Context: The Supreme Court is considering the Centre’s application seeking clarification on its March 11, 2026 judgment concerning the income test used to identify the creamy layer among Other Backward Classes (OBCs).
- The Centre argues that retrospective implementation of the judgment could disturb settled appointments and seniority since 2012 and create a cascading impact across OBC and even Unreserved candidates.
- The case primarily concerns whether parents’ salary income can be used to exclude OBC candidates from reservation when their parents work in Public Sector Undertakings (PSUs) or private employment.
What is the OBC Creamy Layer?
- The creamy layer concept originated in the Supreme Court’s 1992 Indra Sawhney judgment, which upheld OBC reservation while requiring the socially and economically advanced sections within OBCs to be excluded.
- The objective is to ensure that reservation benefits reach genuinely disadvantaged sections rather than being repeatedly captured by relatively privileged OBC families.
- The Department of Personnel and Training (DoPT) laid down exclusion criteria through its 1993 Office Memorandum (OM).
Criteria for Creamy Layer Exclusion
- The 1993 OM provides multiple exclusion categories, including children of certain senior constitutional, judicial, government and armed-forces officers.
- A separate income/wealth test applies to specified categories, including salaried professionals, persons engaged in business, certain property holders and children of parents working in PSUs where equivalence with government posts has not been established.
- The income ceiling, initially ₹1 lakh in 1993, has been revised several times and currently stands at ₹8 lakh per annum, following the 2017 revision.
The Salary-Income Controversy
- Under the 1993 OM, salary income and agricultural income were specifically excluded while applying the income/wealth test; income from sources such as property, business and capital gains was considered.
- A 2004 DoPT letter created ambiguity by appearing to suggest that salary income should be included while determining the income threshold for children of parents employed in PSUs where post equivalence had not been established.
- This resulted in different treatment of OBC candidates depending on whether their parents were employed in government service or PSUs/private organisations.
What Did the Supreme Court Rule in 2026?
- In Union of India v. Rohith Nathan, the Supreme Court held that OBC candidates whose parents work in PSUs or private organisations cannot be subjected to a different income-test treatment merely because their parents are outside government service.
- The Court treated the income/wealth test as a “residual filter” and emphasised that the 1993 framework had consciously excluded salary and agricultural income from the test.
- Applying salary income to PSU/private-sector employees while excluding it for similarly situated government employees amounted to “hostile discrimination” and violated the principle of treating equals equally.
- The Court directed the Centre to implement this interpretation within six months and create supernumerary posts for affected OBC candidates who had been denied consideration solely because their parents’ salaries were counted.
What are Supernumerary Posts?
- Supernumerary posts are additional posts created over and above the sanctioned strength of a service to accommodate persons without displacing those already appointed.
- In this case, they were directed to be used to accommodate affected OBC candidates according to their Civil Services Examination (CSE) ranks and respective examination years.
Why is Retrospective Implementation Difficult?
- The affected cases date back several years, meaning implementation could require reopening settled service allocations and appointments.
- The Centre says retrospective adjustments could generate disputes over service allocation, seniority and subsequent promotions.
- It could also trigger claims from a larger pool of OBC candidates who did not previously approach courts.
- According to the Centre, 22 judgments have already applied the Rohith Nathan principles and 12 new cases have sought reconsideration of OBC non-creamy-layer status.
- The government argues that adjustments benefiting one category could potentially affect other OBC candidates as well as candidates from the Unreserved category.
Centre’s Concern Over the Income Test
- The Centre has argued that salary income may sometimes provide an intelligible basis for distinguishing between OBC candidates with otherwise similar social backgrounds.
- It has also raised the possibility that excluding salary income could result in individuals from families earning very high salaries—even up to ₹1 crore being treated as non-creamy-layer OBC candidates.
- The Centre therefore seeks clarification on the scope and practical application of the judgment rather than simply applying it retrospectively in all cases.
Steps Taken by the Government
- The Ministry of Personnel, Public Grievances and Pensions sought advice from the Ministry of Social Justice and Empowerment on implementing the judgment, since the latter handles policy relating to reservations.
- Initially, the Centre informed the Central Administrative Tribunal (CAT) that it was implementing the March 11 judgment.
- It subsequently approached the Supreme Court, highlighting difficulties arising from retrospective implementation and increasing adjustment claims.
- The Centre has separately sought permission to continue service allocation for CSE 2025 candidates under the earlier interpretation, noting that over 950 candidates were about to begin their Foundation Course.
What Happens Next?
- The Supreme Court has indicated that it will consider constituting a Bench to hear the Centre’s clarification application.
- The Court will have to address both the scope of the March 11 judgment and the practical consequences of applying it retrospectively.
- A key issue is whether the judgment will remain confined to the affected petitioners and similarly situated candidates, or lead to wider reconsideration of creamy-layer determinations made under the earlier interpretation.
Significance
- The case highlights the tension between substantive equality and administrative certainty in implementing reservation policy.
- It also raises a broader question: Should economic income alone determine creamy-layer exclusion, or must income be assessed alongside the parents’ occupation, status and social position?
- The eventual ruling could significantly shape the future interpretation and administration of OBC reservation and the creamy-layer principle.
