New Delhi: The Supreme Court Friday refused to modify its March judgement on the creamy layer status of Other Backward Classes (OBC) candidates, which held that parental salary alone cannot be the basis for denying reservation benefits to children of employees in public sector undertakings (PSUs) and private companies.
However, the court said it would not result in the retrospective reopening of completed selections, appointments or service allocations. The March judgement would govern ongoing and subsequent selection processes, including the allocation of services to candidates who cleared the 2025 Civil Services Examination (CSE).
A bench of Justices P S Narasimha and R Mahadevan said it would not reopen the question of who qualifies as an OBC non-creamy layer (NCL) candidate. In partial relief to the Centre, it clarified that the individual relief granted in March was confined to candidates who were parties to the proceedings.
The decision is likely to end the uncertainty surrounding successful CSE-2025 candidates, whose foundation course is yet to begin. With the matter pending before the Supreme Court, the Department of Personnel and Training (DoPT) had neither allotted cadres to these candidates nor announced their training dates.
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What the Supreme Court clarified
The court said its March judgement did not require a general revision of service allocations or seniority across successive recruitment years. Nor did it grant individual relief to candidates who were not parties to the original proceedings.
The March judgement, it said, determined the rights of candidates who were respondents in the Centre’s appeals against various High Court orders, as well as those who intervened in the proceedings.
“There was no direction requiring the Union Government to revisit appointments already made, revise the seniority of any person, or undertake any selection, appointment or service allocation exercise afresh,” the court said.
It added that the operative relief was confined to the parties to the proceedings. However, this did not dilute the binding nature of the legal principles laid down in the March judgement.
Candidates who were not parties to the proceedings would not automatically be entitled to the same individual relief. However, those whose claims are pending before other courts, tribunals or competent authorities would have their cases considered on merit. The authorities would have to take into account the court’s interpretation of the 1993 Office Memorandum and the 2004 DoPT clarification.
The court also reminded the government of its earlier assurance to create supernumerary posts. It said the government must accommodate candidates covered by the March judgement who meet the non-creamy layer criteria and other eligibility conditions.
Why did the Centre seek a modification?
Five months after the March ruling, the Centre moved an application seeking its modification, arguing that it could have wide-ranging implications for the OBC reservation policy.
It said the judgement could result in candidates whose parents earn high salaries being treated as belonging to the non-creamy layer, potentially affecting the interests of economically disadvantaged OBC candidates.
The Centre also filed a separate application opposing retrospective implementation of the ruling. It warned that reopening past decisions could affect recruitment, service and cadre allocations, seniority, admissions and the administration of OBC reservations, besides triggering litigation.
The government argued that the judgement could benefit candidates whose parents earn more than Rs 1 crore annually, even though they had access to better financial resources and opportunities than other OBC candidates.
“It may adversely affect the spirit and intention of the reservation policy as it can potentially impact the interests and prospects of those candidates who actually belong to lower income group of OBC NCL (non-creamy layer) vis-à-vis those who are economically well off,” the Centre said in its application.
Its principal concern was the absence of a uniform mechanism to identify the creamy layer among candidates whose parents work in the private sector or PSUs. The Centre said it would need to establish equivalence between posts in government departments, PSUs and private organisations to ensure uniform criteria.
It sought two years to complete this exercise, which it said would require consultations with stakeholders, including states and Union Territories.
The Supreme Court reiterated that the government was free to formulate its policy on reservation and creamy-layer criteria, subject to the Constitution and the principles laid down in its March judgement. It declined to prescribe a timeline for establishing equivalence between posts, saying the matter fell within the domain of the executive and legislature.
How did the March judgement come about?
The March judgement followed proceedings that began in the Supreme Court in 2017, after the Centre challenged several High Court decisions directing it to apply uniform criteria when determining the OBC creamy layer status of candidates whose parents worked in government departments, PSUs and private companies.
The dispute arose after successful civil services candidates were denied their preferred service allocations because their parents were employed in PSUs or private firms. They challenged what they described as discriminatory treatment, arguing that their parents’ salary incomes were considered for determining creamy layer status, unlike those of government employees.
The Centre’s appeals questioned the High Court rulings that directed it to follow a uniform principle for identifying non-creamy layer candidates.
At the heart of the dispute was a 2004 DoPT clarifactory letter, which included PSU salaries in the income computation for determining creamy layer status. The Supreme Court held that the letter could not override the Centre’s 1993 Office Memorandum, which excluded salary from the creamy layer income test.
Under the 1993 memorandum, the government was required to establish equivalence between posts in PSUs and private organisations and corresponding government posts.
The Supreme Court held that the salary of a parent employed in a PSU or private company could not, by itself, determine whether a candidate belonged to the creamy layer. The parent’s post and employment category, along with the prescribed income and wealth criteria, had to be examined.
Upholding the High Court decisions, the court said the differential treatment of similarly placed employees in government departments, PSUs and private companies amounted to “hostile discrimination”.
The Centre’s modification application also addressed this aspect of the judgement, saying it would formulate a uniform mechanism to identify creamy layer status across employment categories.
What does this mean for Civil Services Examination-2025?
In a significant clarification, the Supreme Court said the March ruling would apply to CSE-2025 candidates, even though the examination results were declared on March 6, five days before the judgement was pronounced.
The court said candidates covered by the March ruling would be considered under the clarified criteria, provided they met the non-creamy layer and other eligibility requirements.
This means the government will have to proceed with service allocation for eligible CSE-2025 candidates according to the principles laid down in the March judgement, without reopening completed selections or appointments in other recruitment cycles.
(Edited by Anupama Yadav)
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