993 OM
are to suffer exclusion until the equivalence of posts is conducted. The Expert
Committee had expressly recommended that, pending evaluation of equivalence
of posts in PSUs and other bodies, persons falling under Category IIC would
still be entitled to reservation, subject only to exclusion under Category VI by
application of the income/wealth test.
8.4. The learned senior counsel also submitted that the Government’s
interpretation of Explanation (i) to the income/wealth test is erroneous. The
Government has contended that either income from salary or income from
agricultural land is to be considered, but not both excluded, in determining
whether the monetary limit has been exceeded. He argued that this interpretation
is unsupported by reasoning, contrary to the consistent implementation of the
1993 OM, and inconsistent with the Union’s own stand in Neil Aurelio Nunes
16
9
v. Union of India . In that case, the Union distinguished OBC and EWS criteria
by clarifying that for OBCs, salary income is excluded, whereas for EWS, salary
income is included. Acceptance of the Government’s present stand would
obliterate this distinction, leading to arbitrariness and inconsistency.
8.5. Thus, the learned senior counsel urged that the 1993 OM, having statutory
force and having been consistently implemented, must prevail, and that the 2004
Letter, lacking authority, cannot dilute or override the settled criteria.
9. The learned counsel appearing for Respondent No. 1 (G. Babu) submitted
that the DoPT cannot question the validity of an OBC certificate once it has
been duly issued by the competent authority. He contended that DoPT is not the
authority empowered to issue or scrutinize OBC certificates. Under the DoPT
Office Memorandum dated 15.11.1993, the competent authorities for issuance
and verification of OBC certificates are District Magistrates, Collectors, Deputy
Commissioners, Sub-Divisional Magistrates, Tehsildars and other designated
revenue officers. These authorities are specially entrusted with determining
whether an applicant belongs to the OBC category and whether he or she falls
within the Creamy Layer, strictly in accordance with the criteria prescribed in
the Schedule to the 1993 OM.
9.1. The learned counsel emphasised that the model application form
appended to the 1993 OM mandates disclosure of detailed particulars regarding
9
(2022) 4 SCC 64
17
parental qualifications, employment, income, assets and wealth, which are
verified by the issuing authority. Further, the revised OBC certificate format
introduced by the DoPT’s Office Memorandum dated 30.05.2014 expressly
requires the certifying authority to declare that the candidate does not belong to
the Creamy Layer. The certificate is thus issued after comprehensive scrutiny of
contemporary data, including parental income for the preceding three financial
years. He contended that such certificates cannot be lightly disregarded or
questioned in a cavalier manner. Reliance was placed on Madhuri Patil v.
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Commissioner, Tribal Development , wherein this Court held that a social
status certificate remains valid unless it is found to be false or fraudulently
obtained pursuant to investigation by a duly constituted Scrutiny Committee.
9.2. The learned counsel further submitted that the 1993 OM issued pursuant
to the recommendations of the Mandal Commission, the directions of this Court
11
in Indra Sawhney and others v. Union of India and others , and the report of
the Expert Committee of the Ministry of Social Justice, comprehensively
delineates the categories falling within the Creamy Layer exclusion. He argued
that the Union of India seeks to rely upon the 2004 Letter; however, such a letter
cannot override or qualify the binding provisions of the 1993 OM. It was
submitted that while the 1993 OM excluded salary and agricultural income from
the income / wealth test, the 2004 Letter sought to include salary income in the
10
(1994) 6 SCC 241
11
1992 Supp (3) SCC 217
18
case of PSU employees, thereby introducing an artificial and hostile
discrimination between children of government servants and those of PSU
employees.
9.3. It was further submitted that it is settled law that a mere executive letter
cannot override or amend a subsisting Office Memorandum. In support, reliance
12
was placed upon R.P. Bhardwaj v. Union of India , wherein this Court held
that an operative Office Memorandum cannot be modified or curtailed through a
mere circulation of a letter. Reference was also made to K. Sampath v. State of
13
Tamil Nadu reiterating the same principle. Accordingly, the 2004 Letter was
contended to be devoid of statutory authority and incapable of diluting the
binding effect of the 1993 OM.
10. The learned counsel appearing for the Intervenors submitted that the
Intervenors adopt the oral and written submissions advanced on behalf of the
respondents. He urged that no separate or novel relief is required to be crafted.
The present Civil Appeals were instituted by the Union of India against
judgments of various High Courts, seeking direction to the DoPT to reallocate
services to the concerned applicants. In the event of dismissal of the appeals, the
said directions would revive, and the DoPT would be obligated to proceed with
reallocation and verification of OBC status in accordance with law.
12
(2005) 10 SCC 244
13
MANU/TN/9958/2006
19
10.1. The learned counsel submitted that the Union of India has been aware of
these directions since 2017, 2018 and 2022, and had in certain matters obtained
interim orders of stay. The Union was thus fully conscious that, if unsuccessful,
it would be required to implement the High Court directions. It cannot now
plead administrative inconvenience. He drew attention to the 21st Report of the
Parliamentary Committee on Welfare of Other Backward Classes (2018–19),
wherein representatives of the DoPT had informed the Committee that
supernumerary posts would be created to implement the decision of the Delhi
High Court dated 22.03.2018. It was argued that having undertaken to create
such posts, the Union cannot resile from its stated position upon dismissal of the
appeals.
10.2. The learned counsel further submitted that this Court in W.P.(C) No.
914/2016, by order dated 20.03.2017, had directed that candidates selected
through the Civil Services Examination, 2016 be notified that their selection and
seniority would remain subject to the outcome of litigation initiated by OBC
candidates. The DoPT complied with this direction by issuing an Office
Memorandum dated 20.12.2016. It was contended that delays in disposal of the
present batch were attributable to repeated adjournments sought by the Union of
India. In such circumstances, the Union cannot invoke equitable considerations
to avoid compliance with binding directions.
10.3. It was submitted that this Court possesses ample powers under Article
142 of the Constitution to direct creation of supernumerary posts where
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candidates have been wrongfully denied appointment or promotion. In this
regard, reliance was placed upon decisions including Sushma Gosain v. Union
14 15
of India , Dr. PPC Rawani v. Union of India , Union of India v. Vijay
16 17
Kumari , Dr. D.K. Reddy v. Union of India , Delhi Administration v. Nand
18 19
Lal Pant and Union of India v. Parul Debnath , wherein directions for
creation of supernumerary posts were issued in exceptional circumstances.
While acknowledging that cadre management ordinarily falls within the
executive domain, it was contended that in special situations, this Court may
exercise its plenary power to do complete justice.
10.4. Finally, it was urged that upon dismissal of the Civil Appeals and
application of the doctrine of merger, subordinate fora would be bound to apply
the ratio of this Court in the present batch, namely, that Creamy Layer status
must be assessed without reference to the 2004 Letter. Relegation would only
result in multiplicity of proceedings, delay and administrative uncertainty. Many
Intervenors have been litigating the issue for more than five years. It was
therefore submitted that this is a fit case for exercise of power under Article 142
to render complete justice by extending the benefit of the present decision to the
Intervenors, thereby conserving judicial and administrative resources and
minimizing disturbance to existing cadres and seniority positions.
14
(1989) 4 SCC 468
15
(1992) 1 SCC 331
16
1994 Supp (1) SCC 94
17
(1996) 10 SCC 177
18
(1997) 11 SCC 488
19
(2009) 14 SCC 173
21
11. The learned Additional Solicitor General of India for the appellant in CA.
Nos. 3130 - 3141 of 2024 / Union of India submitted that the Delhi High Court
fundamentally erred in construing Column 3 of the Schedule to the 1993 OM as
being confined merely to an "officer class" criterion.
11.1. It was further submitted that the High Court erred in holding that
Category VI of the 1993 OM excludes the component of “salary” entirely from
the expression “gross annual income”. According to the learned counsel, there
are three distinct components of income – income from salary, income from
other sources, and income from agriculture – and Explanation (a) to Category
VI merely prohibits the clubbing of salary and agricultural income with income
from other sources; it does not mandate exclusion of salary per se . The income
from each source, it was contended, must be assessed separately. If either the
income from salary or the income from other sources exceeds the prescribed
threshold for three consecutive years, the candidate would fall within the creamy
layer.
11.2. With respect to Category II-C of the 1993 OM, which pertains to
employees of PSUs, banks and similar institutions where equivalence with
Government posts has not been established, it was submitted that the 1993 OM
itself provides that pending evaluation of equivalence, the criteria specified
under Category VI, namely, the Income / Wealth Test, shall apply. In such
circumstances, Clause VI operates as the primary test for determination of
22
creamy layer, and exclusion of salary from consideration would render the test
otiose. The 2004 Letter, it was argued, merely harmonizes Paras 9 and 10 of the
1993 OM and does not override or amend the 1993 OM; rather, it clarifies that
in the absence of established equivalence, income from salary is relevant for
applying the income test.
11.3. It was further contended that a purposive interpretation must be given to
the expression “gross annual income”. Exclusion of salary of PSU or private
employees from consideration would lead to anomalous and absurd
consequences, whereby children of highly placed PSU executives drawing
substantial salaries could continue to claim non-creamy layer status merely
because their income from other sources falls below the threshold. Such an
interpretation, it was submitted, would defeat the constitutional principle of
qualitative exclusion recognized in Ashok Kumar Thakur (supra) and
reaffirmed subsequently, and would run contrary to the object underlying the
creamy layer doctrine.
11.4. The learned counsel contended that exclusion of the creamy layer is a
constitutional imperative and that the State possesses policy latitude in
identifying reasonable parameters for such exclusion. In the absence of
established equivalence between Government posts and PSU posts, there exists,
according to the Union, an intelligible differentia which justifies a distinct
method of applying the income test to Category II-C employees. The delay in
determining equivalence, it was submitted, cannot operate to confer an
23
unintended benefit upon comparatively advanced sections within the OBCs. It
was further argued that the High Court failed to consider the broader policy
framework and instead proceeded on an erroneous assumption of
discrimination, without appreciating that the income test under Category VI
would be rendered redundant if salary were excluded in cases where
equivalence had not been determined. Consequently, the impugned judgment,
which has the effect of nullifying the 2004 Letter and reopening settled
selections, was stated to be unsustainable in law and contrary to the
constitutional scheme governing OBC reservations.
12. The learned senior counsel for Respondent(s) in CA. Nos. 3130 – 3141 of
2024 submitted that the Constitution Bench in Indra Sawhney v. Union of
India (supra) directed the Union of India to specify appropriate socio-economic
criteria for excluding the socially advanced sections – commonly referred to as
the Creamy Layer – from the ambit of Other Backward Classes. Pursuant
thereto, the Government constituted the Ram Nandan Prasad Committee, whose
report was laid before both Houses of Parliament. The recommendations of the
Committee were accepted in toto and culminated in the issuance of the 1993
OM.
12.1. It was submitted that under the 1993 OM, the sons and daughters of
Government officers directly recruited to Class I posts, and those promoted
from Class II to Class I before the age of 40, were to be treated as falling within
24
the creamy layer. Children of employees in autonomous bodies, public sector
undertakings, banks, insurance organisations, universities and private
enterprises were to be considered creamy layer where their parents held posts
equivalent or comparable to those specified for Government servants. Further,
the income / wealth test prescribed that persons whose gross family income for
the preceding three years exceeded the notified threshold (Rs. 6,00,000 at the
relevant time; presently Rs. 8,00,000) would fall within the creamy layer.
Crucially, income from salaries and agricultural land was expressly excluded
from such computation.
12.2. Learned counsel emphasised that DoPT itself interpreted the 1993 OM as
excluding salary income, as reflected in its Office Memorandum dated
15.11.1993 and the Model Form appended thereto. The Model Form specifically
required disclosure of income excluding salary income. This form, it was
submitted, continues to be uniformly adopted by all certificate-issuing
authorities across the country without modification.
12.3. Reference was then made to the 2004 Letter. Paragraph 3 thereof
acknowledged that the criteria prescribed for Government servants were to
apply mutatis mutandis to similarly placed employees of PSUs, banks and other
organisations. Paragraph 10 reiterated that income from salaries and agricultural
land shall not be taken into account while applying the income / Wealth Test.
However, paragraph 9 of the same 2004 Letter, it was contended, introduced a
contradictory position by providing that where equivalence of posts had not
25
been determined, income from salaries and other sources was to be assessed
separately, and if either exceeded the prescribed limit, the candidate would be
treated as creamy layer. Agricultural income alone was excluded.
12.4. According to the learned counsel, paragraph 9 effectively introduced a
discriminatory regime whereby salary income would be counted in the case of
PSU employees and others falling within Category IIC, but not for Government
servants, armed forces personnel, or constitutional functionaries. The failure of
the Government to determine equivalence of posts could not justify imposing
dual income thresholds for Category IIC. Such an interpretation, it was argued,
runs contrary to the spirit of the Expert Committee’s report and the 1993 OM,
and may lead to anomalous results – disqualifying even the wards of lower-level
employees such as peons, drivers or typists solely on account of salary
progression.
12.5. It was further submitted that paragraph 9 of the 2004 Letter was not
operationalized until the Civil Services Examination 2015 and even thereafter
its implementation remained confined to the UPSC Civil Services Examination,
without adoption by other recruiting bodies. The interpretation is thus peculiar
to DoPT and lacks uniform application.
12.6. On the aspect of estoppel and legitimate expectation, learned counsel
contended that the Union of India is precluded from assailing the impugned
judgment of the Delhi High Court dated 22.03.2018, having complied with it by
issuing a Compliance Order dated 22.05.2018. Having accepted and acted upon
26
the judgment, the Union of India cannot now resile therefrom without first
recalling or withdrawing its compliance.
12.7. It was also urged that the Government cannot adopt a stand before this
Court diametrically opposed to its representations before Parliament, the
20
National Commission for Backward Classes and this Court in other
proceedings. Reliance was placed on:
1. Legal Opinion of the Law Secretary dated 06.02.2019 opining that pending
determination of equivalence, salary cannot be used as a criterion for Category
IIC and that such cases must fall for consideration under Clause VI(b).
2. The observations of the Parliamentary Committee recommending withdrawal
of the Union’s affidavit founded upon paragraph 9 of the 2004 Letter, as being
contrary to the Law Ministry’s advice and the NCBC’s stance.
3. The Tenure Report (2019-2022) of the NCBC holds that salary ought not to
be included in computing gross total income for creamy layer determination.
4. The affidavit filed by the Union in Neil Aurelio Nunes v. Union of India,
WP(C) No. 961 of 2021 (EWS matter), wherein it was specifically distinguished
that the Rs. 8 lakh thresholds for EWS includes salary income, whereas the
threshold for OBC creamy layer excludes salary income.
5. The inconsistency between the stand taken in the EWS matter and the
position now advanced in Union of India v. Ketan (Civil Appeal No. 3130 of
2024).
20
For short, “NCBC”
27
12.8. On the strength of these representations, it was argued that a legitimate
expectation has arisen that the Government would maintain consistency in its
stand. Any deviation would not only defeat such expectation but also undermine
parliamentary accountability and the constitutional principle of collective
responsibility.
12.9. Lastly, learned counsel submitted that this Court by order dated
28.11.2016 in WP(C) No. 914 of 2016 and connected matters, directed that all
subsequent selections would be subject to the final outcome of the pending
petitions. The matters were transferred to the Delhi High Court, which rendered
its judgment on 28.03.2018. The same was complied with on 22.05.2018. The
present appeals were filed after a delay of more than 600 days, without
withdrawal of the compliance order. In these circumstances, the concurrent
findings of the CAT, Madras Bench; the Delhi High Court; the Madras High
Court; and the Kerala High Court warrant affirmation along with consequential
relief.
13. Adding further, it was submitted on behalf of the appellant in SLP (C)
No. 17651 of 2022 that the 1993 OM expressly employs the expression “gross
annual income” and therefore, the Kerala High Court erred in inferring that only
“income from other sources” forms the basis for determination of creamy layer
status in the case of PSU employees where equivalence has not been
established. According to the learned counsel, such an interpretation is contrary
28
to the spirit and consistent understanding of the 1993 OM, as clarified on
multiple occasions by the Reservation Division, and amounts to reading into the
1993 OM, a restriction which it does not contemplate.
13.1. It was further submitted that equivalence of posts in State PSUs vis-à-vis
Central or State Government posts has not yet been comprehensively
undertaken, as the exercise involves complex comparative assessment of a
multitude of posts across States and Union Territories, differing pay structures,
service conditions, and attendant perks and privileges. It was contended that
precisely to address such contingencies, the 1993 OM provides under Category
VI for application of the Income / Wealth Test pending evaluation of
equivalence, and that this mechanism ensures continued implementation of the
creamy layer principle even in the absence of formal equivalence.
13.2. The learned counsel also assailed the Government Order dated
31.05.2018 issued by the State of Kerala purporting to determine equivalence in
respect of posts in the Kerala State Financial Enterprises, contending that the
said order was passed on the basis of an individual representation and not as a
policy decision founded upon objective and quantifiable data. It was urged that
such an exercise is not in consonance with the principles laid down in Indra
21
Sawhney and others v. Union of India of others , which require identification
of socially and educationally backward classes based on objective criteria and
quantifiable data before extending reservation benefits.
21
1992 Supp (3) SCC 217
29
13.3. It was further submitted that in any event, even assuming the validity of
the Government Order dated 31.05.2018, the said equivalence determination
came into existence subsequent to the relevant selection process and was not in
force at the time of consideration of the respondent’s candidature. Reliance was
placed on Rule 10 of the Civil Services Examination Rules, 2017, to contend
that candidates seeking reservation benefits must be in possession of requisite
and valid certificates in support of their claim as on the closing date of the
application, i.e. 17.03.2017. Since the equivalence, even if assumed valid, was
not operative on the relevant date, the respondent could not claim its benefit
retrospectively.
13.4. On these grounds, learned counsel prayed for setting aside the impugned
judgment and allowing the appeal.
14. The learned counsel for Respondent No. 1 in SLP (C) No. 17651 of 2022
submitted that by the impugned judgment dated 25.02.2022 passed by the
Kerala High Court, the respondent was directed to be considered as an OBC-
NCL candidate in the merit list for the Civil Services Examination, 2017. This
was on the ground that the sole surviving parent (mother) of the respondent was
appointed as a Group C employee in a Public Sector Undertaking owned by the
Government of Kerala, and that the PSU was governed by a subsisting order of
equivalence with corresponding posts in the Government of Kerala. The said
equivalence order had been produced before the DoPT by the candidate.
30
14.1. It was further contended that the High Court in its judgment, examined
the validity of the equivalence order and held that such an order could only have
been issued by the Government of Kerala. The High Court substantively
validated the equivalence order after examining the comparability methodology
adopted therein. In paragraph 27 of the judgment, it was categorically held that
the post to which the candidate’s mother was appointed was equivalent to a
Group C post in the public services of the Government of Kerala. In paragraph
30, the High Court declared that the DoPT had erred in denying OBC-NCL
allocation to the candidate. It was submitted that the DoPT had adopted a
mutually contradictory position first demanding an equivalence order and
thereafter disregarding it when duly furnished.
14.2. It was submitted that the High Court highlighted the arbitrary conduct of
the DoPT in paragraphs 20 and 25 of the judgment. The DoPT had altered the
procedure for verification of Creamy Layer status of candidates whose parents
were appointed to State Public Sector Enterprises, both during the Civil Services
Examination, 2016 and midway through the CSE-2017 process, without any
public notice or notification, thereby violating settled procedures and principles
of natural justice. In 2016, the procedure adopted was to seek clarification from
the concerned State Government regarding comparability of posts. However, in
2017 midway through the examination process, the DoPT began insisting upon
formal equivalence orders issued by the State Governments.
31
14.3. Reference was also made to paragraph 31 of the judgment, wherein the
High Court observed that there was no justification for the DoPT to reject the
equivalence order issued by the State Government. It clarified that the
equivalence order to be submitted could only be an order of the State
Government, and in the present case, one issued by the Government of Kerala.
It was contended that “State Public Services” and “State Public Service
Commissions” fall within the exclusive domain of the State List under the
Seventh Schedule to the Constitution. Consequently, the jurisdiction to declare
comparability or equivalence between posts in the public services of the State of
Kerala and Public Sector Enterprises owned by it lies exclusively within the
State Government. It was urged that this constitutional demarcation had been
disregarded by the DoPT in filing the present appeal.
14.4. It was further submitted that the DoPT had not disputed the status of the
post held by the candidate’s deceased father (who passed away in 2012) which
had been accepted as a Group C post in the Government of Kerala based on
orders issued by the same State Government. However, the DoPT was disputing
the equivalence order issued by that very Government in relation to the
candidate’s mother, who was appointed to a Group C post in a State PSU. This
differential treatment, it was contended, amounted to discrimination against the
candidate’s mother alone and reflected arbitrariness in administrative decision-
making. The High Court had noted such arbitrariness in paragraph 33 of its
judgment and dismissed the petition filed by the DoPT.
32
14.5. It was also contended that the action of the DoPT in treating the salary of
an employee of a State PSU, irrespective of the post held, as income for
determining Non-Creamy Layer status was discriminatory, particularly when, in
the case of employees of the Central Government, State Governments, or
Central PSUs, salary income was exempted from such computation. This aspect
had been extensively dealt with by the High Court.
14.6. Finally, it was submitted that the DoPT lacked locus standi to raise
disputes on behalf of the Union Government against orders issued by State
Governments regarding equivalence of posts within the State. The DoPT’s
powers are circumscribed by the Allocation of Business Rules, 1961, and the
subject matter of challenging equivalence determinations of State Governments
does not fall within its assigned business. It was contended that the DoPT
neither possesses authority to reject orders issued by the appropriate State
Government nor to issue directions or requisitions to State Governments in that
regard. Consequently, the challenge to the equivalence order issued by the
Government of Kerala was said to be contrary to the Allocation of Business
Rules, 1961, and violative of Article 77(3) of the Constitution of India.
14.7. It was emphasized that procedural violations were writ large in the actions
of the DoPT in altering verification norms during the conduct of the Civil
Servies Examinations and in adopting inconsistent verification practices from
year to year. Until 2016, the DoPT had sought clarification from State
Governments regarding the nature of posts held by parents serving in State
33
PSUs. In 2017, however, it insisted upon formal equivalence orders midway
through the examination process, without amending the governing rules or
issuing any notification, and thereafter rejected or ignored such orders when
produced. According to the learned counsel, this arbitrary shift in procedure
appeared designed to deny OBC claims of candidates whose parents were
employees of State Public Sector Enterprises. It was further submitted that State
Governments have consistently exercised their constitutional authority under the
Seventh Schedule to issue equivalence orders whenever officers of State Public
Services are posted to State PSUs. By disputing such actions of the “appropriate
Government” within the exclusive domain of the State, the DoPT was alleged to
have engaged in unconstitutional overreach in filing the present appeal.
15. The learned counsel appearing for the Union Public Service Commission
(UPSC) submitted that the role of the said respondent is strictly confined to
conducting the Civil Services Examination in accordance with the Rules and
Regulations framed by the DoPT. The UPSC conducts the examination,
processes the results, and makes recommendations for appointment to the
various services based on the vacancies requisitioned by the respective Cadre
Controlling Authorities. It was contended that the UPSC neither frames policy
nor possesses the authority to adjudicate upon issues relating to reservation
status or the application of the Creamy Layer criteria.
34
15.1. It was further submitted that the determination of eligibility for
reservation benefits, including verification of OBC Non-Creamy Layer status,
falls exclusively within the domain of the DoPT, which is the appellant herein
and the nodal authority for such matters. Therefore, the issues raised in the
present proceedings, as well as the reliefs sought by the appellants pertain solely
to the DoPT, and no substantive relief has been claimed or could be claimed
against the UPSC.
DISCUSSION & FINDINGS
16. We have heard learned counsel appearing for the parties at length and
perused the materials available on record.
17. The present batch of Civil Appeals arises from judgments of the Madras
High Court, Kerala High Court and Delhi High Court. By the impugned
judgments, the respective High Courts adjudicated upon the eligibility of certain
candidates claiming the benefit of OBC (Non-Creamy Layer) reservation in the
Civil Services Examination conducted in different years.
18. It is not in dispute that the respondent candidates were successful in the
Civil Services Examination. However, as the equivalence of posts in Public
Sector Undertakings, banks and other organisations vis-à-vis Government posts
had not been formally determined, the DoPT applied the Income /Wealth Test
under Category VI of the 1993 OM read with 2004 Letter. Upon assessing the
35
parental income of the respective candidates for the preceding three financial
years, the DoPT classified them as falling within the Creamy Layer of the Other
Backward Classes, thereby rendering them ineligible for OBC (Non-Creamy
Layer) reservation benefits. Consequently, their cases were not considered for
service allocation under the reserved category. Aggrieved thereby, the
respondent candidates approached the CAT and obtained orders in their favour.
The writ petitions filed by the appellants challenging the said orders were
dismissed by the High Courts of Madras, Delhi and Kerala. It is in these
circumstances that the present Civil Appeals filed by the appellants have been
placed before us for consideration.
19. The issues involved are allied and overlapping, though they require
distinct treatment for the purpose of analysis. The first issue is whether the
clarificatory letter dated 14.10.2004 can have any overriding or superseding
effect over the Office Memorandum dated 08.09.1993, which expressly lays
down the criteria for exclusion from the benefit of reservation for OBCs by
identifying the creamy layer namely, the socially advanced persons of sections
among the Socially and Educationally Backward Classes. The second issue is
whether there can be hostile discrimination between employees of the
Government and those working in Public or Private Sector Undertakings, when
both occupy posts of the same grade or class.
36
20. Since the issues raised are broader in nature and concern the
constitutional architecture governing identification of the creamy layer, the
validity and interpretation of executive instructions, and the equality mandate
under Article 14, it is neither necessary nor appropriate for this Court to enter
into the granular factual matrix of each individual case. Moreover, the
judgments impugned before us record largely concurrent findings on the
material aspects. The controversy, therefore, turns essentially on questions of
law of general public importance, warranting authoritative determination by this
Court.
21. Before proceeding further, it is apposite to examine the constitutional and
statutory background of reservation in India.
21.1. India’s reservation framework for Other Backward Classes (OBCs)/
Socially and Educationally Backward Classes (SEBCs) has evolved through a
sustained dialogue between constitutional text, legislative intervention, and
judicial doctrine. The objective has consistently been to reconcile the mandate
of substantive equality with the imperatives of administrative efficiency.
Constitutional framework
21.2. The Constitution embedded the principle of advancement of weaker
sections through:
37
• Article 46 (Directive Principles of State Policy), which mandates the State
to promote with special care the educational and economic interests of the
weaker sections, particularly, Scheduled Castes and Scheduled Tribes;
• Article 15(4) (inserted by the First Constitutional Amendment, 1951),
enabling the State to make special provision for the advancement of
socially and educationally backward classes of citizens or for the
Scheduled Castes and the Scheduled Tribes;
• Article 16(4) empowering the State to make provisions for reservation in
appointments or posts in public services for any backward classes
inadequately represented;
• Article 15(5), later inserted, enabling reservation in admissions to
educational institutions, including private educational institutions whether
aided or unaided by the State, other than the minority educational
institutions.
For ease of reference, the above provisions read as under:
“46. Promotion of educational and economic interests of Scheduled Castes,
Scheduled Tribes and other weaker sections .—
The State shall promote with special care the educational and economic
interests of the weaker sections of the people, and, in particular, of the
Scheduled Castes and the Scheduled Tribes, and shall protect them from social
injustice and all forms of exploitation.”
“ 15. Prohibition of discrimination on grounds of religion, race, caste, sex or
place of birth -
38
(4) Nothing in this article or in clause (2) of article 29 shall prevent the State
from making any special provision for the advancement of any socially and
educationally backward classes of citizens or for the Scheduled Castes and the
Scheduled Tribes.”
(5) Nothing in this article or in sub-clause (g) of clause (1) of article 19 shall
prevent the State from making any special provision, by law, for the
advancement of any socially and educationally backward classes of citizens or
for the Scheduled Castes or the Scheduled Tribes in so far as such special
provisions relate to their admission to educational institutions including private
educational institutions, whether aided or unaided by the State, other than the
minority educational institutions referred to in clause (1) of article 30.”
“16. Equality of opportunity in matters of public employment-
(4) Nothing in this article shall prevent the State from making any provision for
the reservation of appointments or posts in favour of any backward class of
citizens which, in the opinion of the State, is not adequately represented in the
services under the State.”
From its inception, Article 16(4) was conceived not as an exception to equality,
but as an instrument to achieve it.
Early Judicial Evolution
22
21.3. In M.R. Balaji and others v. State of Mysore , this Court held that caste
may be a relevant factor in identifying backwardness, but it cannot be the sole or
dominant test. Social backwardness, the Court observed, is on the ultimate
analysis closely linked with poverty, and excessive reservation under the guise
of special provisions would subvert the constitutional scheme. The Court
broadly indicated that reservation should ordinarily remain below 50%,
recognising the need to balance advancement of weaker sections with societal
interests at large. The following paragraphs are pertinent:
22
AIR 1963 SC 649
39
“23. Besides, if the caste of the group of citizens was made the sole basis for
determining the social backwardness of the said group, that test would
inevitably break down in relation to many sections of Indian society which do
not recognise castes in the conventional sense known to Hindu society. How is
one going to decide whether Muslims, Christians or Jains, or even Lingayats are
socially backward or not? The test of castes would be inapplicable to those
groups, but that would hardly justify the exclusion of these groups in toto from
the operation of Article 15(4). It is not unlikely that in some States some
Muslims or Christians or Jains forming groups may be socially backward. That
is why we think that though castes in relation to Hindus may be a relevant factor
to consider in determining the social backwardness of groups or classes of
citizens, it cannot be made the sole or the dominant test in that behalf. Social
backwardness is on the ultimate analysis the result of poverty to a very large
extent. The classes of citizens who are deplorably poor automatically become
socially backward. They do not enjoy a status in society and have, therefore, to
be content to take a backward seat. It is true that social backwardness which
results from poverty is likely to be aggravated by considerations of caste to
which the poor citizens may belong, but that only shows the relevance of both
caste and poverty in determining the backwardness of citizens .
…
34. ……. If admission to professional and technical colleges is unduly
liberalised, it would be idle to contend that the quality of our graduates will not
suffer. That is not to say that reservation should not be adopted; reservation
should and must be adopted to advance the prospects of the weaker sections of
society, but in providing for special measures in that behalf care should be taken
not to exclude admission to higher educational centres to deserving and
qualified candidates of other communities. A special provision contemplated by
Article 15(4) like reservation of posts and appointments contemplated by Article
16(4) must be within reasonable limits. The interests of weaker sections of
society which are a first charge on the States and the Centre have to be adjusted
with the interests of the community as a whole. The adjustment of these
competing claims is undoubtedly a difficult matter, but if under the guise of
making a special provision, a State reserves practically all the seats available in
all the colleges, that clearly would be subverting the object of Article 15(4). In
this matter again, we are reluctant to say definitely what would be a proper
provision to make. Speaking generally and in a broad way, a special provision
should be less than 50%; how much less than 50% would depend upon the
present prevailing circumstances in each case.”
40
23
Similarly, in State of Andhra Pradesh and another v. P. Sagar , this Court
reiterated that classification for the purposes of Article 15(4) cannot rest solely
upon caste; the objective remains the advancement of socially and educationally
backward classes.
Socio-Economic Refinement and Means Test
21.4. By 1985, the doctrine had matured further in K.C. Vasanth Kumar and
24
another v. State of Karnataka , where a Seven-Judge Bench emphasised that
reservation policy cannot remain static but must be subjected to periodic review
to ensure that the truly backward continue to receive its benefits. Justice
D.A.Desai in his concurring opinion, stressed that economic criteria must
increasingly inform the identification of beneficiaries and cautioned that
reservation cannot be allowed to crystallise into a vested or hereditary
entitlement. The Court endorsed the “caste-cum-means” test, drawing support
25
from K.S. Jayasree v. State of Kerala , where the imposition of an income
ceiling within backward classes was upheld as constitutionally valid. Likewise,
26
in R. Chitralekha v. State of Mysore , the Court recognised income and
occupation as permissible indicators of backwardness. These decisions marked a
decisive shift towards economic refinement within socially backward classes, a
principle that ultimately took firm doctrinal shape in Indra Sawhney v. Union
23
1968 SCR (3) 595
24
1985 SCC OnLine SC 339
25
(1976) 3 SCC 730
26
(1964) 6 SCR 368 : AIR 1964 SC 1823
41
of India (supra) , where the exclusion of the ‘creamy layer’ was constitutionally
crystallised. The relevant paragraphs from the judgment in K.C. Vasanth Kumar
read as under:
“26 . Therefore, a time has come to review the criterion for identifying socially
and educationally backward classes ignoring the caste label. The only
criterion which can be realistically devised is the one of economic
backwardness. To this may be added some relevant criteria such as the secular
character of the group, its opportunity for earning livelihood etc. but by and
large economic backwardness must be the loadstar. Why I say this?
…
30. Let me conclude. If economic criterion for compensatory discrimination or
affirmative action is accepted, it would strike at the root cause of social and
educational backwardness, and simultaneously take a vital step in the
direction of destruction of caste structure which in turn would advance the
secular character of the Nation. This approach seeks to translate into reality
the twin constitutional goals: one, to strike at the perpetuation of the caste
stratification of the Indian Society so as to arrest regressive movement and to
take a firm step towards establishing a casteless society; and two, to
progressively eliminate poverty by giving an opportunity to the disadvantaged
sections of the society to raise their position and be part of the mainstream of
life which means eradication of poverty.
31. Let me make abundantly clear that this approach does not deal with
reservation in favour of Scheduled Castes and Scheduled Tribes. Thousands of
years of discrimination and exploitation cannot be wiped out in one generation.
But even here economic criterion is worth applying by refusing preferred
treatment to those amongst them who have already benefited by it and improved
their position. And finally reservation must have a time span otherwise
concessions tend to become vested interests. This is not a judgment in a lis in an
adversary system. When the arguments concluded, a statement was made that
the Government of State of Karnataka would appoint a Commission to
determine constitutionally sound and nationally acceptable criteria for
identifying socially and educationally backward classes of citizens for whose
benefit the State action would be taken. This does not purport to be an
exhaustive essay on guide lines but may point to some extent, the direction in
which the proposed Commission should move.”
42
125…… While caste or community is a relevant factor in determining the social
and educational backwardness, it cannot be said that all members of a caste
need be treated as backward and entitled to reservation under Article 15(4) or
Article 16(4). Caste-cum-means test would be a rational test in identifying
persons who are entitled to the benefit of those provisions. This principle has
received acceptance at the hands of this Court in K.S. Jayasree v. State of
Kerala [(1976) 3 SCC 730]. In that case a Commission appointed by the
Government of the State of Kerala to enquire into the social and economic
conditions of the people of that State and to recommend as to what sections of
the people should be extended the benefits under Article 15(4) of the
Constitution found that only the rich amongst certain castes or communities
were enjoying the benefit of reservations made earlier. It, therefore,
recommended adoption of a means-cum-caste/community test for determining
the sections of the people who should be given the benefit under the relevant
constitutional provisions. The State Government accordingly stipulated that
applicants who were members of certain castes or communities and whose
family income was less than Rs 10000 per year were only entitled to reservation
under Article 15(4). The petitioner in the above case who belonged to one such
community but whose family income was above Rs 10,000 per year questioned
the order before the Kerala High Court on the ground that the imposition of the
ceiling of family income was unconstitutional. The learned Single Judge who
heard the petition allowed it. The Division Bench of the Kerala High Court,
however, reversed the decision of the learned Single Judge and dismissed the
petition. On appeal, this Court while affirming the decision of the Division
Bench in the above case on the question of social backwardness observed at pp.
199-200 thus: (SCC p. 735, para 21)
……
143. Since economic condition is also a relevant criterion, it would be
appropriate to incorporate a “means test” as one of the tests in determining the
backwardness as was done by the Kerala Government in Jayasree case63. These
two tests namely, that the conditions of caste or group or community should be
more or less similar to the conditions in which the Scheduled Castes or
Scheduled Tribes are situated and that the income of the family to which the
candidate belongs does not exceed the specified limit would serve as useful
criteria in determining beneficiaries of any reservation to be made under Article
15(4). For the purpose of Article 16(4) however, it should also be shown that the
backward class in question is in the opinion of the Government not adequately
represented in the Government services.
144. There is one other basis on which a classification made for purposes of
Article 15(4) or Article 16(4) of the Constitution has received the approval of
this Court in Chitralekha case . In that case the Court was concerned with a list
43
of backward classes prepared on the basis of economic condition and
occupation. According to that Government Order, persons whose family income
was Rs 1200 per annum or less and who were engaged in occupations such as
agriculture, petty business, inferior services, crafts or other occupations
involving manual labour were treated as belonging to backward classes. The
petitioner who had filed the petition in the High Court did not challenge the
validity of the said classification. But on a submission made on behalf of the
State Government, the Court expressed its general approval to the method of
classification….”
21.5. Thus, the above decisions collectively established three guiding
propositions:
1. Caste may serve as an initial identifying marker but cannot be the
exclusive determinant.
2. Economic condition is a relevant and rational refining criterion.
3. Reservation policy must balance social justice with broader societal
interests.
Mandal Commission and OBC Reservation
21.6. The Mandal Commission, formally known as the Socially and
Educationally Backward Classes Commission (SEBC) was constituted in 1979
under the chairmanship of B.P. Mandal with the mandate to identify the socially
and educationally backward classes in India. In its 1980 report, drawing upon
data from the 1931 Census (the last caste-based census) along with
contemporaneous sample studies, the Commission estimated that Other
Backward Classes (OBCs) constituted approximately 52% of the population. It
44
recommended 27% reservation in civil posts and services under the Government
of India and Public Sector Undertakings, as well as in higher educational
institutions, thereby bringing the total reservations for SCs, STs and OBCs to
49.5%.
21.7. Acting upon the said report, the Government of India issued an Office
Memorandum dated 13.08.1990 providing for 27% reservation in civil posts and
services for Socially and Educationally Backward Classes (SEdBCs). The said
O.M. was amended on 25.09.1991 to provide that preference within the 27%
reservation would be given to candidates belonging to the poorer sections
among the SEdBCs. The implementation of the Mandal recommendations led
to widespread public debate and social unrest, ultimately resulting in a
constitutional challenge before this Court.
21.8. The validity of the above mentioned 1990 O.M. was considered by nine-
27
Judge Bench in Indra Sawhney and others v. Union of India and others . This
Court upheld the constitutional validity of 27% reservation for OBCs under
Article 16(4), but imposed crucial limitations. It held that total reservations
ordinarily should not exceed 50%, save in extraordinary circumstances, and
most significantly, it mandated the exclusion of the “creamy layer” from among
the OBCs. The Court emphasised that backwardness under Article 16(4) is
27
1992 Supp (3) SCC 217
45
primarily social and that reservation cannot be sustained purely on economic
criteria.
21.9. Justice Sahai , while concurring with the majority, underscored that
backwardness is not static and that individuals within a backward class who
have achieved higher social or economic status must be excluded to prevent
monopolisation of benefits. He observed that while a collectivity may be
backward, individuals from that group who have achieved advancement in
status, service, or affluence must be disentitled from claiming reservation. The
exclusion of the creamy layer was thus articulated as a constitutional necessity
to preserve substantive equality. The following passage from the decision in
Indra Sawhney is relevant:
“629. More backward and backward is an illusion. No constitutional exercise is
called for it. What is required is practical approach to the problem. The
collectivity or the group may be backward class but the individuals from that
class may have achieved the social status or economic affluence. Disentitle them
from claiming reservation. Therefore, while reserving posts for backward
classes, the departments should make a condition precedent that every candidate
must disclose the annual income of the parents beyond which one could not be
considered to be backward. What should be that limit can be determined by the
appropriate State. Income apart, provision should be made that wards of those
backward classes of persons who have achieved a particular status in society
either political or social or economic or if their parents are in higher services
then such individuals should be precluded to avoid monopolisation of the
services reserved for backward classes by a few. Creamy layer, thus, shall stand
eliminated. And once a group or collectivity itself is found to have achieved the
constitutional objective then it should be excluded from the list of backward
class. Therefore,
(1) No reservation can be made on economic criteria.
46
(2) It may be under Article 16(4) if such class satisfies the test of inadequate
representation.
(3) Exclusion of creamy layer is a social purpose. Any legislative or executive
action to remove such persons individually or collectively cannot be
constitutionally invalid.”
21.10. The Court further directed the Government of India to specify, within
four months, the socio-economic criteria for excluding socially advanced
persons or sections from the OBC category and made implementation of the
1990 O.M. subject to such exclusion. It is in furtherance of these directions that
the Ministry of Social Justice appointed an Expert Committee to evolve criteria
for exclusion of the socially advanced sections, the term “creamy layer” being
only a shorthand expression for this constitutional principle. The Expert
Committee, keeping in view the directions in Indra Sawhney , evolved criteria
centred primarily on social status arising from positions and placements in life,
rather than on income alone. The guiding principle was to identify positions
whose occupants could reasonably be deemed to have ceased to be socially
backward and to have attained social advancement. Accordingly, the Committee
framed exclusion criteria under various categories, including the Service
Category.
21.11. Under the Service Category, the Committee recommended that the
criteria applicable to officers directly recruited in Central and State Government
services should apply mutatis mutandis to officers in equivalent or comparable
47
posts in Public Sector Undertakings, Banks, Insurance Corporations,
Universities, Autonomous Bodies, Local Self-Government Bodies and other
similar institutions. Importantly, to avoid delay in implementation pending
equivalence evaluation, the Committee recommended that during the interim
period, the Income / Wealth Test (Category VI) would apply to such persons.
21.12. The Expert Committee made it explicit that even during this
interim phase, persons falling within such PSU and analogous categories would
continue to be entitled to reservation, and exclusion, if any, could only be on the
basis of the prescribed Income / Wealth criteria. The intent was clear: status-
based exclusion would operate once equivalence is determined; until then,
economic filtering under structured criteria alone could apply.
Evolution of Non-Creamy Layer
21.13. The doctrine of exclusion of the “creamy layer”, crystallised by this
28
Court in Indra Sawhney and others v. Union of India and others , forms the
constitutional foundation of the 1993 OM. The subsequent executive framework
must therefore be understood as an operational mechanism to give effect to that
binding constitutional mandate.
28
1992 Supp (3) SCC 217
48
1993 OM
21.14. Pursuant to the said constitutional mandate and the
recommendations of the Expert Committee, the Government of India issued the
1993 OM, which codified the above structural framework. For better
appreciation, the OM is reproduced below:
“No.36012/22/93-Estt. (SCT)
Government of India
Ministry of Personnel, Public
Grievances & Pensions (Department of
Personnel & Training)
th
New Delhi, the 8
September, 1993
OFFICE MEMORANDUM
Subject:- Reservation for Other Backward Classes in Civil Posts and Services
under the Government of India - Regarding.
The undersigned is directed to refer to this Department's O.M. No.
th
36012/31/90-Estt. (SCT), dated the 13 August, 1990 and 25'" September, 1991
regarding reservation for Socially and Educationally Backward Classes in Civil
Posts and Services under the Government of India and to say that following the
Supreme Court judgment in the Indra Sawhney and others Vs. Union of India
and others case [Writ Petition (Civil) No. 930 of 1990] the Government of India
appointed an Expert Committee to recommend the criteria for exclusion of the
socially advanced persons/sections from the benefits of reservations for Other
Backward Classes in civil posts and services under the Government of India.
2. Consequent to the consideration of the Expert Committee's
recommendations this Department's Office Memorandum No. 36012/31/90-Estt.
(SCT), dated 13.08.90 referred to in Para(1) above is hereby modified to
provide as follows:
(a) 27% (twenty seven percent) of the vacancies in civil posts and services
under the Government of India, to be filled through direct recruitment, shall be
reserved for the Other Backward Classes. Detailed instructions relating to the
procedure to be followed for enforcing reservation will be issued separately.
49
(b) Candidates belonging to OBCs recruited on the basis of merit in an open
competition on the same standards prescribed for the general candidates shall
not be adjusted against the reservation quota of 27%.
(c)(i) The aforesaid reservation shall not apply to persons/sections mentioned
in column 3 of the Schedule to this office memorandum.
(ii) The rule of exclusion will not apply to persons working as artisans or
engaged in hereditary occupations, callings. A list of such occupations, callings
will be issued separately by the Ministry of Welfare.
(d) The OBCs for the purpose of the aforesaid reservation would comprise,
in the first phase, the castes and communities which are common to both the
report of the Mandal Commission and the State Government's Lists.
A list of such castes and communities is being issued separately by the Ministry
of Welfare.
(e) The aforesaid reservation shall take immediate effect. However, this will
not apply to vacancies where the recruitment process has already been initiated
prior to the issue of this order.
3. Similar instructions in respect of public sector undertaking and
financial institutions including public sector banks will be issued by the
Department of Public Enterprises and by the Ministry of Finance respectively
effective from the date of this Office Memorandum.
Sd/-
(Smt. Sarita Prasad)
Joint Secretary to the
Government of India
To
All Ministries/Department of Government of India.”
The Schedule appended to the above 1993 OM enumerated specific categories
for exclusion and operationalised the status-based criteria, while providing a
residual Income / Wealth Test under Category VI.
Under Category II (Service Category), the Schedule classified Government
servants into sub-categories II A and II B, referring respectively to officers
directly recruited to Class I (Group A) and Class II (Group B) services. These
50
provisions unmistakably pertain to higher echelons of service and do not
concern lower-level employees. Category II C extends the same principle to
employees of Public Sector Undertakings, Banks, Insurance Organisations,
Universities and similar bodies, by stipulating that the criteria in sub-categories
II A and II B shall apply mutatis mutandis to officers holding equivalent or
comparable posts in such organisations.
Income / Wealth Test
21.15. However, the 1993 OM expressly provides that pending evaluation
of equivalence or comparability of posts vis-à-vis Government services, the
Income / Wealth Test under Category VI alone would apply. This is significant.
The specific criteria for disentitlement under II C, namely direct recruitment to a
post equivalent to Class I / Group A, or promotion to such post before the age of
40, remain inoperative until equivalence is determined. Thus, in the absence of
such evaluation, the entire category II C cannot be automatically deprived of
reservation; exclusion, if any, can only be under Category VI.
Category VI, which embodies the Income / Wealth Test operates as a residual
filter. Explanation (i) under this category specifically provides that income from
salaries and income from agricultural land shall not be clubbed with income
from other sources for the purpose of computing gross annual income.
Explanation (ii) pertains to the periodic revision of the prescribed income limit.
51
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.
2004 - Letter of Clarification
21.16. In 2004, a letter of clarification was issued to address practical
issues that had arisen in implementation. The clarification recognizes that where
equivalence of posts in PSUs and similar organisations has not been evaluated,
creamy layer status must be determined on the basis of the Income / Wealth
Test. It reiterates that income from salaries and income from agricultural land
shall not be taken into account while applying the test. The clarification further
explains that income from salaries and income from other sources (excluding
salaries and agricultural land) are to be assessed separately, and exclusion would
follow only if either component exceeds the prescribed limit for three
consecutive years.
21.17. Thus, the evolution of the non-creamy layer principle demonstrates
that the 1993 OM read with the 2004 Letter, preserves the primacy of status-
based exclusion and confines economic exclusion to the structured parameters
of Category VI. Salary income cannot be mechanically aggregated in a manner
that defeats the constitutional objective articulated in Indra Sawhney . The
interpretation of the 1993 OM and its implementation in the present case must
52
therefore be tested against this constitutional architecture. In this backdrop, we
now proceed to examine the issues involved herein.
Issue No. 1
Whether the clarificatory letter dated 14.10.2004 can have any overriding or
superseding effect over the Office Memorandum dated 08.09.1993, which
expressly lays down the criteria for exclusion from the benefit of reservation
for OBCs by identifying the creamy layer namely, the socially advanced
persons of sections among the Socially and Educationally Backward Classes?
22. A bare perusal of the 1993 OM makes it abundantly clear that certain
categories of persons, namely, the sons or daughters of those holding Class
I/Group A or Class II/Group B posts in the Civil Services of the Central and
State Governments, have been excluded. The income/wealth test has also been
stipulated in the office memorandum, which prescribes an Income / Wealth Test
as an additional criterion of exclusion. Significantly, the 1993 OM provides that
these criteria shall apply mutatis mutandis for exclusion from reservation in
respect of the children of those working in Public Sector Undertakings, Banks,
Insurance organisations, Universities and other similar institutions, as well as
those holding equivalent or comparable positions in private employment.
23. The question of “equivalence of posts” as contemplated both in the 1993
OM and in the subsequent 2004 Letter, is fundamentally a matter of policy.
53
Such equivalence must be determined by the Government on the basis of a
detailed analysis of data by experts in the field. Until such equivalence is
formally evaluated and notified by the Government, the entitlement of
candidates whose parent(s) work in organisations other than in Class I or II of
the Central or State Civil Services, shall be decided by the Income/ Wealth Test.
The core question therefore is whether paragraph 9 of the 2004 Letter merely
explains the scheme of the 1993 OM or impermissibly alters its substantive
structure of exclusion.
24. Before adverting to the 2004 Letter, it is essential to reiterate the well-
established principle that a mere government letter cannot have the effect of
overriding, overruling or superseding any proceeding in the nature of an
executive instruction or an Office Memorandum issued in exercise of executive
power under Article 162 of the Constitution. The clarificatory letter must,
therefore, be construed strictly as one explaining or supplementing the
foundational guidelines laid down in the 1993 OM, which was issued after due
deliberation and following the requisite procedure and not as altering its
substantive framework. It is settled law that a clarificatory instruction cannot
introduce a substantive condition that does not exist in the parent policy. If it
travels beyond explanation and alters rights or liabilities, it ceases to be
clarificatory and assumes the character of an amendment.
54
25. In order to understand the impact of the clarificatory letter dated
14.10.2004, it is apposite to extract Paragraphs 7-10 thereof as follows:
“7. In regard to clause (v) of para 4, it is clarified that the sons and daughters of
parents of whom only the husband is a directly recruited Class II/Group B
officer who gets into Class I/Group A at the age of 40 or earlier are treated to
be in creamy layer. If the father is directly recruited Class III/Group C or Class
IV/Group D employee and he gets into Class I/Group A at the age of 40 or
earlier, his sons and daughters shall not be treated to be falling in creamy layer.
8. In regard to clauses (vi), (vii) and (viii) of para 4, it is clarified that the
creamy layer status of a candidate is determined on the basis of the status of his
parents and not on the basis of his own status or income or on the basis of status
or income or on the basis of status or income of his/her spouse. Therefore, while
determining the creamy layer status of a person the status or the income of the
candidate himself or of his/her spouse shall not be taken into account.
9. In regard to clause (ix) of para 4, it is clarified that the creamy layer status of
sons and daughters of persons employed in organizations where equivalence or
comparability of posts vis-à-vis posts in Government has not been evaluated is
determined as follows:
Income of the parents from the salaries and from the other Sources [other than
salaries and agricultural land] is determined separately. If either the income of
the parents from the salaries or the income of the parents from other sources
[other than salaries and agricultural land] exceeds the limit of Rs.2.5 lakh per
annum for a period of three consecutive years, the sons and daughters of such
persons shall be treated to fall in creamy layer. But the sons and daughters of
parents whose income from other sources is less than Rs.2.5 lakh per annum and
income from other sources is also less than Rs.2.5 lakh per annum will not be
treated as falling in creamy layer even if the sum of the income from salaries
and the income from the other sources is more than Rs.2.5 lakh per annum for a
period of three consecutive years. It may be noted that income from agricultural
land is not taken into account while applying the Test.
10. In regard to clause (x) of para 4, it is clarified that while applying the
Income/Wealth Test to determine creamy layer status of any candidate as given
in Category VI of the Schedule to the OM, income from the salaries and income
from the agricultural land shall not be taken into account. It means that if
income from salaries of the parents of any candidate is more than Rs.2.5 lakh
per annum, income from agricultural land is more than Rs.2.5 lakh per annum,
but income from other sources is less than Rs.2.5 lakh per annum, the candidate
55
shall not be treated to be falling in creamy layer on the basis of Income/Wealth
Test provided his parent(s) do not possess wealth above the exemption limit as
prescribed in the Wealth Tax Act for a period of three consecutive years.”
26. The above extract makes it clear that income from salaries, agriculture or
other sources cannot be clubbed for the purpose of applying the income/wealth
test to determine the creamy layer status of a candidate. It is also evident from a
comprehensive reading of the 1993 OM along with the clarificatory letter dated
14.10.2004 that income from salaries alone cannot be the sole criterion to decide
whether a candidate falls within the creamy layer. The status as well as the
category of post to which a candidate’s parent or parents belong is essential. The
exclusion under Categories I to III of the Schedule is status-based rather than
purely income-based, reflecting the policy understanding that advancement
within the governmental service hierarchy denotes social progression
independent of fluctuating salary levels. 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.
27. In fact, paragraph 7 of the 2004 Letter makes it amply clear that a
mechanical application of income thresholds may in certain situations, produce
inequitable outcomes. To that limited extent, the 2004 Letter may be understood
as reinforcing the scheme of the 1993 OM provided it is construed as
explanatory and not as altering the substantive framework.
56
28. In this context, a perusal of the 21st Report of the Parliamentary
Committee on Welfare of Other Backward Classes (2018–19) elucidates the
evolution of the guidelines governing exclusion from reservation by
st
identification of the creamy layer. It is also necessary to point out that the 21
report records that the 2004 Letter has done more to confuse the position than to
clarify it, which was its intended purpose.
29. The observations of the Parliamentary Committee lend institutional
support to the view that paragraph 9 has generated interpretative ambiguity and
may have been applied beyond its intended contours. The Report records that
the 2004 Letter did not emanate from the DoPT Secretariat and that its origin
could not be traced in terms of the initial note file. It further observes that
determining exclusion from reservation solely on the basis of income from
salaries, as indicated in the 2004 Letter, would not be consistent with the
original framework. The entire architecture of paragraph 9 of the 2004 Letter is
premised on a prior determination of equivalence. Income is intended to operate
only as a surrogate measure in the absence of such equivalence; it cannot
supplant the primary status-based framework embodied in the 1993 OM.
30. In light of the foregoing, any attempt to read paragraph 9 of the 2004
Letter in isolation, so as to dilute or override the substantive scheme of the 1993
OM would be legally untenable. Overemphasis on the 2004 Letter to the extent
of making income alone determinative without regard to parental status or
57
category of service would defeat the structural framework of exclusion
envisaged under the 1993 OM.
31. 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.
Issue No. 2
Whether there can be hostile discrimination between employees of the
Government and those working in Public or Private Sector Undertakings,
when both occupy posts of the same grade or class?
32. The second issue that needs to be decided here is whether caste, as a
determining factor for entitlement to reservation, can be diluted or distorted by
introducing invidious discrimination between similarly placed categories of
persons.
33. At the outset, it must be noted that while caste may be an indicator of
historical disadvantage, it cannot be treated as the sole determinant of
backwardness. The exclusion of the creamy layer among the backward classes is
not a matter of mere policy preference but a constitutional imperative intended
to ensure that the benefits of reservation reach those who are socially and
educationally backward in the true sense of the phrase. The principle seeks to
prevent relatively advanced segments within the backward classes from
58
siphoning off the advantages of affirmative action, so that the objective and
purpose of the constitutional scheme of affirmative action, of which reservation
is a reflection, are adhered to.
34. It is in this context that the Tribunal as well as the High Courts have held
that Group C and Group D employees who, by virtue of promotion and efflux of
time, surpass the income levels as stated in the excluded categories of persons in
the Schedule to the Office Memorandum, which applies to Group A and Group
B Government employees (direct recruits), and who by virtue of such income
from salary alone do not stand excluded from reservation, cannot be treated
differently from those employees of PSUs and private undertakings who also
belong to or are equivalent to such Group C and Group D categories of posts.
Treating them differently, or in other words, treating the children of those
employed in PSUs or private employment, etc., as being excluded from the
benefit of reservation only on the basis of their income derived from salaries,
and without reference to their posts (whether Group A or B, or Group C or D)
would certainly lead to hostile discrimination between parties who are similarly
placed and would amount to equals being treated unequally, thereby attracting
the rigour of the equality doctrine under Articles 14, 15 and 16, of which
reservation is a facet.
35. It is well settled that a classification, to withstand scrutiny under Article
14, must satisfy the twin requirements of (i) intelligible differentia
59
distinguishing persons grouped together from others left out, and (ii) a rational
nexus with the object sought to be achieved. If similarly situated persons are
subjected to differential treatment without a constitutionally sustainable basis,
such action would fall foul of Article 14.
36. The object of excluding the creamy layer is to ensure that socially
advanced sections within the OBCs do not appropriate benefits meant for the
genuinely backward; it is not to create artificial distinctions between equally
placed members of the same social class.
37. The principle laid down in Indra Sawhney and others v. Union of India
29
and others that “To continue to confer upon such advanced sections special
benefits would amount to treating equals unequally; to rank them with the rest
of the backward classes would amount to treating the unequals equally” would
stand attracted equally to a case where proper identification of a section or class
of persons or a person belonging to OBC as being either socially advanced or
backward is not carried out by the Government. In fact, it would not be an
overstatement to say that if this exercise is not undertaken in a manner that is
rational, non-arbitrary, reasonable and equal, it would lead to the illegal
exclusion of genuine claimants and deserving persons within the OBC category
from the benefit of reservation, which, being a facet of equality, is a right
protected by the Constitution, as made amply clear by the judgments in State of
29
1992 Supp (3) SCC 217
60
30
Kerala and Others v. N.M. Thomas and Others as well as Indra Sawhney v.
Union of India . To state it in other words, Article 16(4) is a structural reflection
and a conceptualized representation of the principle of substantive equality
embodied and envisaged under Article 16(1) of the Constitution. Therefore, any
interpretation of the 1993 OM or the 2004 Letter that results in unequal
treatment of similarly placed OBC candidates would not only be legally
erroneous but constitutionally impermissible.
38. Relevant portion of the judgment in State of Kerala v. N.M. Thomas
(supra) is extracted for reference:
“44. Our Constitution aims at equality of status and opportunity for all citizens
including those who are socially, economically and educationally backward.
The claims of members of backward classes require adequate representation in
legislative and executive bodies. If members of Scheduled Castes and Tribes,
who are said by this Court to be backward classes, can maintain minimum
necessary requirement of administrative efficiency, not only representation but
also preference may be given to them to enforce equality and to eliminate
inequality. Articles 15(4) and 16(4) bring out the position of backward classes to
merit equality. Special provisions are made for the advancement of backward
classes and reservations of appointments and posts for them to secure adequate
representation. These provisions will bring out the content of equality
guaranteed by Articles 14, 15(1) and 16(1). The basic concept of equality is
equality of opportunity for appointment. Preferential treatment for members of
backward classes with due regard to administrative efficiency alone can mean
equality of opportunity for all citizens. Equality under Article 16 could not have
a different content from equality under Article 14. Equality of opportunity for
unequals can only mean aggravation of inequality. Equality of opportunity
admits discrimination with reason and prohibits discrimination without reason.
Discrimination with reasons means rational classification for differential
treatment having nexus to the Constitutionally permissible object. Preferential
representation for the backward classes in services with due regard to
administrative efficiency is permissible object and backward classes are a
30
MANU/SC/0479/1975 : 19.09.1975 - SC
61
rational classification recognised by our Constitution. Therefore, differential
treatment in standards of selection are within the concept of equality.
45. A rule in favour of an under-represented backward community specifying the
basic needs of efficiency of administration will not contravene Articles 14, 16(1)
and 16(2). The rule in the present case does not impair the test of efficiency in
administration inasmuch as members of Scheduled Castes and Tribes who are
promoted have to acquire the qualification of passing the test. The only
relaxation which is done in their case is that they are granted two years more
time than others to acquire the qualification. Scheduled Castes and Tribes are
descriptive of backwardness. It is the aim of our Constitution to bring them up
from handicapped position to improvement. If classification is permissible under
Article 14. it is equally permissible under Article 16, because both the Articles
lay down equality. The quality and concept of equality is that if persons are
dissimilarly placed they cannot be made equal by having the same treatment.
Promotion of members of Scheduled Castes and Tribes under the impeached
rules and orders is based on the classification with the object of securing
representation to members of Scheduled Castes and Tribes. Efficiency has been
kept to view and not sacrificed.
46. All legitimate methods are available for equality of opportunity in services
under Article 16(1). Article 16(1) is affirmative whereas Article 14 is negative in
language. Article 16(4) indicates one of the methods of achieving equality
embodied in Article 16(1). Article 16(1) using the expression "equality" makes it
relatable to all matters of employment from appointment through promotion and
termination to payment of pension and gratuity. Article 16(1) permits
classification on the basis of object and purpose of law or State action except
classification involving discrimination prohibited by Article 16(2). Equal
protection of laws necessarily involves classification. The validity of the
classification must be adjudged with reference to the purpose of law. The
classification in the present case is justified because the purpose of
classification is to enable members of Scheduled Castes and Tribes to find
representation by promotion to a limited extent. From the point of view of time a
differential treatment is given to members of Scheduled Castes and Tribes for
the purpose of giving them equality consistent with efficiency.”
39. Approving the decision in N.M. Thomas, this Court held in Indra
31
Sawhney and Others v. Union of India and Others as follows:
31
1992 Supp (3) SCC 217
62
“741. In Balaji it was held - "there is no doubt that Article 15(4) has to be read
as a proviso or an exception to Articles 15(1) and 29(2)". It was observed that
Article 15(4) was inserted by the First Amendment in the light of the decision in
Champakam, with a view to remove the defect pointed out by this Court namely,
the absence of a provision in Article 15 corresponding to Clause (4) of Article
16. Following Balaji it was held by another Constitution Bench (by majority) in
Devadasan - "further this Court has already held that Clause (4) of Article 16 is
by way of a proviso or an exception to Clause (1)". Subbarao, J., however,
opined in his dissenting opinion that Article 16(4) is not an exception to Article
16(1) but that it is only an emphatic way of stating the principle inherent in the
main provision itself. Be that as it may, since the decision in Devadasan, it was
assumed by this Court that Article 16(4) is an exception to Article 16(1). This
view, however, received a severe set-back from the majority decision in State of
Kerala and Ors. v. N.M. Thomas MANU/SC/0479/1975 : (1976) I LLJ 376 SC.
Though the minority (H.R. Khanna and A.C. Gupta, JJ.) stuck to the view that
Article 16(4) is an exception, the majority (Ray, C.J., Mathew, Krishna Iyer and
Fazal Ali, JJ.) held that Article 16(4) is not an exception to Article 16(1) but that
it was merely an emphatic way of stating a principle implicit in Article 16(1).
(Beg. J. took a slightly different view which it is not necessary to mention here).
The said four learned Judges - whose views have been referred to in para 41 -
held that Article 16(1) being a facet of the doctrine of equality enshrined in
Article 14 permits reasonable classification just as Article 14 does. In our
respectful opinion, the view taken by the majority in Thomas is the correct one.
We too believe that Article 16(1) does permit reasonable classification for
ensuring attainment of the equality of opportunity assured by it. For assuring
equality of opportunity, it may well be necessary in certain situations to treat
unequally situated persons unequally. Not doing so, would perpetuate and
accentuate inequality. Article 16(4) is an instance of such classification, put in
to place the matter beyond controversy. The "backward class of citizens" are
classified as a separate category deserving a special treatment in the nature of
reservation of appointments/posts in the services of the State. Accordingly, we
hold that Clause (4) of Article 16 is not exception to Clause (1) of Article 16. It
is an instance of classification implicit in and permitted by Clause (1). The
speech of Dr. Ambedkar during the debate on draft Article 10(3) [corresponding
to Article 16(4)] in the Constituent Assembly - referred to in para 28 - shows
that a substantial number of members of the Constituent Assembly insisted upon
a "provision (being) made for the entry of certain communities which have so
far been outside the administration", and that draft Clause (3) was put in
recognition and acceptance of the said demand. It is a provision which must be
read along with and in harmony with Clause (1). Indeed, even without Clause
(4), it would have been permissible for the State to have evolved such a
classification and made a provision for reservation of appointments/posts in
their favour. Clause (4) merely puts the matter beyond any doubt in specific
terms.
63
742. Regarding the view expressed in Balaji and Devadasan, it must be
remembered that at that time it was not yet recognised by this Court that Article
16(1) being a facet of Article 14 does implicitly permit classification. Once this
feature was recognised the theory of Clause (4) being an exception to Clause (1)
became untenable. It had to be accepted that Clause (4) is an instance of
classification inherent in Clause (1). Now, just as Article 16(1) is a facet or an
elaboration of the principle underlying Article 14, Clause (2) of Article 16 is
also an elaboration of a facet of Clause (1). If Clause (4) is an exception to
Clause (1) then it is equally an exception to Clause (2). Question then arises, in
what respect is Clause (4) an exception to Clause (2), if 'class' does not means
'caste'. Neither Clause (1) nor Clause (2) speak of class. Does the contention
mean that Clause (1) does not permit classification and therefore Clause (4) is
an exception to it. Thus, from any point of view, the contention of the petitioners
has no merit”.
40. Adopting an interpretation that disadvantages one segment of the same
backward class without rational justification would amount to treating equals as
unequals and would thus become the antithesis of equality, the corner stone of
our Republic. Having regard to the peculiar facts of the present cases, the
reasoning adopted by the High Court that treating similarly placed employees of
private entities and PSUs differently from Government employees and their
wards, while deciding their entitlement to reservation, would amount to hostile
discrimination, is certainly one that inspires the confidence of this Court.
41. Thus, we find no infirmity in the judgments impugned before us. The
civil appeals accordingly fail.
42. As regards the intervention applications, we find that several candidates
who were successful in the Civil Services Examination of different years sought
64
permission to intervene the present proceedings to advance their respective
contentions. They submit, in substance, contentions similar to those urged by
the respondent candidates in the civil appeals, asserting that they belong to the
Non-Creamy Layer of the Other Backward Classes. It is their case that their
applications, representations, or proceedings are presently pending consideration
before the Department of Personnel and Training (DoPT), the High Courts or
the Central Administrative Tribunal, and that any decision rendered in the
present batch of matters would have a direct bearing upon their entitlement.
Accordingly, they seek appropriate orders in the present proceedings.
43. At this juncture, it is to be noted that supernumerary posts have already
st
been assured by the DoPT and this position stands recorded in the 21 Report of
the Parliamentary Committee on the Welfare of Other Backward Classes. In
view thereof, we find no difficulty in directing the appellants to create such
supernumerary posts, as required, to accommodate the candidates who satisfy
the non-creamy layer criteria as clarified in the present judgment, subject to
their otherwise fulfilling eligibility conditions.
CONCLUSION
44. To sum up
(i) All the Civil Appeals are dismissed.
65
(ii) The appellants are directed to consider the claims of the respondent
candidates and intervenors in accordance with the principles laid down
in this judgment, and to implement the same within a period of six
months from the date of this judgment.
(iii) There shall be no order as to costs.
(iv) Pending application(s) including Intervention Applications, stand
disposed of accordingly.
…………………...…………………………J.
[PAMIDIGHANTAM SRI NARASIMHA]
.…………………………J.
[R. MAHADEVAN]
NEW DELHI;
MARCH 11, 2026.
REPORTABLE
IN THE SUPREME COURT OF INDIA
2026 INSC 230
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 2827 – 2829 of 2018
UNION OF INDIA AND OTHERS … APPELLANT(S)
VERSUS
ROHITH NATHAN AND ANOTHER, ETC. … RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). 3130 – 3141 of 2024
UNION OF INDIA … APPELLANT(S)
VERSUS
KETAN AND OTHERS, ETC. … RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). OF 2026
[Arising out of SLP (C) NO. 17651 of 2022
UNION OF INDIA & ANOTHER … APPELLANT(S)
VERSUS
Signature Not Verified
Digitally signed by
SAPNA BISHT
Date: 2026.03.11
18:32:36 IST
Reason:
DR. IBSON SHAH. I. AND ANOTHER … RESPONDENT(S)
2
J U D G M E N T
R. MAHADEVAN, J.
Leave granted in SLP (C) No. 17651 of 2022.
2. This judgment deals with three matters arising out of separate orders
passed by different High Courts. Since the questions of law involved in all the
cases are substantially identical and common, they were heard together and are
being decided by this common judgment.
FACTUAL BACKGROUND
3. The facts giving rise to the respective appeals are set out below.
C.A. No(s). 2827 – 2829 of 2018 [Union of India & Ors. v. Rohith Nathan and
Anr. Etc.]
4. The present Civil Appeals have been filed against the common judgment
dated 31.08.2017 passed by the High Court of Judicature at Madras in W.P.
Nos. 6387, 6388 and 6389 of 2017, whereby the High Court dismissed the writ
petitions filed by the appellants and affirmed the common order dated
1
12.01.2017 passed by the Central Administrative Tribunal , Chennai Bench in
O.A. Nos. 1133, 1132 and 1375 of 2014.
4.1. Respondent No. 1 in CA. Nos. 2827 and 2828 of 2018, Rohith Nathan,
secured All India Rank 174 in the Civil Services Examination, 2012 under the
OBC category. His father was employed in a private organisation namely M/s.
1
For short, “CAT”
3
HCL Technologies Ltd., and was drawing a salary exceeding the prescribed
creamy layer limit under the extant guidelines. On that basis, he was treated as
falling within the creamy layer. Though he was recommended by the UPSC as a
General Merit candidate and allocated to the Indian Police Service against an
unreserved vacancy, Respondent No. 1 sought benefit of OBC reservation and
allocation to the Indian Foreign Service against the vacancy reserved for OBC
candidates by treating him as OBC (Non-Creamy Layer) candidate. He
accordingly filed O.A. No. 1132 of 2014 before the CAT, Chennai seeking a
direction for allotment to the Indian Foreign Service as per his OBC rank in the
Civil Services Examination, 2012. He also filed O.A. No. 1133 of 2014 seeking
to quash the portion relating to Category II(C) in the Schedule to the Office
Memorandum dated 08.09.1993 (O.M. No. 36012/22/93-Estt (SCT)).
4.2. Respondent No. 1 in C.A. No. 2829 of 2018, G. Babu, appeared in the
Civil Services Examination, 2013 under the OBC category and secured Rank
629. His father was employed in a Public Sector Undertaking namely Neyveli
Lignite Corporation, as a Senior Executive Engineer. As his father’s salary
income exceeded the prescribed limit, he was also treated as falling within the
creamy layer under the applicable guidelines. To claim the benefit of OBC
reservation for allocation to a service against a vacancy reserved for OBC
candidates, Respondent No. 1 filed O.A. No. 1375 of 2014 before the CAT,
Chennai Bench seeking reallocation to the Indian Police Service or any other
service as per his OBC rank.
4
4.3. The CAT, having heard the parties, held that under the Office
Memorandum dated 08.09.1993, income from salary and agricultural income
stood excluded from the Income / Wealth Test for determination of creamy layer
status. It further held that paragraph 9 of the clarificatory letter dated
14.10.2004, insofar as it directed inclusion of salary income of PSU and private
sector employees under Category II(C), resulted in hostile discrimination
between the wards of Government servants and those of PSU/private sector
employees. By its common order dated 12.01.2017, the CAT allowed all three
Original Applications and directed as follows:
"We direct the DoPT to withdraw the clarification in para 9 of the OM dated
14.10.2004 to the extent it is made applicable to II-C and reformulate it
appropriately in the light of the observations made herein within a period of
three months. The respondents are also directed to reallocate the service of the
two applicants on the basis of their OBC status within a period of three months
from the date of receipt of a copy of this order."
4.4. Aggrieved, the Union of India and others filed W.P. (C) Nos. 6387, 6388
and 6389 of 2017 before the High Court of Madras. By common judgment dated
31.08.2017, the High Court dismissed all three writ petitions primarily on two
grounds:
(i) The failure of the Union of India to formulate an equivalence /
comparability test resulted in placing the sons and daughters of PSU
employees at a disadvantage compared to similarly placed
Government servants; and
5
(ii) When salary income of parents serving in State/Central Government in
Group C and D posts, or those entering Group B and A posts, after
attaining the age of 40 years, was not considered for creamy layer
determination, inclusion of salary income of PSU employees under
Category II-C introduced an element of hostile discrimination.
4.5. Challenging the aforesaid common judgment, the appellants have
preferred the present Civil Appeals.
C.A. No(s). 3130 – 3141 of 2024 [Union of India v. Ketan and others etc.]
5. The present batch of Civil Appeals has been preferred against the
common judgment dated 22.03.2018 passed by the High Court of Delhi at New
Delhi in W.P. Nos. 3073 – 3084 of 2017. By the said judgment, the High Court
disposed of the writ petitions, set aside Letter No. 36033/5/2004- Estt. (Res.)
dated 14.10.2004, and directed the appellants to verify the creamy layer status of
the respondent candidates (except Sagar Chourasia, who had already been
selected) strictly in terms of Office Memorandum dated 08.09.1993.
5.1. According to the appellants, the respondents had appeared in the Civil
Services Examination, 2015 claiming reservation under the OBC (non-creamy
layer) category. The parents of all respondent candidates were PSU employees,
bank employees or otherwise fell under Category II(C) of the Schedule to the
2
Office Memorandum dated 08.09.1993 . The candidates were recommended by
2
For short, “1993 OM”
6
the UPSC for service allocation. While forwarding their dossiers, UPSC
requested verification of their creamy layer status.
5.2. Upon verification, it was found that equivalence of their parents’ posts
qua Government posts had not been established. Accordingly, applying the
1993 OM read with the clarificatory letter dated 14.10.2004, the department
applied the “income / wealth test” under Category VI and computed the parents’
salary income for the preceding three years. Since the income exceeded the
prescribed ceiling, the respondents were treated as falling within the creamy
layer. Consequently, by publication dated 22.06.2016, the respondents were
denied allocation under the OBC category.
5.3. Challenging the same, the respondent candidates filed W.P. Nos. 3073 –
3084 of 2017 before the Delhi High Court inter alia seeking quashment of the
clarificatory letter dated 14.10.2004 and issuance of a direction for allocation of
services treating them as OBC (Non-Creamy Layer) candidates.
5.4. During the pendency of the matter, the Union of India issued Office
Memorandum No. DPE-GM-/0020/2014-GM-FTS-1740 dated 25.10.2017,
clarifying gradation and creamy layer criteria in Central Public Sectors
Enterprises, indicating that Board level and Managerial-level posts (below
Board level) subject to the proviso that executives whose annual income as per
1993 OM was less than Rs. 8 lakhs, would not fall under the creamy layer.
5.5. By the impugned judgment dated 22.03.2018, the Delhi High Court
disposed of the writ petitions, by holding that the 1993 OM contemplated
7
consideration only of income from “other sources” for applying the Income /
Wealth Test where equivalence had not been established. It further held that the
clarificatory letter dated 14.10.2004 impermissibly introduced salary income as
a determinative factor and lacked rational basis. Consequently, the High Court
set aside the letter dated 14.10.2004 and directed re-verification strictly in
accordance with the 1993 OM.
5.6. Pursuant thereto, the appellants issued a speaking order dated 22.05.2018
reconsidering the matter under the 1993 OM, but again rejected the claim of
Non-Creamy Layer status by taking into account parental salary. Certain
respondents thereafter filed Contempt Petition (C) Nos. 684/2018, 972/2018 and
973/2018 before the Delhi High Court, in which notices were issued.
5.7. Apprehending coercive proceedings, the appellants have preferred the
present appeals.
Civil Appeal @ SLP (C) No. 17651 of 2022 [Union of India & Anr. v. DR.
Ibson Shah. I. and Anr.]
6. This Civil Appeal challenges the final judgment dated 25.02.2022 passed
by the High Court of Kerala at Ernakulam in OP (CAT) No. 94 of 2021,
whereby the High Court declined to interfere with the order dated 13.10.2020
passed by the Central Administrative Tribunal, Ernakulam Bench in O.A. No.
718 of 2018.
8
6.1. The UPSC had issued notification for the Civil Services Examination,
3
2016 and the Department of Personnel and Training notified the detailed rules
vide Gazette Notification dated 27.04.2016. Rule 24 required candidates to
possess requisite certificates in the prescribed format for OBC reservation. Rule
25 stipulated that OBC status, including creamy layer determination would be
reckoned as on the closing date of applications.
6.2. Respondent No. 1 appeared in the Civil Services Examination, 2016 and
the Civil Services Examination, 2017 under the OBC category and secured
Rank 540 (2016) and Rank 620 (2017). His father had been directly recruited as
a Lower Division Clerk (Group C) in the Legal Metrology Department,
Government of Kerala, and died in 2012. His mother was directly recruited as
Junior Assistant (Group C clerical cadre) in Kerala State Financial Enterprises
(KSFE), a State PSU.
6.3. Upon verification, DoPT found that the mother, being employed in a PSU
under Category II(C), earned salary exceeding Rs. 6 lakhs per annum for three
consecutive years (as revised by the Office Memorandum dated 27.05.2013).
Accordingly, Respondent No. 1 was treated as falling within the creamy layer.
In CSE-2017 he was denied allocation; in CSE-2016 he was treated as a General
Merit candidate and allocated Indian Defence Accounts Service (IDAS) vide
letter dated 21.08.2017.
3
For short, “DoPT”
9
6.4. Aggrieved, Respondent No. 1 filed O.A. No. 718/2018 before the CAT,
Ernakulam, which ruled in his favour on 13.10.2020. The High Court of Kerala
affirmed the same and dismissed OP(CAT) No. 94/2021 filed by the appellants,
on 25.02.2022, inter alia holding that:
• The respondent possessed a valid OBC-NCL certificate before the cut-off
date;
• Both parents were Group C entrants (clerical cadre) below Group A and
B;
• Under Category II of the 1993 OM, mere parental service in a PSU could
not lead to creamy layer exclusion;
• The comparability exercise under Category II(C) was transitional;
• The Government’s failure to determine equivalence could not prejudice
candidates; and
• Denial of OBC-NCL status to wards of PSU employees, while granting it
to similarly placed Government servants, would constitute hostile
discrimination.
Therefore, the appellant, Union of India, is before this Court with the present
appeal.
SUBMISSIONS OF THE PARTIES
7. The learned Additional Solicitor General of India appearing for the
appellant in CA Nos. 2827 – 2829 of 2018 / Union of India submitted that the
impugned judgment dated 31.08.2017 passed by the High Court of Madras in
W.P. Nos. 6387, 6388 and 6389 of 2017 is ex facie unsustainable in law and
10
deserves to be set aside. It was urged that the exclusion of persons falling within
the Creamy Layer is aimed at ensuring that reservation benefits are not extended
to those who are no longer backward. Any legislative or executive action to
remove such persons, individually or collectively, cannot be constitutionally
invalid but is in consonance with the principle laid down by this Court in Indra
4
Sawhney v. Union of India and others . This Court in Indra Sawhney v. Union
5
of India and others , explained the rationale underlying the rule of exclusion of
the Creamy Layer, holding that non-exclusion thereof would amount to
discrimination and violation of Articles 14 and 16, inasmuch as unequals cannot
be treated as equals. It was further submitted that the Union of India was fully
competent and empowered to issue the clarificatory letter dated 14.10.2004 in
order to ensure that the intended benefits of reservation reach the truly deserving
candidates among the backward classes. To sustain the spirit of the
constitutional provisions of equality, it is obligatory on the State to identify the
most deserving candidates, as the State is obliged to remove inequalities and
backwardness from society. If non-deserving candidates are given the benefit of
reservation, it would breach the spirit of the constitutional provision. Reliance
6
was also placed on the decision in Ashok Kumar Thakur v. Union of India ,
wherein this Court held that the Government should not proceed on the basis
4
1992 Supp (3) SCC 217
5
(2000) 1 SCC 168
6
(2008) 6 SCC 1
11
that once a class is considered backward, it should continue to be backward for
all times, as such an approach would defeat the very purpose of reservation.
7.1. The learned counsel further submitted that the respondents have reached a
comparatively higher level of social advancement and economic status, and
therefore, as a matter of law, the declaration of such persons as being
non-entitled to be treated as backward is sustainable. The Department has
rightly considered the respondents as falling under the Creamy Layer, and
vacancies reserved for OBC candidates are earmarked and allocated to other
non-Creamy Layer candidates who are eligible and entitled.
7.2. It was contended that the High Court erred in dismissing the writ petitions
solely on the ground of alleged discrimination between wards of PSU
employees and wards of Government employees, without examining the merits
of the individual cases decided by the Tribunal. The income from the salary of
the parents of the respondents was not considered by the High Court while
deciding the case. The delay in determination of equivalence between PSU
employees and Government employees should not result in providing an undue
advantage to the respondent candidates who belong to a comparatively higher
strata of the OBC category by virtue of their parents’ salary income as this
would deny the benefit of reservation to deserving candidates.
7.3. It was further contended that the 1993 OM has been upheld by this Court
in Ashok Kumar Thakur (supra) , and the High Court erred in holding that the
1993 OM and the clarificatory letter dated 14.10.2004 bring about hostile
12
discrimination. Clause II-C of the Schedule to the 1993 OM clearly states that
employees in PSUs, banks, insurance organisations, universities etc. are to be
treated on the same footing as Government employees, and pending evaluation
of equivalence, the criteria specified in Category VI would apply. All candidates
producing certificates for claiming the benefit of reservation under the OBC
Non-Creamy Layer category must undergo all six tests given in the Schedule to
the 1993 OM to determine their Creamy Layer status. The service status of the
parents of persons employed in PSUs or private enterprises, in which
equivalence has not been established vis-à-vis Government services is
determined by the quantum of salary that they receive.
7.4. It was submitted that the clarificatory letter dated 14.10.2004 was issued
only to clarify the procedure to be adopted for applying the income / wealth test
in the case of sons and daughters of parents employed in PSUs, etc., where
equivalence has not been established. The High Court erred in holding that para
9 of the letter was not in consonance with the 1993 OM. The timely rise in the
income of Government servants through successive Pay Commissions has not
erased the importance of the social status criteria to be adopted in their case. For
determining Creamy Layer status, the sons and daughters of Government
servants undergo both social and economic tests, whereas those of PSU and
private employees undergo only the economic test.
7.5. The learned counsel further contended that an appointment given to a
non-eligible candidate deprives an eligible Non-Creamy Layer OBC candidate
13
of appointment. The judgment of the High Court is contrary to the established
policy of the Government. This Court has held that it is not within the domain of
the courts to embark upon an inquiry as to whether a particular public policy is
wise or acceptable, or whether a better policy could be evolved. Such a policy
decision would normally not be interfered with unless it is capricious, arbitrary,
or offends Article 14.
7.6. It was thus submitted that the 1993 OM and the letter dated 14.10.2004
form part of a consistent and constitutionally sound framework for the
identification of the creamy layer, and that the inclusion of salary in gross
annual income aligns with the principle of substantive equality and prevents
distortion of the reservation system. Further, it was contended that the exclusion
of salary would subvert the constitutional goal of social justice, lead to reverse
discrimination, and create administrative chaos, thereby undermining the rights
of genuinely backward OBC candidates.
7.7. On these grounds, the learned counsel prays that the impugned judgment
of the High Court dated 31.08.2017 deserves to be quashed and that the
respondents be declared as falling within the Creamy Layer and not entitled to
reservation benefits under the OBC category.
8. The learned senior counsel appearing for Respondent No.1
(Rohith Nathan) submitted that the 1993 OM carries the authority of law, having
been issued pursuant to the directions in Indra Sawhney and others v. Union of
14
7
India and others after due deliberation by an Expert Committee, parliamentary
scrutiny, and inter-ministerial consultation. He pointed out that the Expert
Committee had evolved criteria for the exclusion of socially advanced persons
from the benefit of reservation for OBCs, with emphasis on social status and
high income from business, profession, or other sources, while expressly
excluding income derived from salary and agricultural land. The report of the
Committee was laid before both Houses of Parliament and formally accepted by
the Government, and the 1993 OM was issued after vetting by the Law Ministry
and consultation with the Ministry of Social Justice & Empowerment.
8.1. In contrast, the learned senior counsel submitted that the clarificatory
8
letter dated 14.10.2004 was issued without consultation, deliberation, or any
traceable administrative record, and by the DoPT, which was not the competent
authority under the Allocation of Business Rules, 1961. He referred to RTI
responses confirming that no consultation with the Ministry of Social Justice &
Empowerment preceded the issuance of the 2004 letter, and that the file notings
were not traceable. He therefore contended that the 2004 Letter is non est in law
and cannot override or dilute the binding effect of the 1993 OM.
8.2. The learned senior counsel further submitted that the implementation of
the 1993 OM itself demonstrates that salary and agricultural income are
excluded from the income/wealth test. He referred to the DoPT’s Office
7
1992 Supp (3) SCC 217
8
For short, “2004 Letter”
15
Memorandum dated 15.11.1993 annexing a model application form which
expressly excluded salary and agricultural income, and pointed out that various
State Governments such as Andhra Pradesh, Telangana, and Tamil Nadu, as
well as statutory bodies including the National Commission for Backward
Classes and the Ministry of Social Justice & Empowerment, have consistently
followed this principle.
8.3. The learned senior counsel contended that it is incorrect for the
Government to submit that OBCs belonging to Category IIC of the 1993 OM
are to suffer exclusion until the equivalence of posts is conducted. The Expert
Committee had expressly recommended that, pending evaluation of equivalence
of posts in PSUs and other bodies, persons falling under Category IIC would
still be entitled to reservation, subject only to exclusion under Category VI by
application of the income/wealth test.
8.4. The learned senior counsel also submitted that the Government’s
interpretation of Explanation (i) to the income/wealth test is erroneous. The
Government has contended that either income from salary or income from
agricultural land is to be considered, but not both excluded, in determining
whether the monetary limit has been exceeded. He argued that this interpretation
is unsupported by reasoning, contrary to the consistent implementation of the
1993 OM, and inconsistent with the Union’s own stand in Neil Aurelio Nunes
16
9
v. Union of India . In that case, the Union distinguished OBC and EWS criteria
by clarifying that for OBCs, salary income is excluded, whereas for EWS, salary
income is included. Acceptance of the Government’s present stand would
obliterate this distinction, leading to arbitrariness and inconsistency.
8.5. Thus, the learned senior counsel urged that the 1993 OM, having statutory
force and having been consistently implemented, must prevail, and that the 2004
Letter, lacking authority, cannot dilute or override the settled criteria.
9. The learned counsel appearing for Respondent No. 1 (G. Babu) submitted
that the DoPT cannot question the validity of an OBC certificate once it has
been duly issued by the competent authority. He contended that DoPT is not the
authority empowered to issue or scrutinize OBC certificates. Under the DoPT
Office Memorandum dated 15.11.1993, the competent authorities for issuance
and verification of OBC certificates are District Magistrates, Collectors, Deputy
Commissioners, Sub-Divisional Magistrates, Tehsildars and other designated
revenue officers. These authorities are specially entrusted with determining
whether an applicant belongs to the OBC category and whether he or she falls
within the Creamy Layer, strictly in accordance with the criteria prescribed in
the Schedule to the 1993 OM.
9.1. The learned counsel emphasised that the model application form
appended to the 1993 OM mandates disclosure of detailed particulars regarding
9
(2022) 4 SCC 64
17
parental qualifications, employment, income, assets and wealth, which are
verified by the issuing authority. Further, the revised OBC certificate format
introduced by the DoPT’s Office Memorandum dated 30.05.2014 expressly
requires the certifying authority to declare that the candidate does not belong to
the Creamy Layer. The certificate is thus issued after comprehensive scrutiny of
contemporary data, including parental income for the preceding three financial
years. He contended that such certificates cannot be lightly disregarded or
questioned in a cavalier manner. Reliance was placed on Madhuri Patil v.
10
Commissioner, Tribal Development , wherein this Court held that a social
status certificate remains valid unless it is found to be false or fraudulently
obtained pursuant to investigation by a duly constituted Scrutiny Committee.
9.2. The learned counsel further submitted that the 1993 OM issued pursuant
to the recommendations of the Mandal Commission, the directions of this Court
11
in Indra Sawhney and others v. Union of India and others , and the report of
the Expert Committee of the Ministry of Social Justice, comprehensively
delineates the categories falling within the Creamy Layer exclusion. He argued
that the Union of India seeks to rely upon the 2004 Letter; however, such a letter
cannot override or qualify the binding provisions of the 1993 OM. It was
submitted that while the 1993 OM excluded salary and agricultural income from
the income / wealth test, the 2004 Letter sought to include salary income in the
10
(1994) 6 SCC 241
11
1992 Supp (3) SCC 217
18
case of PSU employees, thereby introducing an artificial and hostile
discrimination between children of government servants and those of PSU
employees.
9.3. It was further submitted that it is settled law that a mere executive letter
cannot override or amend a subsisting Office Memorandum. In support, reliance
12
was placed upon R.P. Bhardwaj v. Union of India , wherein this Court held
that an operative Office Memorandum cannot be modified or curtailed through a
mere circulation of a letter. Reference was also made to K. Sampath v. State of
13
Tamil Nadu reiterating the same principle. Accordingly, the 2004 Letter was
contended to be devoid of statutory authority and incapable of diluting the
binding effect of the 1993 OM.
10. The learned counsel appearing for the Intervenors submitted that the
Intervenors adopt the oral and written submissions advanced on behalf of the
respondents. He urged that no separate or novel relief is required to be crafted.
The present Civil Appeals were instituted by the Union of India against
judgments of various High Courts, seeking direction to the DoPT to reallocate
services to the concerned applicants. In the event of dismissal of the appeals, the
said directions would revive, and the DoPT would be obligated to proceed with
reallocation and verification of OBC status in accordance with law.
12
(2005) 10 SCC 244
13
MANU/TN/9958/2006
19
10.1. The learned counsel submitted that the Union of India has been aware of
these directions since 2017, 2018 and 2022, and had in certain matters obtained
interim orders of stay. The Union was thus fully conscious that, if unsuccessful,
it would be required to implement the High Court directions. It cannot now
plead administrative inconvenience. He drew attention to the 21st Report of the
Parliamentary Committee on Welfare of Other Backward Classes (2018–19),
wherein representatives of the DoPT had informed the Committee that
supernumerary posts would be created to implement the decision of the Delhi
High Court dated 22.03.2018. It was argued that having undertaken to create
such posts, the Union cannot resile from its stated position upon dismissal of the
appeals.
10.2. The learned counsel further submitted that this Court in W.P.(C) No.
914/2016, by order dated 20.03.2017, had directed that candidates selected
through the Civil Services Examination, 2016 be notified that their selection and
seniority would remain subject to the outcome of litigation initiated by OBC
candidates. The DoPT complied with this direction by issuing an Office
Memorandum dated 20.12.2016. It was contended that delays in disposal of the
present batch were attributable to repeated adjournments sought by the Union of
India. In such circumstances, the Union cannot invoke equitable considerations
to avoid compliance with binding directions.
10.3. It was submitted that this Court possesses ample powers under Article
142 of the Constitution to direct creation of supernumerary posts where
20
candidates have been wrongfully denied appointment or promotion. In this
regard, reliance was placed upon decisions including Sushma Gosain v. Union
14 15
of India , Dr. PPC Rawani v. Union of India , Union of India v. Vijay
16 17
Kumari , Dr. D.K. Reddy v. Union of India , Delhi Administration v. Nand
18 19
Lal Pant and Union of India v. Parul Debnath , wherein directions for
creation of supernumerary posts were issued in exceptional circumstances.
While acknowledging that cadre management ordinarily falls within the
executive domain, it was contended that in special situations, this Court may
exercise its plenary power to do complete justice.
10.4. Finally, it was urged that upon dismissal of the Civil Appeals and
application of the doctrine of merger, subordinate fora would be bound to apply
the ratio of this Court in the present batch, namely, that Creamy Layer status
must be assessed without reference to the 2004 Letter. Relegation would only
result in multiplicity of proceedings, delay and administrative uncertainty. Many
Intervenors have been litigating the issue for more than five years. It was
therefore submitted that this is a fit case for exercise of power under Article 142
to render complete justice by extending the benefit of the present decision to the
Intervenors, thereby conserving judicial and administrative resources and
minimizing disturbance to existing cadres and seniority positions.
14
(1989) 4 SCC 468
15
(1992) 1 SCC 331
16
1994 Supp (1) SCC 94
17
(1996) 10 SCC 177
18
(1997) 11 SCC 488
19
(2009) 14 SCC 173
21
11. The learned Additional Solicitor General of India for the appellant in CA.
Nos. 3130 - 3141 of 2024 / Union of India submitted that the Delhi High Court
fundamentally erred in construing Column 3 of the Schedule to the 1993 OM as
being confined merely to an "officer class" criterion.
11.1. It was further submitted that the High Court erred in holding that
Category VI of the 1993 OM excludes the component of “salary” entirely from
the expression “gross annual income”. According to the learned counsel, there
are three distinct components of income – income from salary, income from
other sources, and income from agriculture – and Explanation (a) to Category
VI merely prohibits the clubbing of salary and agricultural income with income
from other sources; it does not mandate exclusion of salary per se . The income
from each source, it was contended, must be assessed separately. If either the
income from salary or the income from other sources exceeds the prescribed
threshold for three consecutive years, the candidate would fall within the creamy
layer.
11.2. With respect to Category II-C of the 1993 OM, which pertains to
employees of PSUs, banks and similar institutions where equivalence with
Government posts has not been established, it was submitted that the 1993 OM
itself provides that pending evaluation of equivalence, the criteria specified
under Category VI, namely, the Income / Wealth Test, shall apply. In such
circumstances, Clause VI operates as the primary test for determination of
22
creamy layer, and exclusion of salary from consideration would render the test
otiose. The 2004 Letter, it was argued, merely harmonizes Paras 9 and 10 of the
1993 OM and does not override or amend the 1993 OM; rather, it clarifies that
in the absence of established equivalence, income from salary is relevant for
applying the income test.
11.3. It was further contended that a purposive interpretation must be given to
the expression “gross annual income”. Exclusion of salary of PSU or private
employees from consideration would lead to anomalous and absurd
consequences, whereby children of highly placed PSU executives drawing
substantial salaries could continue to claim non-creamy layer status merely
because their income from other sources falls below the threshold. Such an
interpretation, it was submitted, would defeat the constitutional principle of
qualitative exclusion recognized in Ashok Kumar Thakur (supra) and
reaffirmed subsequently, and would run contrary to the object underlying the
creamy layer doctrine.
11.4. The learned counsel contended that exclusion of the creamy layer is a
constitutional imperative and that the State possesses policy latitude in
identifying reasonable parameters for such exclusion. In the absence of
established equivalence between Government posts and PSU posts, there exists,
according to the Union, an intelligible differentia which justifies a distinct
method of applying the income test to Category II-C employees. The delay in
determining equivalence, it was submitted, cannot operate to confer an
23
unintended benefit upon comparatively advanced sections within the OBCs. It
was further argued that the High Court failed to consider the broader policy
framework and instead proceeded on an erroneous assumption of
discrimination, without appreciating that the income test under Category VI
would be rendered redundant if salary were excluded in cases where
equivalence had not been determined. Consequently, the impugned judgment,
which has the effect of nullifying the 2004 Letter and reopening settled
selections, was stated to be unsustainable in law and contrary to the
constitutional scheme governing OBC reservations.
12. The learned senior counsel for Respondent(s) in CA. Nos. 3130 – 3141 of
2024 submitted that the Constitution Bench in Indra Sawhney v. Union of
India (supra) directed the Union of India to specify appropriate socio-economic
criteria for excluding the socially advanced sections – commonly referred to as
the Creamy Layer – from the ambit of Other Backward Classes. Pursuant
thereto, the Government constituted the Ram Nandan Prasad Committee, whose
report was laid before both Houses of Parliament. The recommendations of the
Committee were accepted in toto and culminated in the issuance of the 1993
OM.
12.1. It was submitted that under the 1993 OM, the sons and daughters of
Government officers directly recruited to Class I posts, and those promoted
from Class II to Class I before the age of 40, were to be treated as falling within
24
the creamy layer. Children of employees in autonomous bodies, public sector
undertakings, banks, insurance organisations, universities and private
enterprises were to be considered creamy layer where their parents held posts
equivalent or comparable to those specified for Government servants. Further,
the income / wealth test prescribed that persons whose gross family income for
the preceding three years exceeded the notified threshold (Rs. 6,00,000 at the
relevant time; presently Rs. 8,00,000) would fall within the creamy layer.
Crucially, income from salaries and agricultural land was expressly excluded
from such computation.
12.2. Learned counsel emphasised that DoPT itself interpreted the 1993 OM as
excluding salary income, as reflected in its Office Memorandum dated
15.11.1993 and the Model Form appended thereto. The Model Form specifically
required disclosure of income excluding salary income. This form, it was
submitted, continues to be uniformly adopted by all certificate-issuing
authorities across the country without modification.
12.3. Reference was then made to the 2004 Letter. Paragraph 3 thereof
acknowledged that the criteria prescribed for Government servants were to
apply mutatis mutandis to similarly placed employees of PSUs, banks and other
organisations. Paragraph 10 reiterated that income from salaries and agricultural
land shall not be taken into account while applying the income / Wealth Test.
However, paragraph 9 of the same 2004 Letter, it was contended, introduced a
contradictory position by providing that where equivalence of posts had not
25
been determined, income from salaries and other sources was to be assessed
separately, and if either exceeded the prescribed limit, the candidate would be
treated as creamy layer. Agricultural income alone was excluded.
12.4. According to the learned counsel, paragraph 9 effectively introduced a
discriminatory regime whereby salary income would be counted in the case of
PSU employees and others falling within Category IIC, but not for Government
servants, armed forces personnel, or constitutional functionaries. The failure of
the Government to determine equivalence of posts could not justify imposing
dual income thresholds for Category IIC. Such an interpretation, it was argued,
runs contrary to the spirit of the Expert Committee’s report and the 1993 OM,
and may lead to anomalous results – disqualifying even the wards of lower-level
employees such as peons, drivers or typists solely on account of salary
progression.
12.5. It was further submitted that paragraph 9 of the 2004 Letter was not
operationalized until the Civil Services Examination 2015 and even thereafter
its implementation remained confined to the UPSC Civil Services Examination,
without adoption by other recruiting bodies. The interpretation is thus peculiar
to DoPT and lacks uniform application.
12.6. On the aspect of estoppel and legitimate expectation, learned counsel
contended that the Union of India is precluded from assailing the impugned
judgment of the Delhi High Court dated 22.03.2018, having complied with it by
issuing a Compliance Order dated 22.05.2018. Having accepted and acted upon
26
the judgment, the Union of India cannot now resile therefrom without first
recalling or withdrawing its compliance.
12.7. It was also urged that the Government cannot adopt a stand before this
Court diametrically opposed to its representations before Parliament, the
20
National Commission for Backward Classes and this Court in other
proceedings. Reliance was placed on:
1. Legal Opinion of the Law Secretary dated 06.02.2019 opining that pending
determination of equivalence, salary cannot be used as a criterion for Category
IIC and that such cases must fall for consideration under Clause VI(b).
2. The observations of the Parliamentary Committee recommending withdrawal
of the Union’s affidavit founded upon paragraph 9 of the 2004 Letter, as being
contrary to the Law Ministry’s advice and the NCBC’s stance.
3. The Tenure Report (2019-2022) of the NCBC holds that salary ought not to
be included in computing gross total income for creamy layer determination.
4. The affidavit filed by the Union in Neil Aurelio Nunes v. Union of India,
WP(C) No. 961 of 2021 (EWS matter), wherein it was specifically distinguished
that the Rs. 8 lakh thresholds for EWS includes salary income, whereas the
threshold for OBC creamy layer excludes salary income.
5. The inconsistency between the stand taken in the EWS matter and the
position now advanced in Union of India v. Ketan (Civil Appeal No. 3130 of
2024).
20
For short, “NCBC”
27
12.8. On the strength of these representations, it was argued that a legitimate
expectation has arisen that the Government would maintain consistency in its
stand. Any deviation would not only defeat such expectation but also undermine
parliamentary accountability and the constitutional principle of collective
responsibility.
12.9. Lastly, learned counsel submitted that this Court by order dated
28.11.2016 in WP(C) No. 914 of 2016 and connected matters, directed that all
subsequent selections would be subject to the final outcome of the pending
petitions. The matters were transferred to the Delhi High Court, which rendered
its judgment on 28.03.2018. The same was complied with on 22.05.2018. The
present appeals were filed after a delay of more than 600 days, without
withdrawal of the compliance order. In these circumstances, the concurrent
findings of the CAT, Madras Bench; the Delhi High Court; the Madras High
Court; and the Kerala High Court warrant affirmation along with consequential
relief.
13. Adding further, it was submitted on behalf of the appellant in SLP (C)
No. 17651 of 2022 that the 1993 OM expressly employs the expression “gross
annual income” and therefore, the Kerala High Court erred in inferring that only
“income from other sources” forms the basis for determination of creamy layer
status in the case of PSU employees where equivalence has not been
established. According to the learned counsel, such an interpretation is contrary
28
to the spirit and consistent understanding of the 1993 OM, as clarified on
multiple occasions by the Reservation Division, and amounts to reading into the
1993 OM, a restriction which it does not contemplate.
13.1. It was further submitted that equivalence of posts in State PSUs vis-à-vis
Central or State Government posts has not yet been comprehensively
undertaken, as the exercise involves complex comparative assessment of a
multitude of posts across States and Union Territories, differing pay structures,
service conditions, and attendant perks and privileges. It was contended that
precisely to address such contingencies, the 1993 OM provides under Category
VI for application of the Income / Wealth Test pending evaluation of
equivalence, and that this mechanism ensures continued implementation of the
creamy layer principle even in the absence of formal equivalence.
13.2. The learned counsel also assailed the Government Order dated
31.05.2018 issued by the State of Kerala purporting to determine equivalence in
respect of posts in the Kerala State Financial Enterprises, contending that the
said order was passed on the basis of an individual representation and not as a
policy decision founded upon objective and quantifiable data. It was urged that
such an exercise is not in consonance with the principles laid down in Indra
21
Sawhney and others v. Union of India of others , which require identification
of socially and educationally backward classes based on objective criteria and
quantifiable data before extending reservation benefits.
21
1992 Supp (3) SCC 217
29
13.3. It was further submitted that in any event, even assuming the validity of
the Government Order dated 31.05.2018, the said equivalence determination
came into existence subsequent to the relevant selection process and was not in
force at the time of consideration of the respondent’s candidature. Reliance was
placed on Rule 10 of the Civil Services Examination Rules, 2017, to contend
that candidates seeking reservation benefits must be in possession of requisite
and valid certificates in support of their claim as on the closing date of the
application, i.e. 17.03.2017. Since the equivalence, even if assumed valid, was
not operative on the relevant date, the respondent could not claim its benefit
retrospectively.
13.4. On these grounds, learned counsel prayed for setting aside the impugned
judgment and allowing the appeal.
14. The learned counsel for Respondent No. 1 in SLP (C) No. 17651 of 2022
submitted that by the impugned judgment dated 25.02.2022 passed by the
Kerala High Court, the respondent was directed to be considered as an OBC-
NCL candidate in the merit list for the Civil Services Examination, 2017. This
was on the ground that the sole surviving parent (mother) of the respondent was
appointed as a Group C employee in a Public Sector Undertaking owned by the
Government of Kerala, and that the PSU was governed by a subsisting order of
equivalence with corresponding posts in the Government of Kerala. The said
equivalence order had been produced before the DoPT by the candidate.
30
14.1. It was further contended that the High Court in its judgment, examined
the validity of the equivalence order and held that such an order could only have
been issued by the Government of Kerala. The High Court substantively
validated the equivalence order after examining the comparability methodology
adopted therein. In paragraph 27 of the judgment, it was categorically held that
the post to which the candidate’s mother was appointed was equivalent to a
Group C post in the public services of the Government of Kerala. In paragraph
30, the High Court declared that the DoPT had erred in denying OBC-NCL
allocation to the candidate. It was submitted that the DoPT had adopted a
mutually contradictory position first demanding an equivalence order and
thereafter disregarding it when duly furnished.
14.2. It was submitted that the High Court highlighted the arbitrary conduct of
the DoPT in paragraphs 20 and 25 of the judgment. The DoPT had altered the
procedure for verification of Creamy Layer status of candidates whose parents
were appointed to State Public Sector Enterprises, both during the Civil Services
Examination, 2016 and midway through the CSE-2017 process, without any
public notice or notification, thereby violating settled procedures and principles
of natural justice. In 2016, the procedure adopted was to seek clarification from
the concerned State Government regarding comparability of posts. However, in
2017 midway through the examination process, the DoPT began insisting upon
formal equivalence orders issued by the State Governments.
31
14.3. Reference was also made to paragraph 31 of the judgment, wherein the
High Court observed that there was no justification for the DoPT to reject the
equivalence order issued by the State Government. It clarified that the
equivalence order to be submitted could only be an order of the State
Government, and in the present case, one issued by the Government of Kerala.
It was contended that “State Public Services” and “State Public Service
Commissions” fall within the exclusive domain of the State List under the
Seventh Schedule to the Constitution. Consequently, the jurisdiction to declare
comparability or equivalence between posts in the public services of the State of
Kerala and Public Sector Enterprises owned by it lies exclusively within the
State Government. It was urged that this constitutional demarcation had been
disregarded by the DoPT in filing the present appeal.
14.4. It was further submitted that the DoPT had not disputed the status of the
post held by the candidate’s deceased father (who passed away in 2012) which
had been accepted as a Group C post in the Government of Kerala based on
orders issued by the same State Government. However, the DoPT was disputing
the equivalence order issued by that very Government in relation to the
candidate’s mother, who was appointed to a Group C post in a State PSU. This
differential treatment, it was contended, amounted to discrimination against the
candidate’s mother alone and reflected arbitrariness in administrative decision-
making. The High Court had noted such arbitrariness in paragraph 33 of its
judgment and dismissed the petition filed by the DoPT.
32
14.5. It was also contended that the action of the DoPT in treating the salary of
an employee of a State PSU, irrespective of the post held, as income for
determining Non-Creamy Layer status was discriminatory, particularly when, in
the case of employees of the Central Government, State Governments, or
Central PSUs, salary income was exempted from such computation. This aspect
had been extensively dealt with by the High Court.
14.6. Finally, it was submitted that the DoPT lacked locus standi to raise
disputes on behalf of the Union Government against orders issued by State
Governments regarding equivalence of posts within the State. The DoPT’s
powers are circumscribed by the Allocation of Business Rules, 1961, and the
subject matter of challenging equivalence determinations of State Governments
does not fall within its assigned business. It was contended that the DoPT
neither possesses authority to reject orders issued by the appropriate State
Government nor to issue directions or requisitions to State Governments in that
regard. Consequently, the challenge to the equivalence order issued by the
Government of Kerala was said to be contrary to the Allocation of Business
Rules, 1961, and violative of Article 77(3) of the Constitution of India.
14.7. It was emphasized that procedural violations were writ large in the actions
of the DoPT in altering verification norms during the conduct of the Civil
Servies Examinations and in adopting inconsistent verification practices from
year to year. Until 2016, the DoPT had sought clarification from State
Governments regarding the nature of posts held by parents serving in State
33
PSUs. In 2017, however, it insisted upon formal equivalence orders midway
through the examination process, without amending the governing rules or
issuing any notification, and thereafter rejected or ignored such orders when
produced. According to the learned counsel, this arbitrary shift in procedure
appeared designed to deny OBC claims of candidates whose parents were
employees of State Public Sector Enterprises. It was further submitted that State
Governments have consistently exercised their constitutional authority under the
Seventh Schedule to issue equivalence orders whenever officers of State Public
Services are posted to State PSUs. By disputing such actions of the “appropriate
Government” within the exclusive domain of the State, the DoPT was alleged to
have engaged in unconstitutional overreach in filing the present appeal.
15. The learned counsel appearing for the Union Public Service Commission
(UPSC) submitted that the role of the said respondent is strictly confined to
conducting the Civil Services Examination in accordance with the Rules and
Regulations framed by the DoPT. The UPSC conducts the examination,
processes the results, and makes recommendations for appointment to the
various services based on the vacancies requisitioned by the respective Cadre
Controlling Authorities. It was contended that the UPSC neither frames policy
nor possesses the authority to adjudicate upon issues relating to reservation
status or the application of the Creamy Layer criteria.
34
15.1. It was further submitted that the determination of eligibility for
reservation benefits, including verification of OBC Non-Creamy Layer status,
falls exclusively within the domain of the DoPT, which is the appellant herein
and the nodal authority for such matters. Therefore, the issues raised in the
present proceedings, as well as the reliefs sought by the appellants pertain solely
to the DoPT, and no substantive relief has been claimed or could be claimed
against the UPSC.
DISCUSSION & FINDINGS
16. We have heard learned counsel appearing for the parties at length and
perused the materials available on record.
17. The present batch of Civil Appeals arises from judgments of the Madras
High Court, Kerala High Court and Delhi High Court. By the impugned
judgments, the respective High Courts adjudicated upon the eligibility of certain
candidates claiming the benefit of OBC (Non-Creamy Layer) reservation in the
Civil Services Examination conducted in different years.
18. It is not in dispute that the respondent candidates were successful in the
Civil Services Examination. However, as the equivalence of posts in Public
Sector Undertakings, banks and other organisations vis-à-vis Government posts
had not been formally determined, the DoPT applied the Income /Wealth Test
under Category VI of the 1993 OM read with 2004 Letter. Upon assessing the
35
parental income of the respective candidates for the preceding three financial
years, the DoPT classified them as falling within the Creamy Layer of the Other
Backward Classes, thereby rendering them ineligible for OBC (Non-Creamy
Layer) reservation benefits. Consequently, their cases were not considered for
service allocation under the reserved category. Aggrieved thereby, the
respondent candidates approached the CAT and obtained orders in their favour.
The writ petitions filed by the appellants challenging the said orders were
dismissed by the High Courts of Madras, Delhi and Kerala. It is in these
circumstances that the present Civil Appeals filed by the appellants have been
placed before us for consideration.
19. The issues involved are allied and overlapping, though they require
distinct treatment for the purpose of analysis. The first issue is whether the
clarificatory letter dated 14.10.2004 can have any overriding or superseding
effect over the Office Memorandum dated 08.09.1993, which expressly lays
down the criteria for exclusion from the benefit of reservation for OBCs by
identifying the creamy layer namely, the socially advanced persons of sections
among the Socially and Educationally Backward Classes. The second issue is
whether there can be hostile discrimination between employees of the
Government and those working in Public or Private Sector Undertakings, when
both occupy posts of the same grade or class.
36
20. Since the issues raised are broader in nature and concern the
constitutional architecture governing identification of the creamy layer, the
validity and interpretation of executive instructions, and the equality mandate
under Article 14, it is neither necessary nor appropriate for this Court to enter
into the granular factual matrix of each individual case. Moreover, the
judgments impugned before us record largely concurrent findings on the
material aspects. The controversy, therefore, turns essentially on questions of
law of general public importance, warranting authoritative determination by this
Court.
21. Before proceeding further, it is apposite to examine the constitutional and
statutory background of reservation in India.
21.1. India’s reservation framework for Other Backward Classes (OBCs)/
Socially and Educationally Backward Classes (SEBCs) has evolved through a
sustained dialogue between constitutional text, legislative intervention, and
judicial doctrine. The objective has consistently been to reconcile the mandate
of substantive equality with the imperatives of administrative efficiency.
Constitutional framework
21.2. The Constitution embedded the principle of advancement of weaker
sections through:
37
• Article 46 (Directive Principles of State Policy), which mandates the State
to promote with special care the educational and economic interests of the
weaker sections, particularly, Scheduled Castes and Scheduled Tribes;
• Article 15(4) (inserted by the First Constitutional Amendment, 1951),
enabling the State to make special provision for the advancement of
socially and educationally backward classes of citizens or for the
Scheduled Castes and the Scheduled Tribes;
• Article 16(4) empowering the State to make provisions for reservation in
appointments or posts in public services for any backward classes
inadequately represented;
• Article 15(5), later inserted, enabling reservation in admissions to
educational institutions, including private educational institutions whether
aided or unaided by the State, other than the minority educational
institutions.
For ease of reference, the above provisions read as under:
“46. Promotion of educational and economic interests of Scheduled Castes,
Scheduled Tribes and other weaker sections .—
The State shall promote with special care the educational and economic
interests of the weaker sections of the people, and, in particular, of the
Scheduled Castes and the Scheduled Tribes, and shall protect them from social
injustice and all forms of exploitation.”
“ 15. Prohibition of discrimination on grounds of religion, race, caste, sex or
place of birth -
38
(4) Nothing in this article or in clause (2) of article 29 shall prevent the State
from making any special provision for the advancement of any socially and
educationally backward classes of citizens or for the Scheduled Castes and the
Scheduled Tribes.”
(5) Nothing in this article or in sub-clause (g) of clause (1) of article 19 shall
prevent the State from making any special provision, by law, for the
advancement of any socially and educationally backward classes of citizens or
for the Scheduled Castes or the Scheduled Tribes in so far as such special
provisions relate to their admission to educational institutions including private
educational institutions, whether aided or unaided by the State, other than the
minority educational institutions referred to in clause (1) of article 30.”
“16. Equality of opportunity in matters of public employment-
(4) Nothing in this article shall prevent the State from making any provision for
the reservation of appointments or posts in favour of any backward class of
citizens which, in the opinion of the State, is not adequately represented in the
services under the State.”
From its inception, Article 16(4) was conceived not as an exception to equality,
but as an instrument to achieve it.
Early Judicial Evolution
22
21.3. In M.R. Balaji and others v. State of Mysore , this Court held that caste
may be a relevant factor in identifying backwardness, but it cannot be the sole or
dominant test. Social backwardness, the Court observed, is on the ultimate
analysis closely linked with poverty, and excessive reservation under the guise
of special provisions would subvert the constitutional scheme. The Court
broadly indicated that reservation should ordinarily remain below 50%,
recognising the need to balance advancement of weaker sections with societal
interests at large. The following paragraphs are pertinent:
22
AIR 1963 SC 649
39
“23. Besides, if the caste of the group of citizens was made the sole basis for
determining the social backwardness of the said group, that test would
inevitably break down in relation to many sections of Indian society which do
not recognise castes in the conventional sense known to Hindu society. How is
one going to decide whether Muslims, Christians or Jains, or even Lingayats are
socially backward or not? The test of castes would be inapplicable to those
groups, but that would hardly justify the exclusion of these groups in toto from
the operation of Article 15(4). It is not unlikely that in some States some
Muslims or Christians or Jains forming groups may be socially backward. That
is why we think that though castes in relation to Hindus may be a relevant factor
to consider in determining the social backwardness of groups or classes of
citizens, it cannot be made the sole or the dominant test in that behalf. Social
backwardness is on the ultimate analysis the result of poverty to a very large
extent. The classes of citizens who are deplorably poor automatically become
socially backward. They do not enjoy a status in society and have, therefore, to
be content to take a backward seat. It is true that social backwardness which
results from poverty is likely to be aggravated by considerations of caste to
which the poor citizens may belong, but that only shows the relevance of both
caste and poverty in determining the backwardness of citizens .
…
34. ……. If admission to professional and technical colleges is unduly
liberalised, it would be idle to contend that the quality of our graduates will not
suffer. That is not to say that reservation should not be adopted; reservation
should and must be adopted to advance the prospects of the weaker sections of
society, but in providing for special measures in that behalf care should be taken
not to exclude admission to higher educational centres to deserving and
qualified candidates of other communities. A special provision contemplated by
Article 15(4) like reservation of posts and appointments contemplated by Article
16(4) must be within reasonable limits. The interests of weaker sections of
society which are a first charge on the States and the Centre have to be adjusted
with the interests of the community as a whole. The adjustment of these
competing claims is undoubtedly a difficult matter, but if under the guise of
making a special provision, a State reserves practically all the seats available in
all the colleges, that clearly would be subverting the object of Article 15(4). In
this matter again, we are reluctant to say definitely what would be a proper
provision to make. Speaking generally and in a broad way, a special provision
should be less than 50%; how much less than 50% would depend upon the
present prevailing circumstances in each case.”
40
23
Similarly, in State of Andhra Pradesh and another v. P. Sagar , this Court
reiterated that classification for the purposes of Article 15(4) cannot rest solely
upon caste; the objective remains the advancement of socially and educationally
backward classes.
Socio-Economic Refinement and Means Test
21.4. By 1985, the doctrine had matured further in K.C. Vasanth Kumar and
24
another v. State of Karnataka , where a Seven-Judge Bench emphasised that
reservation policy cannot remain static but must be subjected to periodic review
to ensure that the truly backward continue to receive its benefits. Justice
D.A.Desai in his concurring opinion, stressed that economic criteria must
increasingly inform the identification of beneficiaries and cautioned that
reservation cannot be allowed to crystallise into a vested or hereditary
entitlement. The Court endorsed the “caste-cum-means” test, drawing support
25
from K.S. Jayasree v. State of Kerala , where the imposition of an income
ceiling within backward classes was upheld as constitutionally valid. Likewise,
26
in R. Chitralekha v. State of Mysore , the Court recognised income and
occupation as permissible indicators of backwardness. These decisions marked a
decisive shift towards economic refinement within socially backward classes, a
principle that ultimately took firm doctrinal shape in Indra Sawhney v. Union
23
1968 SCR (3) 595
24
1985 SCC OnLine SC 339
25
(1976) 3 SCC 730
26
(1964) 6 SCR 368 : AIR 1964 SC 1823
41
of India (supra) , where the exclusion of the ‘creamy layer’ was constitutionally
crystallised. The relevant paragraphs from the judgment in K.C. Vasanth Kumar
read as under:
“26 . Therefore, a time has come to review the criterion for identifying socially
and educationally backward classes ignoring the caste label. The only
criterion which can be realistically devised is the one of economic
backwardness. To this may be added some relevant criteria such as the secular
character of the group, its opportunity for earning livelihood etc. but by and
large economic backwardness must be the loadstar. Why I say this?
…
30. Let me conclude. If economic criterion for compensatory discrimination or
affirmative action is accepted, it would strike at the root cause of social and
educational backwardness, and simultaneously take a vital step in the
direction of destruction of caste structure which in turn would advance the
secular character of the Nation. This approach seeks to translate into reality
the twin constitutional goals: one, to strike at the perpetuation of the caste
stratification of the Indian Society so as to arrest regressive movement and to
take a firm step towards establishing a casteless society; and two, to
progressively eliminate poverty by giving an opportunity to the disadvantaged
sections of the society to raise their position and be part of the mainstream of
life which means eradication of poverty.
31. Let me make abundantly clear that this approach does not deal with
reservation in favour of Scheduled Castes and Scheduled Tribes. Thousands of
years of discrimination and exploitation cannot be wiped out in one generation.
But even here economic criterion is worth applying by refusing preferred
treatment to those amongst them who have already benefited by it and improved
their position. And finally reservation must have a time span otherwise
concessions tend to become vested interests. This is not a judgment in a lis in an
adversary system. When the arguments concluded, a statement was made that
the Government of State of Karnataka would appoint a Commission to
determine constitutionally sound and nationally acceptable criteria for
identifying socially and educationally backward classes of citizens for whose
benefit the State action would be taken. This does not purport to be an
exhaustive essay on guide lines but may point to some extent, the direction in
which the proposed Commission should move.”
42
125…… While caste or community is a relevant factor in determining the social
and educational backwardness, it cannot be said that all members of a caste
need be treated as backward and entitled to reservation under Article 15(4) or
Article 16(4). Caste-cum-means test would be a rational test in identifying
persons who are entitled to the benefit of those provisions. This principle has
received acceptance at the hands of this Court in K.S. Jayasree v. State of
Kerala [(1976) 3 SCC 730]. In that case a Commission appointed by the
Government of the State of Kerala to enquire into the social and economic
conditions of the people of that State and to recommend as to what sections of
the people should be extended the benefits under Article 15(4) of the
Constitution found that only the rich amongst certain castes or communities
were enjoying the benefit of reservations made earlier. It, therefore,
recommended adoption of a means-cum-caste/community test for determining
the sections of the people who should be given the benefit under the relevant
constitutional provisions. The State Government accordingly stipulated that
applicants who were members of certain castes or communities and whose
family income was less than Rs 10000 per year were only entitled to reservation
under Article 15(4). The petitioner in the above case who belonged to one such
community but whose family income was above Rs 10,000 per year questioned
the order before the Kerala High Court on the ground that the imposition of the
ceiling of family income was unconstitutional. The learned Single Judge who
heard the petition allowed it. The Division Bench of the Kerala High Court,
however, reversed the decision of the learned Single Judge and dismissed the
petition. On appeal, this Court while affirming the decision of the Division
Bench in the above case on the question of social backwardness observed at pp.
199-200 thus: (SCC p. 735, para 21)
……
143. Since economic condition is also a relevant criterion, it would be
appropriate to incorporate a “means test” as one of the tests in determining the
backwardness as was done by the Kerala Government in Jayasree case63. These
two tests namely, that the conditions of caste or group or community should be
more or less similar to the conditions in which the Scheduled Castes or
Scheduled Tribes are situated and that the income of the family to which the
candidate belongs does not exceed the specified limit would serve as useful
criteria in determining beneficiaries of any reservation to be made under Article
15(4). For the purpose of Article 16(4) however, it should also be shown that the
backward class in question is in the opinion of the Government not adequately
represented in the Government services.
144. There is one other basis on which a classification made for purposes of
Article 15(4) or Article 16(4) of the Constitution has received the approval of
this Court in Chitralekha case . In that case the Court was concerned with a list
43
of backward classes prepared on the basis of economic condition and
occupation. According to that Government Order, persons whose family income
was Rs 1200 per annum or less and who were engaged in occupations such as
agriculture, petty business, inferior services, crafts or other occupations
involving manual labour were treated as belonging to backward classes. The
petitioner who had filed the petition in the High Court did not challenge the
validity of the said classification. But on a submission made on behalf of the
State Government, the Court expressed its general approval to the method of
classification….”
21.5. Thus, the above decisions collectively established three guiding
propositions:
1. Caste may serve as an initial identifying marker but cannot be the
exclusive determinant.
2. Economic condition is a relevant and rational refining criterion.
3. Reservation policy must balance social justice with broader societal
interests.
Mandal Commission and OBC Reservation
21.6. The Mandal Commission, formally known as the Socially and
Educationally Backward Classes Commission (SEBC) was constituted in 1979
under the chairmanship of B.P. Mandal with the mandate to identify the socially
and educationally backward classes in India. In its 1980 report, drawing upon
data from the 1931 Census (the last caste-based census) along with
contemporaneous sample studies, the Commission estimated that Other
Backward Classes (OBCs) constituted approximately 52% of the population. It
44
recommended 27% reservation in civil posts and services under the Government
of India and Public Sector Undertakings, as well as in higher educational
institutions, thereby bringing the total reservations for SCs, STs and OBCs to
49.5%.
21.7. Acting upon the said report, the Government of India issued an Office
Memorandum dated 13.08.1990 providing for 27% reservation in civil posts and
services for Socially and Educationally Backward Classes (SEdBCs). The said
O.M. was amended on 25.09.1991 to provide that preference within the 27%
reservation would be given to candidates belonging to the poorer sections
among the SEdBCs. The implementation of the Mandal recommendations led
to widespread public debate and social unrest, ultimately resulting in a
constitutional challenge before this Court.
21.8. The validity of the above mentioned 1990 O.M. was considered by nine-
27
Judge Bench in Indra Sawhney and others v. Union of India and others . This
Court upheld the constitutional validity of 27% reservation for OBCs under
Article 16(4), but imposed crucial limitations. It held that total reservations
ordinarily should not exceed 50%, save in extraordinary circumstances, and
most significantly, it mandated the exclusion of the “creamy layer” from among
the OBCs. The Court emphasised that backwardness under Article 16(4) is
27
1992 Supp (3) SCC 217
45
primarily social and that reservation cannot be sustained purely on economic
criteria.
21.9. Justice Sahai , while concurring with the majority, underscored that
backwardness is not static and that individuals within a backward class who
have achieved higher social or economic status must be excluded to prevent
monopolisation of benefits. He observed that while a collectivity may be
backward, individuals from that group who have achieved advancement in
status, service, or affluence must be disentitled from claiming reservation. The
exclusion of the creamy layer was thus articulated as a constitutional necessity
to preserve substantive equality. The following passage from the decision in
Indra Sawhney is relevant:
“629. More backward and backward is an illusion. No constitutional exercise is
called for it. What is required is practical approach to the problem. The
collectivity or the group may be backward class but the individuals from that
class may have achieved the social status or economic affluence. Disentitle them
from claiming reservation. Therefore, while reserving posts for backward
classes, the departments should make a condition precedent that every candidate
must disclose the annual income of the parents beyond which one could not be
considered to be backward. What should be that limit can be determined by the
appropriate State. Income apart, provision should be made that wards of those
backward classes of persons who have achieved a particular status in society
either political or social or economic or if their parents are in higher services
then such individuals should be precluded to avoid monopolisation of the
services reserved for backward classes by a few. Creamy layer, thus, shall stand
eliminated. And once a group or collectivity itself is found to have achieved the
constitutional objective then it should be excluded from the list of backward
class. Therefore,
(1) No reservation can be made on economic criteria.
46
(2) It may be under Article 16(4) if such class satisfies the test of inadequate
representation.
(3) Exclusion of creamy layer is a social purpose. Any legislative or executive
action to remove such persons individually or collectively cannot be
constitutionally invalid.”
21.10. The Court further directed the Government of India to specify, within
four months, the socio-economic criteria for excluding socially advanced
persons or sections from the OBC category and made implementation of the
1990 O.M. subject to such exclusion. It is in furtherance of these directions that
the Ministry of Social Justice appointed an Expert Committee to evolve criteria
for exclusion of the socially advanced sections, the term “creamy layer” being
only a shorthand expression for this constitutional principle. The Expert
Committee, keeping in view the directions in Indra Sawhney , evolved criteria
centred primarily on social status arising from positions and placements in life,
rather than on income alone. The guiding principle was to identify positions
whose occupants could reasonably be deemed to have ceased to be socially
backward and to have attained social advancement. Accordingly, the Committee
framed exclusion criteria under various categories, including the Service
Category.
21.11. Under the Service Category, the Committee recommended that the
criteria applicable to officers directly recruited in Central and State Government
services should apply mutatis mutandis to officers in equivalent or comparable
47
posts in Public Sector Undertakings, Banks, Insurance Corporations,
Universities, Autonomous Bodies, Local Self-Government Bodies and other
similar institutions. Importantly, to avoid delay in implementation pending
equivalence evaluation, the Committee recommended that during the interim
period, the Income / Wealth Test (Category VI) would apply to such persons.
21.12. The Expert Committee made it explicit that even during this
interim phase, persons falling within such PSU and analogous categories would
continue to be entitled to reservation, and exclusion, if any, could only be on the
basis of the prescribed Income / Wealth criteria. The intent was clear: status-
based exclusion would operate once equivalence is determined; until then,
economic filtering under structured criteria alone could apply.
Evolution of Non-Creamy Layer
21.13. The doctrine of exclusion of the “creamy layer”, crystallised by this
28
Court in Indra Sawhney and others v. Union of India and others , forms the
constitutional foundation of the 1993 OM. The subsequent executive framework
must therefore be understood as an operational mechanism to give effect to that
binding constitutional mandate.
28
1992 Supp (3) SCC 217
48
1993 OM
21.14. Pursuant to the said constitutional mandate and the
recommendations of the Expert Committee, the Government of India issued the
1993 OM, which codified the above structural framework. For better
appreciation, the OM is reproduced below:
“No.36012/22/93-Estt. (SCT)
Government of India
Ministry of Personnel, Public
Grievances & Pensions (Department of
Personnel & Training)
th
New Delhi, the 8
September, 1993
OFFICE MEMORANDUM
Subject:- Reservation for Other Backward Classes in Civil Posts and Services
under the Government of India - Regarding.
The undersigned is directed to refer to this Department's O.M. No.
th
36012/31/90-Estt. (SCT), dated the 13 August, 1990 and 25'" September, 1991
regarding reservation for Socially and Educationally Backward Classes in Civil
Posts and Services under the Government of India and to say that following the
Supreme Court judgment in the Indra Sawhney and others Vs. Union of India
and others case [Writ Petition (Civil) No. 930 of 1990] the Government of India
appointed an Expert Committee to recommend the criteria for exclusion of the
socially advanced persons/sections from the benefits of reservations for Other
Backward Classes in civil posts and services under the Government of India.
2. Consequent to the consideration of the Expert Committee's
recommendations this Department's Office Memorandum No. 36012/31/90-Estt.
(SCT), dated 13.08.90 referred to in Para(1) above is hereby modified to
provide as follows:
(a) 27% (twenty seven percent) of the vacancies in civil posts and services
under the Government of India, to be filled through direct recruitment, shall be
reserved for the Other Backward Classes. Detailed instructions relating to the
procedure to be followed for enforcing reservation will be issued separately.
49
(b) Candidates belonging to OBCs recruited on the basis of merit in an open
competition on the same standards prescribed for the general candidates shall
not be adjusted against the reservation quota of 27%.
(c)(i) The aforesaid reservation shall not apply to persons/sections mentioned
in column 3 of the Schedule to this office memorandum.
(ii) The rule of exclusion will not apply to persons working as artisans or
engaged in hereditary occupations, callings. A list of such occupations, callings
will be issued separately by the Ministry of Welfare.
(d) The OBCs for the purpose of the aforesaid reservation would comprise,
in the first phase, the castes and communities which are common to both the
report of the Mandal Commission and the State Government's Lists.
A list of such castes and communities is being issued separately by the Ministry
of Welfare.
(e) The aforesaid reservation shall take immediate effect. However, this will
not apply to vacancies where the recruitment process has already been initiated
prior to the issue of this order.
3. Similar instructions in respect of public sector undertaking and
financial institutions including public sector banks will be issued by the
Department of Public Enterprises and by the Ministry of Finance respectively
effective from the date of this Office Memorandum.
Sd/-
(Smt. Sarita Prasad)
Joint Secretary to the
Government of India
To
All Ministries/Department of Government of India.”
The Schedule appended to the above 1993 OM enumerated specific categories
for exclusion and operationalised the status-based criteria, while providing a
residual Income / Wealth Test under Category VI.
Under Category II (Service Category), the Schedule classified Government
servants into sub-categories II A and II B, referring respectively to officers
directly recruited to Class I (Group A) and Class II (Group B) services. These
50
provisions unmistakably pertain to higher echelons of service and do not
concern lower-level employees. Category II C extends the same principle to
employees of Public Sector Undertakings, Banks, Insurance Organisations,
Universities and similar bodies, by stipulating that the criteria in sub-categories
II A and II B shall apply mutatis mutandis to officers holding equivalent or
comparable posts in such organisations.
Income / Wealth Test
21.15. However, the 1993 OM expressly provides that pending evaluation
of equivalence or comparability of posts vis-à-vis Government services, the
Income / Wealth Test under Category VI alone would apply. This is significant.
The specific criteria for disentitlement under II C, namely direct recruitment to a
post equivalent to Class I / Group A, or promotion to such post before the age of
40, remain inoperative until equivalence is determined. Thus, in the absence of
such evaluation, the entire category II C cannot be automatically deprived of
reservation; exclusion, if any, can only be under Category VI.
Category VI, which embodies the Income / Wealth Test operates as a residual
filter. Explanation (i) under this category specifically provides that income from
salaries and income from agricultural land shall not be clubbed with income
from other sources for the purpose of computing gross annual income.
Explanation (ii) pertains to the periodic revision of the prescribed income limit.
51
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.
2004 - Letter of Clarification
21.16. In 2004, a letter of clarification was issued to address practical
issues that had arisen in implementation. The clarification recognizes that where
equivalence of posts in PSUs and similar organisations has not been evaluated,
creamy layer status must be determined on the basis of the Income / Wealth
Test. It reiterates that income from salaries and income from agricultural land
shall not be taken into account while applying the test. The clarification further
explains that income from salaries and income from other sources (excluding
salaries and agricultural land) are to be assessed separately, and exclusion would
follow only if either component exceeds the prescribed limit for three
consecutive years.
21.17. Thus, the evolution of the non-creamy layer principle demonstrates
that the 1993 OM read with the 2004 Letter, preserves the primacy of status-
based exclusion and confines economic exclusion to the structured parameters
of Category VI. Salary income cannot be mechanically aggregated in a manner
that defeats the constitutional objective articulated in Indra Sawhney . The
interpretation of the 1993 OM and its implementation in the present case must
52
therefore be tested against this constitutional architecture. In this backdrop, we
now proceed to examine the issues involved herein.
Issue No. 1
Whether the clarificatory letter dated 14.10.2004 can have any overriding or
superseding effect over the Office Memorandum dated 08.09.1993, which
expressly lays down the criteria for exclusion from the benefit of reservation
for OBCs by identifying the creamy layer namely, the socially advanced
persons of sections among the Socially and Educationally Backward Classes?
22. A bare perusal of the 1993 OM makes it abundantly clear that certain
categories of persons, namely, the sons or daughters of those holding Class
I/Group A or Class II/Group B posts in the Civil Services of the Central and
State Governments, have been excluded. The income/wealth test has also been
stipulated in the office memorandum, which prescribes an Income / Wealth Test
as an additional criterion of exclusion. Significantly, the 1993 OM provides that
these criteria shall apply mutatis mutandis for exclusion from reservation in
respect of the children of those working in Public Sector Undertakings, Banks,
Insurance organisations, Universities and other similar institutions, as well as
those holding equivalent or comparable positions in private employment.
23. The question of “equivalence of posts” as contemplated both in the 1993
OM and in the subsequent 2004 Letter, is fundamentally a matter of policy.
53
Such equivalence must be determined by the Government on the basis of a
detailed analysis of data by experts in the field. Until such equivalence is
formally evaluated and notified by the Government, the entitlement of
candidates whose parent(s) work in organisations other than in Class I or II of
the Central or State Civil Services, shall be decided by the Income/ Wealth Test.
The core question therefore is whether paragraph 9 of the 2004 Letter merely
explains the scheme of the 1993 OM or impermissibly alters its substantive
structure of exclusion.
24. Before adverting to the 2004 Letter, it is essential to reiterate the well-
established principle that a mere government letter cannot have the effect of
overriding, overruling or superseding any proceeding in the nature of an
executive instruction or an Office Memorandum issued in exercise of executive
power under Article 162 of the Constitution. The clarificatory letter must,
therefore, be construed strictly as one explaining or supplementing the
foundational guidelines laid down in the 1993 OM, which was issued after due
deliberation and following the requisite procedure and not as altering its
substantive framework. It is settled law that a clarificatory instruction cannot
introduce a substantive condition that does not exist in the parent policy. If it
travels beyond explanation and alters rights or liabilities, it ceases to be
clarificatory and assumes the character of an amendment.
54
25. In order to understand the impact of the clarificatory letter dated
14.10.2004, it is apposite to extract Paragraphs 7-10 thereof as follows:
“7. In regard to clause (v) of para 4, it is clarified that the sons and daughters of
parents of whom only the husband is a directly recruited Class II/Group B
officer who gets into Class I/Group A at the age of 40 or earlier are treated to
be in creamy layer. If the father is directly recruited Class III/Group C or Class
IV/Group D employee and he gets into Class I/Group A at the age of 40 or
earlier, his sons and daughters shall not be treated to be falling in creamy layer.
8. In regard to clauses (vi), (vii) and (viii) of para 4, it is clarified that the
creamy layer status of a candidate is determined on the basis of the status of his
parents and not on the basis of his own status or income or on the basis of status
or income or on the basis of status or income of his/her spouse. Therefore, while
determining the creamy layer status of a person the status or the income of the
candidate himself or of his/her spouse shall not be taken into account.
9. In regard to clause (ix) of para 4, it is clarified that the creamy layer status of
sons and daughters of persons employed in organizations where equivalence or
comparability of posts vis-à-vis posts in Government has not been evaluated is
determined as follows:
Income of the parents from the salaries and from the other Sources [other than
salaries and agricultural land] is determined separately. If either the income of
the parents from the salaries or the income of the parents from other sources
[other than salaries and agricultural land] exceeds the limit of Rs.2.5 lakh per
annum for a period of three consecutive years, the sons and daughters of such
persons shall be treated to fall in creamy layer. But the sons and daughters of
parents whose income from other sources is less than Rs.2.5 lakh per annum and
income from other sources is also less than Rs.2.5 lakh per annum will not be
treated as falling in creamy layer even if the sum of the income from salaries
and the income from the other sources is more than Rs.2.5 lakh per annum for a
period of three consecutive years. It may be noted that income from agricultural
land is not taken into account while applying the Test.
10. In regard to clause (x) of para 4, it is clarified that while applying the
Income/Wealth Test to determine creamy layer status of any candidate as given
in Category VI of the Schedule to the OM, income from the salaries and income
from the agricultural land shall not be taken into account. It means that if
income from salaries of the parents of any candidate is more than Rs.2.5 lakh
per annum, income from agricultural land is more than Rs.2.5 lakh per annum,
but income from other sources is less than Rs.2.5 lakh per annum, the candidate
55
shall not be treated to be falling in creamy layer on the basis of Income/Wealth
Test provided his parent(s) do not possess wealth above the exemption limit as
prescribed in the Wealth Tax Act for a period of three consecutive years.”
26. The above extract makes it clear that income from salaries, agriculture or
other sources cannot be clubbed for the purpose of applying the income/wealth
test to determine the creamy layer status of a candidate. It is also evident from a
comprehensive reading of the 1993 OM along with the clarificatory letter dated
14.10.2004 that income from salaries alone cannot be the sole criterion to decide
whether a candidate falls within the creamy layer. The status as well as the
category of post to which a candidate’s parent or parents belong is essential. The
exclusion under Categories I to III of the Schedule is status-based rather than
purely income-based, reflecting the policy understanding that advancement
within the governmental service hierarchy denotes social progression
independent of fluctuating salary levels. 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.
27. In fact, paragraph 7 of the 2004 Letter makes it amply clear that a
mechanical application of income thresholds may in certain situations, produce
inequitable outcomes. To that limited extent, the 2004 Letter may be understood
as reinforcing the scheme of the 1993 OM provided it is construed as
explanatory and not as altering the substantive framework.
56
28. In this context, a perusal of the 21st Report of the Parliamentary
Committee on Welfare of Other Backward Classes (2018–19) elucidates the
evolution of the guidelines governing exclusion from reservation by
st
identification of the creamy layer. It is also necessary to point out that the 21
report records that the 2004 Letter has done more to confuse the position than to
clarify it, which was its intended purpose.
29. The observations of the Parliamentary Committee lend institutional
support to the view that paragraph 9 has generated interpretative ambiguity and
may have been applied beyond its intended contours. The Report records that
the 2004 Letter did not emanate from the DoPT Secretariat and that its origin
could not be traced in terms of the initial note file. It further observes that
determining exclusion from reservation solely on the basis of income from
salaries, as indicated in the 2004 Letter, would not be consistent with the
original framework. The entire architecture of paragraph 9 of the 2004 Letter is
premised on a prior determination of equivalence. Income is intended to operate
only as a surrogate measure in the absence of such equivalence; it cannot
supplant the primary status-based framework embodied in the 1993 OM.
30. In light of the foregoing, any attempt to read paragraph 9 of the 2004
Letter in isolation, so as to dilute or override the substantive scheme of the 1993
OM would be legally untenable. Overemphasis on the 2004 Letter to the extent
of making income alone determinative without regard to parental status or
57
category of service would defeat the structural framework of exclusion
envisaged under the 1993 OM.
31. 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.
Issue No. 2
Whether there can be hostile discrimination between employees of the
Government and those working in Public or Private Sector Undertakings,
when both occupy posts of the same grade or class?
32. The second issue that needs to be decided here is whether caste, as a
determining factor for entitlement to reservation, can be diluted or distorted by
introducing invidious discrimination between similarly placed categories of
persons.
33. At the outset, it must be noted that while caste may be an indicator of
historical disadvantage, it cannot be treated as the sole determinant of
backwardness. The exclusion of the creamy layer among the backward classes is
not a matter of mere policy preference but a constitutional imperative intended
to ensure that the benefits of reservation reach those who are socially and
educationally backward in the true sense of the phrase. The principle seeks to
prevent relatively advanced segments within the backward classes from
58
siphoning off the advantages of affirmative action, so that the objective and
purpose of the constitutional scheme of affirmative action, of which reservation
is a reflection, are adhered to.
34. It is in this context that the Tribunal as well as the High Courts have held
that Group C and Group D employees who, by virtue of promotion and efflux of
time, surpass the income levels as stated in the excluded categories of persons in
the Schedule to the Office Memorandum, which applies to Group A and Group
B Government employees (direct recruits), and who by virtue of such income
from salary alone do not stand excluded from reservation, cannot be treated
differently from those employees of PSUs and private undertakings who also
belong to or are equivalent to such Group C and Group D categories of posts.
Treating them differently, or in other words, treating the children of those
employed in PSUs or private employment, etc., as being excluded from the
benefit of reservation only on the basis of their income derived from salaries,
and without reference to their posts (whether Group A or B, or Group C or D)
would certainly lead to hostile discrimination between parties who are similarly
placed and would amount to equals being treated unequally, thereby attracting
the rigour of the equality doctrine under Articles 14, 15 and 16, of which
reservation is a facet.
35. It is well settled that a classification, to withstand scrutiny under Article
14, must satisfy the twin requirements of (i) intelligible differentia
59
distinguishing persons grouped together from others left out, and (ii) a rational
nexus with the object sought to be achieved. If similarly situated persons are
subjected to differential treatment without a constitutionally sustainable basis,
such action would fall foul of Article 14.
36. The object of excluding the creamy layer is to ensure that socially
advanced sections within the OBCs do not appropriate benefits meant for the
genuinely backward; it is not to create artificial distinctions between equally
placed members of the same social class.
37. The principle laid down in Indra Sawhney and others v. Union of India
29
and others that “To continue to confer upon such advanced sections special
benefits would amount to treating equals unequally; to rank them with the rest
of the backward classes would amount to treating the unequals equally” would
stand attracted equally to a case where proper identification of a section or class
of persons or a person belonging to OBC as being either socially advanced or
backward is not carried out by the Government. In fact, it would not be an
overstatement to say that if this exercise is not undertaken in a manner that is
rational, non-arbitrary, reasonable and equal, it would lead to the illegal
exclusion of genuine claimants and deserving persons within the OBC category
from the benefit of reservation, which, being a facet of equality, is a right
protected by the Constitution, as made amply clear by the judgments in State of
29
1992 Supp (3) SCC 217
60
30
Kerala and Others v. N.M. Thomas and Others as well as Indra Sawhney v.
Union of India . To state it in other words, Article 16(4) is a structural reflection
and a conceptualized representation of the principle of substantive equality
embodied and envisaged under Article 16(1) of the Constitution. Therefore, any
interpretation of the 1993 OM or the 2004 Letter that results in unequal
treatment of similarly placed OBC candidates would not only be legally
erroneous but constitutionally impermissible.
38. Relevant portion of the judgment in State of Kerala v. N.M. Thomas
(supra) is extracted for reference:
“44. Our Constitution aims at equality of status and opportunity for all citizens
including those who are socially, economically and educationally backward.
The claims of members of backward classes require adequate representation in
legislative and executive bodies. If members of Scheduled Castes and Tribes,
who are said by this Court to be backward classes, can maintain minimum
necessary requirement of administrative efficiency, not only representation but
also preference may be given to them to enforce equality and to eliminate
inequality. Articles 15(4) and 16(4) bring out the position of backward classes to
merit equality. Special provisions are made for the advancement of backward
classes and reservations of appointments and posts for them to secure adequate
representation. These provisions will bring out the content of equality
guaranteed by Articles 14, 15(1) and 16(1). The basic concept of equality is
equality of opportunity for appointment. Preferential treatment for members of
backward classes with due regard to administrative efficiency alone can mean
equality of opportunity for all citizens. Equality under Article 16 could not have
a different content from equality under Article 14. Equality of opportunity for
unequals can only mean aggravation of inequality. Equality of opportunity
admits discrimination with reason and prohibits discrimination without reason.
Discrimination with reasons means rational classification for differential
treatment having nexus to the Constitutionally permissible object. Preferential
representation for the backward classes in services with due regard to
administrative efficiency is permissible object and backward classes are a
30
MANU/SC/0479/1975 : 19.09.1975 - SC
61
rational classification recognised by our Constitution. Therefore, differential
treatment in standards of selection are within the concept of equality.
45. A rule in favour of an under-represented backward community specifying the
basic needs of efficiency of administration will not contravene Articles 14, 16(1)
and 16(2). The rule in the present case does not impair the test of efficiency in
administration inasmuch as members of Scheduled Castes and Tribes who are
promoted have to acquire the qualification of passing the test. The only
relaxation which is done in their case is that they are granted two years more
time than others to acquire the qualification. Scheduled Castes and Tribes are
descriptive of backwardness. It is the aim of our Constitution to bring them up
from handicapped position to improvement. If classification is permissible under
Article 14. it is equally permissible under Article 16, because both the Articles
lay down equality. The quality and concept of equality is that if persons are
dissimilarly placed they cannot be made equal by having the same treatment.
Promotion of members of Scheduled Castes and Tribes under the impeached
rules and orders is based on the classification with the object of securing
representation to members of Scheduled Castes and Tribes. Efficiency has been
kept to view and not sacrificed.
46. All legitimate methods are available for equality of opportunity in services
under Article 16(1). Article 16(1) is affirmative whereas Article 14 is negative in
language. Article 16(4) indicates one of the methods of achieving equality
embodied in Article 16(1). Article 16(1) using the expression "equality" makes it
relatable to all matters of employment from appointment through promotion and
termination to payment of pension and gratuity. Article 16(1) permits
classification on the basis of object and purpose of law or State action except
classification involving discrimination prohibited by Article 16(2). Equal
protection of laws necessarily involves classification. The validity of the
classification must be adjudged with reference to the purpose of law. The
classification in the present case is justified because the purpose of
classification is to enable members of Scheduled Castes and Tribes to find
representation by promotion to a limited extent. From the point of view of time a
differential treatment is given to members of Scheduled Castes and Tribes for
the purpose of giving them equality consistent with efficiency.”
39. Approving the decision in N.M. Thomas, this Court held in Indra
31
Sawhney and Others v. Union of India and Others as follows:
31
1992 Supp (3) SCC 217
62
“741. In Balaji it was held - "there is no doubt that Article 15(4) has to be read
as a proviso or an exception to Articles 15(1) and 29(2)". It was observed that
Article 15(4) was inserted by the First Amendment in the light of the decision in
Champakam, with a view to remove the defect pointed out by this Court namely,
the absence of a provision in Article 15 corresponding to Clause (4) of Article
16. Following Balaji it was held by another Constitution Bench (by majority) in
Devadasan - "further this Court has already held that Clause (4) of Article 16 is
by way of a proviso or an exception to Clause (1)". Subbarao, J., however,
opined in his dissenting opinion that Article 16(4) is not an exception to Article
16(1) but that it is only an emphatic way of stating the principle inherent in the
main provision itself. Be that as it may, since the decision in Devadasan, it was
assumed by this Court that Article 16(4) is an exception to Article 16(1). This
view, however, received a severe set-back from the majority decision in State of
Kerala and Ors. v. N.M. Thomas MANU/SC/0479/1975 : (1976) I LLJ 376 SC.
Though the minority (H.R. Khanna and A.C. Gupta, JJ.) stuck to the view that
Article 16(4) is an exception, the majority (Ray, C.J., Mathew, Krishna Iyer and
Fazal Ali, JJ.) held that Article 16(4) is not an exception to Article 16(1) but that
it was merely an emphatic way of stating a principle implicit in Article 16(1).
(Beg. J. took a slightly different view which it is not necessary to mention here).
The said four learned Judges - whose views have been referred to in para 41 -
held that Article 16(1) being a facet of the doctrine of equality enshrined in
Article 14 permits reasonable classification just as Article 14 does. In our
respectful opinion, the view taken by the majority in Thomas is the correct one.
We too believe that Article 16(1) does permit reasonable classification for
ensuring attainment of the equality of opportunity assured by it. For assuring
equality of opportunity, it may well be necessary in certain situations to treat
unequally situated persons unequally. Not doing so, would perpetuate and
accentuate inequality. Article 16(4) is an instance of such classification, put in
to place the matter beyond controversy. The "backward class of citizens" are
classified as a separate category deserving a special treatment in the nature of
reservation of appointments/posts in the services of the State. Accordingly, we
hold that Clause (4) of Article 16 is not exception to Clause (1) of Article 16. It
is an instance of classification implicit in and permitted by Clause (1). The
speech of Dr. Ambedkar during the debate on draft Article 10(3) [corresponding
to Article 16(4)] in the Constituent Assembly - referred to in para 28 - shows
that a substantial number of members of the Constituent Assembly insisted upon
a "provision (being) made for the entry of certain communities which have so
far been outside the administration", and that draft Clause (3) was put in
recognition and acceptance of the said demand. It is a provision which must be
read along with and in harmony with Clause (1). Indeed, even without Clause
(4), it would have been permissible for the State to have evolved such a
classification and made a provision for reservation of appointments/posts in
their favour. Clause (4) merely puts the matter beyond any doubt in specific
terms.
63
742. Regarding the view expressed in Balaji and Devadasan, it must be
remembered that at that time it was not yet recognised by this Court that Article
16(1) being a facet of Article 14 does implicitly permit classification. Once this
feature was recognised the theory of Clause (4) being an exception to Clause (1)
became untenable. It had to be accepted that Clause (4) is an instance of
classification inherent in Clause (1). Now, just as Article 16(1) is a facet or an
elaboration of the principle underlying Article 14, Clause (2) of Article 16 is
also an elaboration of a facet of Clause (1). If Clause (4) is an exception to
Clause (1) then it is equally an exception to Clause (2). Question then arises, in
what respect is Clause (4) an exception to Clause (2), if 'class' does not means
'caste'. Neither Clause (1) nor Clause (2) speak of class. Does the contention
mean that Clause (1) does not permit classification and therefore Clause (4) is
an exception to it. Thus, from any point of view, the contention of the petitioners
has no merit”.
40. Adopting an interpretation that disadvantages one segment of the same
backward class without rational justification would amount to treating equals as
unequals and would thus become the antithesis of equality, the corner stone of
our Republic. Having regard to the peculiar facts of the present cases, the
reasoning adopted by the High Court that treating similarly placed employees of
private entities and PSUs differently from Government employees and their
wards, while deciding their entitlement to reservation, would amount to hostile
discrimination, is certainly one that inspires the confidence of this Court.
41. Thus, we find no infirmity in the judgments impugned before us. The
civil appeals accordingly fail.
42. As regards the intervention applications, we find that several candidates
who were successful in the Civil Services Examination of different years sought
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permission to intervene the present proceedings to advance their respective
contentions. They submit, in substance, contentions similar to those urged by
the respondent candidates in the civil appeals, asserting that they belong to the
Non-Creamy Layer of the Other Backward Classes. It is their case that their
applications, representations, or proceedings are presently pending consideration
before the Department of Personnel and Training (DoPT), the High Courts or
the Central Administrative Tribunal, and that any decision rendered in the
present batch of matters would have a direct bearing upon their entitlement.
Accordingly, they seek appropriate orders in the present proceedings.
43. At this juncture, it is to be noted that supernumerary posts have already
st
been assured by the DoPT and this position stands recorded in the 21 Report of
the Parliamentary Committee on the Welfare of Other Backward Classes. In
view thereof, we find no difficulty in directing the appellants to create such
supernumerary posts, as required, to accommodate the candidates who satisfy
the non-creamy layer criteria as clarified in the present judgment, subject to
their otherwise fulfilling eligibility conditions.
CONCLUSION
44. To sum up
(i) All the Civil Appeals are dismissed.
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(ii) The appellants are directed to consider the claims of the respondent
candidates and intervenors in accordance with the principles laid down
in this judgment, and to implement the same within a period of six
months from the date of this judgment.
(iii) There shall be no order as to costs.
(iv) Pending application(s) including Intervention Applications, stand
disposed of accordingly.
…………………...…………………………J.
[PAMIDIGHANTAM SRI NARASIMHA]
.…………………………J.
[R. MAHADEVAN]
NEW DELHI;
MARCH 11, 2026.