Parental Salary Alone Not Sufficient to Determine OBC Creamy Layer Status

Source: Supreme Court

Why in News?

A bench of Justices PS Narasimha and R. Mahadevan of the Supreme Court, in Union of India and Others v. Rohith Nathan and Another (2026), dismissed a batch of appeals filed by the Union of India, granting relief to several UPSC candidates who had been wrongly denied OBC reservation benefits by being classified as falling within the creamy layer solely on the basis of their parents' salary income. 

• The Court held that creamy layer determination must primarily be guided by the status and category of the post held by the candidate's parents, as laid down in the 1993 Office Memorandum (OM) issued pursuant to the landmark Indira Sawhney judgment, and that a 2004 clarificatory letter could not be read so as to make income alone the determinative criterion.

What was the Background of Union of India v. Rohith Nathan (2026) Case? 

• The dispute arose from Civil Services Examination candidates who claimed reservation under the OBC Non-Creamy Layer category. 
• During eligibility verification, the Department of Personnel and Training (DoPT) classified them as belonging to the creamy layer by considering only their parents' salary income. 
• Many of the parents in question were employees of public sector undertakings (PSUs), banks, or similar organisations. 
• The government relied on a clarificatory letter dated 14 October 2004, which provided that where equivalence between PSU posts and government posts had not been determined, salary income could be separately considered under the income/wealth test. 
• Candidates whose parents earned above the prescribed income threshold were consequently denied OBC reservation benefits. 
• Several candidates challenged these decisions before the Central Administrative Tribunal and various High Courts including the Madras, Delhi, and Kerala High Courts, all of which ruled in their favour. 
• The Union of India appealed those rulings before the Supreme Court.

What were the Court's Observations? 

• On the 1993 Office Memorandum and the Primacy of Status: The Court held that the 1993 OM, formulated pursuant to Indira Sawhney, treats the status and category of parental post as the primary indicator of social advancement. Salary income and agricultural income were consciously excluded from the common pool while determining exclusion under the Income/Wealth Test. The Court observed that income from salaries, agriculture, or other sources cannot be clubbed for the purpose of applying the income/wealth test. 
• On the 2004 Clarification: The Court found the 2004 clarification legally unsustainable to the extent it made salary income alone determinative of creamy layer status. It held that a clarificatory instruction cannot introduce a substantive condition that does not exist in the parent policy. Accordingly, the 2004 letter could not override or dilute the structural framework established under the 1993 OM. 
• On Hostile Discrimination Between Government and PSU Employees: The Court noted that Group C and Group D government employees whose salaries increase over time are not automatically excluded from reservation. Under the government's interpretation, however, children of PSU employees could be excluded solely because parental salary exceeded the income threshold, even where the posts were equivalent to lower government service categories. The Court held that such differential treatment violates Articles 14 and 16 of the Constitution, amounting to equals being treated unequally. 
• On Relief: The Court directed DoPT to consider the claims of the respondent candidates and intervenors within six months, applying the creamy layer test without including salary income from parental employment. Noting the government's earlier indication before a Parliamentary Committee regarding supernumerary posts, the Court also directed that such posts be created wherever necessary to accommodate affected candidates.

What is the Creamy Layer Concept and How is it Defined and Applied?  

Definition and Purpose: 

• The creamy layer concept sets a threshold within which OBC reservation benefits are applicable.  
• It aims to exclude relatively well-off individuals from the OBC category from availing reservation benefits.  
• The concept was introduced by the Supreme Court in the Indra Sawhney case (1992) to ensure that reservation benefits reach the truly disadvantaged. 

Income Criteria: 

• The current income threshold for the creamy layer is Rs 8 lakh per year.  
• This limit applies to income from sources other than salary and agricultural income.  
• The income threshold is supposed to be revised every three years but was last updated in 2017. 

Other Criteria: 

• For children of government employees, the creamy layer is determined by their parents' rank rather than income.  
• Children of parents in constitutional posts, directly recruited Group-A officers, or both parents in Group-B services fall under the creamy layer.  
• Children of high-ranking military officers (Colonel and above or equivalent) are also considered part of the creamy layer.