Supreme Court Holds Salary Income Cannot Be Included for Determining OBC Creamy Layer; 2004 Clarification Invalid

Case Name: Union of India v. Rohith Nathan and Others; Union of India v. Ketan and Others; Union of India v. Dr. Ibson Shah I. and Another
Citation: 2026 INSC 230
Date of Judgment/Order: 11 March 2026
Bench: Hon’ble Mr. Justice R. Mahadevan; Hon’ble Mr. Justice Pamidighantam Sri Narsimha

Held: The Supreme Court held that salary income cannot be included for determining the creamy layer status of Other Backward Classes under the Office Memorandum dated 08.09.1993, and that the clarificatory letter dated 14.10.2004, insofar as it mandates inclusion of salary income for PSU and similar employees, is invalid and unenforceable as it overrides the parent policy and introduces impermissible discrimination.

Summary: The case involved a batch of appeals by the Union of India challenging decisions of various High Courts which had held that salary income of parents employed in Public Sector Undertakings or similar bodies cannot be included for determining whether a candidate falls within the OBC creamy layer. The controversy centered on the interpretation of the 1993 Office Memorandum, issued pursuant to the judgment in Indra Sawhney, which excluded salary and agricultural income from the income/wealth test. The Union relied upon a 2004 clarificatory letter to justify inclusion of salary income where equivalence of PSU posts with Government posts had not been determined. The respondents contended that the 2004 letter lacked authority, contradicted the 1993 OM, and resulted in hostile discrimination between children of Government employees and those of PSU/private sector employees. The Court examined the constitutional framework governing reservations, the evolution of the creamy layer doctrine, and the scheme of the 1993 OM. It found that the 1993 OM expressly excluded salary income and that the 2004 letter, issued without proper authority or deliberation, could not override or dilute the binding criteria. The Court further held that applying different standards to similarly situated individuals solely based on the nature of parental employment was arbitrary and violative of Article 14.

Decision: The Supreme Court dismissed the appeals filed by the Union of India, upheld the judgments of the Madras, Delhi and Kerala High Courts, and declared that creamy layer determination must be carried out strictly in accordance with the 1993 Office Memorandum without including salary income; it further directed consequential benefits to eligible candidates and left implementation to be carried out in accordance with law.