The story so far: The Supreme Court of India has said it will consider setting up a Bench to hear the Centre’s application seeking clarification over the court’s March 11 judgment on the income test component of the OBC creamy layer exclusion criteria. Retrospectively implementing the Supreme Court’s March judgment on the income/wealth test for OBC creamy layer determination is “extremely difficult” and will cause a “cascading effect” in the settled services from 2012 till now, with the impact extending to “all categories, including the Unreserved category”, the Union government had told the Supreme Court of India in a batch of applications.
The Department of Personnel and Training (DoPT) has argued that the Supreme Court’s Rohith Nathan judgment, if implemented retrospectively, will lead to a barrage of contestations from virtually anyone who had been denied a Non-Creamy Layer certificate or had not approached the authorities for one during recruitments, examinations, admissions, etc., citing the judgment.
Why does the Centre call the Supreme Court ruling “extremely difficult” to implement?
The Supreme Court of India on March 11 delivered its judgment in a batch of cases pending for close to a decade, relating to how the DoPT should interpret the crucial income/wealth test, which is one of the layers through which the “creamy layer” (or relatively socially and economically forward) among the Other Backward Classes communities is excluded from availing the benefit of reservation.
The cases that eventually came to the Supreme Court were related to the claims of at least 50 OBC candidates who had appeared in Civil Services Examinations (CSE) since 2015 and were excluded from consideration for an OBC-reserved post after the DoPT classified them as part of the creamy layer solely on the basis of their parents’ income. These candidates argued that the DoPT had incorrectly applied the income/wealth test component of the layered exclusion exercise.
The Supreme Court found that the DoPT was incorrectly applying the income test for this category of OBC candidates and directed the government to create supernumerary posts for the OBC candidates to whom the income test had been applied with what it called “hostile discrimination,” and allot them services according to their ranks in their respective CSE years.
What are the criteria for excluding the OBC creamy layer?
The creamy layer concept among OBCs emerged from the Supreme Court’s 1992 ruling in the Indra Sawhney case, which paved the way for the implementation of OBC reservations. The idea was to exclude, from the benefits of reservation, those OBC candidates whose families had accumulated social and economic privileges over the years. Such candidates came to be described as belonging to the “creamy layer”.
To clarify which categories of OBC candidates would fall under the creamy layer, the DoPT issued an Office Memorandum ((OM), a guiding charter) in September 1993, laying down the criteria for exclusion. The OM prescribed specific categories of OBC candidates who would not be entitled to the OBC quota. These included children of people holding constitutional positions, such as the Offices of President and Vice-President; judges of the High Courts and the Supreme Court; Class I and Class II officers directly recruited into the Central or State governments; and children of officers in the armed forces or paramilitary forces above a particular rank.
Besides this, the DoPT also prescribed a crucial income or wealth test, applicable to people in the salaried professional class or engaged in trade; people holding plantations, vacant land and/or buildings in urban areas; and people whose parents held posts in Central or State PSUs where the equivalence of these posts with government service posts had not yet been established. It is this last category, that is, children of parents holding posts in Central or State PSUs or in private employment where the equivalence of the posts with government service posts had not yet been established, that the Court delivered its March 11 judgment.
What was the problem with the 1993 OM and 2004 letter?
Under the 1993 DoPT OM on the income/wealth test for OBC reservations, a candidate would be considered part of the creamy layer if their parents’ gross family income exceeded the prescribed limit for three consecutive years, or if they possessed wealth above the exemption limit prescribed under the Wealth Tax Act, 1957. The income limit, which was ₹1 lakh when the 1993 OM was issued, was revised several times and now stands at ₹8 lakh, with the last revision having come in 2017. Importantly, the 1993 DoPT OM specified that income from salaries and agricultural land should be excluded when applying the income/wealth test, with income from other sources such as property, business, or capital gains being considered.
However, in October 2004, the DoPT issued a letter meant to clarify issues that had arisen in interpreting the 1993 OM. In para 9 of this letter, the DoPT took up the issue of how to calculate income for the income/wealth test for OBCs whose parents were in Central or State PSUs where equivalence of posts had not yet been established. The DoPT seemed to suggest that income from salaries was to be counted to determine if the income was above the prescribed threshold for three consecutive years. The threshold was subsequently revised to ₹8 lakh per year in 2017.
In an October 2020 affidavit filed in the Supreme Court, the DoPT referred to both the 1993 OM and the 2004 clarificatory letter, stating that it had different ways of applying the income/wealth test to different categories. However, it did not clearly explain in which cases income from salaries was to be included while applying the income/wealth test.
In the 2026 ruling, the Division Bench noted that until the government establishes equivalence between the posts of Central or State PSUs and government services, the income/wealth test must continue to apply equally.
How did the Supreme Court interpret the income test?
The March 11 Rohith Nathan judgment said that OBC candidates whose parents work in PSUs or the private sector, where the government has yet to establish equivalence of posts with government services, cannot be treated differently from OBC candidates in other categories under the creamy layer exclusion criteria.
Significantly, the Supreme Court ruled that the income/wealth test component of the exclusion exercise must be seen and operated as a “residual filter”, adding that salaries and agricultural incomes had been consciously left out while applying this test under the 1993 OM. The Court found that while the 1993 OM was clear about excluding income from salaries from the calculation of the income/wealth test, the 2004 letter appeared to call for its inclusion in circumstances that were not clearly specified.
The Court went on to note that the interpretation of the 1993 OM, read with the 2004 letter, had led to “hostile discrimination” between the children of those in government service and those in PSUs or private employment.
Without establishing equivalence of posts, the income test, including salaries, was being applied to rule out OBC candidates whose parents were not in government service, while OBC candidates whose parents were in government service were being subjected to a test that did not include salaries. This is what the Court had described as “hostile discrimination”.
The Supreme Court said, “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.”
The Court had directed the Centre to implement this reading of the income test within six months by creating supernumerary posts for the petitioners, who were OBC candidates in the Civil Services Examinations and had been excluded from the creamy layer on account of their parents’ salaries alone. The parents were working in public sector undertakings or the private sector, where equivalence of their posts with government posts had not yet been established.
Did the Centre try to implement the Supreme Court’s directions?
The Supreme Court’s ruling in the Rohith Nathan case was a watershed moment for this category of OBCs, who had said that the issue had been pending for more than a decade. As per the Supreme Court’s direction, the Union Government was supposed to issue further instructions in pursuance of the court’s reading of the income test component — on how the supernumerary posts must be created and how the existing strength of the services must be adjusted to accommodate them.
According to government records, the Union Ministry of Personnel, Pensions and Public Grievances wrote to the Ministry of Social Justice and Empowerment on June 3, seeking advice on implementing the directions of the Rohith Nathan judgment. The Personnel Ministry told the Social Justice Secretary that the Allocation of Business Rules provide for the Social Justice Ministry to formulate policy on reservations and that it was therefore seeking “clarification/action” in this regard. The Personnel Ministry further sought “advice on instructions to be adopted or notified” by the DoPT.
As of August 19, the Centre’s position before the Central Administrative Tribunal in a matter identical to that of the aggrieved OBC candidates in the Rohith Nathan case was that it was in the process of implementing the March 11 judgment.
However, a few days later, the DoPT filed an application highlighting why it was seemingly impossible to follow the Supreme Court’s directions and the issues that were arising in implementing them retrospectively. In this application, the Centre said that despite its efforts to create the supernumerary posts as called for in the Rohith Nathan judgment, it was facing an increasing number of claims for adjustment, issues of seniority arising from such adjustments, and concerns that even this exercise could be “unfair” to a different category of OBC candidates and candidates of “all categories, including the unreserved category”.
The Centre noted that since the March 11 judgment, 22 other judgments have been issued by courts applying the principles laid out in Rohith Nathan. In addition, the DoPT said that 12 new cases have been filed seeking reconsideration of OBC non-creamy layer status under the Rohith Nathan principles, by candidates who had not previously approached the courts.
However, OBC candidates who were waiting to benefit from the Rohith Nathan judgment have spoken to The Hindu and argued that the Centre’s reluctance to implement the directions does not appear to make sense. These candidates have asked why the DoPT had not mentioned these larger issues with implementation earlier; they have also questioned why the DoPT now seems to think the judgment would have a cascading effect on other recruitments, examinations and admissions.
These candidates have noted that the older reading of the income test — the one that the SC said practised “hostile discrimination” — was being applied only by the DoPT, and that too arbitrarily. One candidate The Hindu spoke to said that many among the litigants had subsequently been considered as OBC non-creamy layer candidates by other recruiting departments and services.
What happens next?
Along with the application that the DoPT has filed setting out the difficulties it was facing in implementing the Rohith Nathan judgement’s directions, especially retrospectively, the Union government had filed a separate application, seeking that it be allowed to continue allotting services as per the old reading of the income test for CSE 2025 candidates, and seeking clarification on how to implement the directions. The Centre said that the over 950 candidates recommended for CSE 2025 were about to start their Foundation Course by the end of this month and that they had already applied for the CSE, taken it, and been recommended based on the old reading of the income test.
The DoPT argued, in this application, that the retrospective application of the Rohith Nathan judgment was specifically running into the issues mentioned above.
The Supreme Court has now said it will consider setting up a Bench to hear the Centre’s request for clarification on how to implement its directions and its request to allow the allotment of services to CSE 2025 candidates to continue as settled for the time being.
However, in the other application filed along with this, the Centre has asked for clarification on how to implement the direction overall. It has further argued that there might be some value in including income from salaries, as in some cases it might be the “sole intelligible differentia” between two OBC candidates from “similar social backgrounds”. It has also argued that, in the absence of salary consideration, some cases might lead to OBC candidates with parents earning up to ₹1 crore being considered non-creamy layer.
Now, the question is: how far will the Supreme Court’s March 11 verdict reach?
