New Delhi: In a blow to what it termed “hostile discrimination”, the Supreme Court ruled Wednesday that children of Public Sector Undertaking (PSU) and private sector employees cannot be denied OBC reservation benefits simply because of their parents’ salary.
A bench of Justices P.S. Narasimha and R. Mahadevan affirmed that social status, rather than just a paycheck, must be the primary measure for identifying the “creamy layer”.
The legal battle pitted the Union of India against successful civil services candidates who were denied their preferred service allocations because their parents worked in PSUs or private firms.
The central government had argued that because it had not yet determined which PSU jobs were “equivalent” to high-ranking government posts, it was justified in using a “salary-only” test to exclude these candidates.
However, the top court found this practice deeply flawed.
For regular government servants, the “creamy layer” is determined by rank (like Class I or II), and their salary is never the sole ground for exclusion, it noted.
By applying a different, harsher rule to PSU employees, the Supreme Court noted the government created an illegal divide.
Candidates who moved court
Students involved in these legal challenges were successful Civil Services Examination (CSE) candidates whose OBC (non-creamy layer) status was rejected based on their parents’ professional salaries.
The father of Rohith Nathan (CSE 2012, Rank 174), for instance, is employed by the private firm HCL Technologies Ltd and his annual salary exceeded the prescribed limits. This led to Nathan being initially allocated to the IPS as a general candidate instead of his preferred IFS.
Another candidate, G. Babu (CSE 2013, Rank 629) is the son of a senior executive engineer at Neyveli Lignite Corporation (now NLC India Ltd), a PSU, and was treated as “creamy layer” because of his father’s income.
The deceased father of Dr Ibson Shah I (CSE 2016, Rank 540; CSE 2017, Rank 620) was a Group C clerk in the Kerala government, while his mother was a Group C junior assistant in Kerala State Financial Enterprises, a PSU run by the state government. He was denied OBC allocation because his mother’s salary exceeded the threshold.
Finally, a larger group including Ketan and others from the 2015 examination were children of PSU employees who were disqualified from reservation benefits when the government factored in their parents’ salaries in its “income/wealth test” after failing to establish formal “post equivalence” between their parents’ PSU roles and standard government grades.
Between 2017 and 2022, various high courts—Madras, Delhi, and Kerala—ruled in favor of the candidates, quashing the government’s 2004 interpretation. The Centre challenged these orders in the Supreme Court.
Why SC ruled against govt memo
In September 1993, the central government issued the foundational Office Memorandum (OM) establishing that salary is excluded from the creamy layer “income test”.
More than a decade later, in October 2004, the Department of Personnel and Training (DoPT) issued a “clarificatory letter” which began including PSU salaries in the income computation.
The bench emphasized that a mere executive letter from 2004 could not override the foundational 1993 policy.
The 1993 Office Memorandum (OM) explicitly stated that income from salaries and agricultural land must be excluded when testing for ‘creamy layer’.
The court stated: “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.”
Furthermore, the judges observed that “determination of creamy layer status solely on the basis of income brackets, without reference to the categories of posts… is clearly unsustainable in law”.
The ‘equality doctrine’ upheld
The Supreme Court’s latest judgment centered on the constitutional principle that “equals must be treated equally”. It held that if a government clerk’s child is eligible for reservation irrespective of a salary hike, the child of a similarly-placed PSU employee must be treated the same way.
The top court highlighted that the ‘creamy layer’ exists to exclude the truly “socially advanced”, not to create “artificial distinctions between equally placed members of the same social class”.
The Supreme Court has given the Centre six months to implement the claims of the affected candidates and intervenors.
To ensure justice is served without displacing existing officers, it has directed the central government to create supernumerary posts as needed to accommodate those who were wrongfully denied their positions.
(Edited by Amrtansh Arora)
Also Read: Don’t include salary while assessing annual income for OBC quota — Parliament panel in report