By Imperilex legal
· UNION OF INDIA AND OTHERS V. ROHITH NATHAN AND ANOTHER
· Supreme Court of India
· J. PAMIDIGHANTAM SRI NARASIMHA & J. R. MAHADEVAN
· 11 -03-2026
· 2026 INSC 230
Introduction
The Supreme Court of India clarified that 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.
Factual Background
1. Rohit Nathan(herein after referred as R1 ) secured AIR 174 in Civil Services Examination, 2012 under OBC category. The father of R1 was employed in M/s. HCL Technologies Ltd. having salary exceeding the prescribed creamy layer limit and hence R1 was treated as falling in creamy layer. R1 was offered for Indian Police Service against an unreserved vacancy but chose 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. An application was filed before CAT Chennai by R1 which after careful consideration was allowed by CAT on the grounds:
a. Office of Memorandum dated 08.09.1993 exclude income from salary & agriculture from Income & Wealth Test.
b. Para 9 of the clarification letter dated 14.10.2004 directed inclusion of salary income of PSU & Private Sector under category II(C) thereby made hostile discrimination between the wards of Government servants and PSU Employees. Union of India(herein after P1), aggrieved by decision of CAT, preferred appeal before Madras High Court via Writ Petition(C) 6387 of 2017 contending that CAT erred in interpretation of Memorandum.
2. Hon’ble Madars High Court via judgment dated 31-08-2017 dismissed all three Writ Petitions and held :
a. Failure of Union of India in formulating rules & regulations regarding comparability test resulted in disadvantages to the candidates having their parents working in PSU category II-C against Government services.
b. Person working in Government services in group B & C or those transferring to Group A or B after attending the age of 40 years was not considered for creamy layer thereby resulted in element of hostile discrimination.
3. Several similar judgments were passed by Hon’ble High Courts of other states including Delhi & kerala whereby all the judgments held that rational basis was not present in letter dated 14.10.2004.
There were multiple petitions filed by candidates, who cleared UPSC, to obtain the benefit of OBC reservation. Though it will not be practical to cover the entire candidate’s factual background but the petition with most common facts among all is covered below:
C.A. No(s). 2827 – 2829 of 2018 [Union of India & Ors. v. Rohith Nathan and Anr. Etc.
Submissions of Appellant(herein after referred as U.O.I)
1. U.O.I. submitted that judgment of Hon’ble High Court of Madras in relevant mentioned W.P. is ex facie unsustainable in law. It was contended that excluding the persons falling in creamy layer was to ensure the benefits would be availed only by deserving persons and not those who are no longer backward.
2. Legislative and Executive actions removing candidates was not be considered unconstitutional but was in consonance of guidelines & principles laid down in Indra Sawhney v. Union of India and others i.e. non exclusion of persons already availed benefit of reservations would amount to gross violation of Article 14 & Article 16 of The Constitution of India. Also in Ashok Kumar Thakur v. Union of India mentions that Government should not considered a class considered as backward would continue to be backward which will defeat the very whole purpose of reservation.
3. Respondents have reached comparatively a higher level of social advancement and economical status thereby it was sustainable to declare them as non-entitled for benefits for reservation.
4. Hon’ble High Courts erred in dismissing the petitions solely on grounds of discrimination between PSU & Government employees without examining merits. The delay determining equivalence between PSU & Govt. employees must not result in undue advantage to the candidates who belong to comparatively higher strata of OBC category compare to other candidates by virtue of parent’s income.
5. The 1993 OM, upheld in Ashok Kumar Thakur v. Union of India, & clarification letter dated 14-10-2004 was wrongly interpreted by Hon’ble High Courts as Clause II(C) clearly mentions regarding PSU, Government services, Banking etc will be treated on same footing but to evaluation of equivalence only occurred in Category VI. The candidates, claiming reservations, have to be examined in all six tests as per 1993 Om. The service status of parents working in PSU etc.. in which equivalence has not been established or Government services are determined by quantum of services they receive.
6. The 1993 OM and the letter dated 14.10.2004 forms a part of a consistent and constitutionally sound framework for the identification of the creamy layer, and the inclusion of salary in gross annual income perfectly aligns with the principle of substantive equality and prevents misuse of the reservation system.
Submissions on behalf of Respondents
1. The 1993 Om carries the authority of law as being issued as per directions of Indra Sawhney and others v. Union of India and others after due consideration by Executive Committee, Parliamentary Scrutiny and internal-ministerial consultation whereby authority letter dated 14.10.2004 was issued without following these steps thereby non est in law.
2. The forms, as per 1993 Om, did not have columns for salary & agricultural income and large number of states has consistently followed this principle.
3. Expert Committee has expressly recommended that exclusion of candidate of class II(C) from reservation based on pending evaluation of equivalent posts in PSUs & other bodies would not sustain. The only exclusion would be under category VI by application of income/wealth.
4. Appellants interpretation of income & wealth is erroneous and present ground is in contradiction of the ground taken in Neil Aurelio Nunes v. Union of India of including salary for EWS but excluding salary for OBC’swill obliterate distinction and create space for arbitrariness.
5. The DoPT is not the correct body to evaluate the certificates of OBC and as per memorandum of 1993 the tehsildars, District Magistrates, Collectors, Sub-Divisional Magistrates etc.. are authorized persons to evaluate OBC certificates or whether he or she fell under creamy layer.
6. Mere executive letter cannot override or amend a subsisting Office of Memorandum.
Analysis by Supreme Court
Issue for consideration before Supreme Court were:
a) 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?
b) 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?
Supreme Court while revising precedents like M.R. Balaji and others v. State of Mysore, where it was held that Caste maybe relevant factor in determining backwardness but shall not be sole criteria or dominant test importance must be given to social test, K.C. Vasanth Kumar and another v. State of Karnataka, where seven judge constitutional bench held reservation policy cannot be static and must be subjected to periodical review to ensure deserving backward people continue to receive benefits made for them, constitute three proposition for guidance which were:
a) Caste may serve as an initial identifying marker but cannot be the exclusive determinant.
b) Economic condition is a relevant and rational refining criterion.
c) Reservation policy must balance social justice with broader societal interests.
This Court directed Government of India to specify socio-economic criteria for excluding socio-advance persons or sections of OBC category. Executive Committee, keeping in view the judgment of Indra Swahney, made criteria with central focus on social status arising from placement of person and position in life. Similarly in service area, recommendation was made by above said committee that criteria applicable to officers directly recruited in State or Central services be applied mutatis mutandis to the officers working on comparable posts in PSU, Banking etc.. Further to avoid delay in implementation category VI would be applicable during the Income / Wealth Test.
The significant point was in 1993 Om it was specifically provided that evaluation of comparability the Income/Wealth test in category VI would solely apply. The disentitlement under category II(C) for reservation in OBC namely direct recruitment to the post in Group A/B or promotion to said post before 40 years remains inoperative until equivalence is determined. Nevertheless, the entire category without such evaluation cannot be deprived of benefit under category II(C).
The letter of clarification dated 14-10-2004 explained where the evaluation has not been done for equivalence post of PSU etc. Creamy layer must be determined by income/wealth test excluding the agricultural or salaries. It also clarified that income from salaries or other resources must be assessed separately thereby constituting exclusion would only follow if either of the components exceeds the prescribed limit in consecutive three preceding years. This evolution is referred as non-creamy layer whereby preserved that significance is on status based exclusion and confines economic exclusion to structured parameters of category VI.
Judgment
The issue (a) was considered as unsustainable in law on the grounds that the mentioned para 9 in the letter, if read solely or in isolation, would dilute or override the substantive scheme of 1993 whereby major focus on income without regards to the parent status or category of service would defeat the structural framework of exclusion.
The issue (b) was considered arbitrary on the ground that discrimination of candidate of same segment of backward class without any rational jurisdiction would amount to inequality and violation of article 14.
It was held that the civil appeals be dismissed and Appellants must consider the claims of respondent candidates and intervention in accordance with the principal laid down herein.
Key Takeaways
a) Primacy of the 1993 OBC Creamy Layer Office Memorandum
The Supreme Court held that the Office Memorandum dated 08.09.1993 remains the primary framework for determining exclusion from OBC reservation under the creamy layer doctrine. Any subsequent clarification, including the 2004 DoPT letter, cannot override or amend the substantive criteria laid down in the 1993 OM
b) Status-based exclusion remains central to the creamy layer doctrine
The Court reaffirmed that the creamy layer concept is not purely income-based; it is primarily status-based, identifying socially advanced sections among OBCs.
c) Equivalence of posts in PSUs must be respected
Where a State Government determines equivalence between PSU posts and government posts, such determination cannot be casually ignored by central authorities.
d) Salary income cannot automatically be counted for creamy layer determination
The Court clarified that salary income should not be mechanically aggregated for applying the income test when determining non-creamy layer status.
Link of Judgment: