Supreme Court Draws Line: No Creamy Layer Penalty for PSU Kids' Salaries Without Post Match

In a landmark verdict that could reshape OBC reservation allocations in civil services, the Supreme Court of India on March 11, 2026, dismissed appeals by the Union of India against rulings from the Madras, Delhi, and Kerala High Courts. Justices R. Mahadevan and Pamidighantam Sri Narasimha upheld orders favoring candidates like Rohith Nathan, G. Babu, Ketan, and Dr. Ibson Shah I., whose parents worked in PSUs or private firms. The bench ruled that salary income cannot disqualify OBC non-creamy layer status for such candidates until formal equivalence of their parents' posts to government Group A/B roles is established.

The Reservation Riddle That Sparked a Multi-Court Battle

The saga began with Civil Services Examinations from 2012 to 2017. Top OBC rankers like Rohith Nathan (AIR 174, CSE 2012) and others were provisionally recommended but denied reserved service allocations—such as Indian Foreign Service—after DoPT deemed them creamy layer based on parental salaries exceeding limits. Their fathers worked at HCL Technologies and Neyveli Lignite Corporation, respectively.

Similar fates befell 2015 CSE candidates (Ketan batch) and Dr. Ibson Shah (CSE 2016/17), whose mother was a Kerala PSU junior assistant. Tribunals and High Courts sided with them, quashing DoPT's reliance on a 2004 clarificatory letter that folded salary into the income test for Category II-C (PSUs/banks sans equivalence). Appeals landed at the apex court in 2018-2024, clubbed for a common judgment in Union of India v. Rohith Nathan (2026 INSC 230).

Core questions: Does the 2004 letter override the 1993 OM excluding salary from creamy layer tests? And does including PSU salaries create unconstitutional discrimination versus government employees?

Union's Income Hammer vs Candidates' Status Shield

The Centre, via Additional Solicitor General, defended the 2004 letter as essential to bar "socially advanced" OBCs per Indra Sawhney (1992). It argued Category II-C mandates income/wealth test (Category VI) pending equivalence, with salary assessed separately—if over Rs 8 lakh (revised) for three years, exclusion follows. Exclusion ensures benefits reach "truly backward," avoiding reverse discrimination, they said, citing Ashok Kumar Thakur (2008).

Respondents countered: The 1993 OM—born from Mandal Expert Committee post- Indra Sawhney —excludes salary/agricultural income explicitly. The 2004 letter, a mere unconsulted DoPT note sans Law Ministry vetting, can't amend it. RTI replies showed no file notings; states like Tamil Nadu exclude salary uniformly. Singling out PSU wards for salary scrutiny discriminates against Group C/D equivalents, violating Article 14 equality. They invoked Neil Aurelio Nunes (2022) where Union distinguished OBC (salary out) from EWS (salary in).

Intervenors urged Article 142 powers for supernumerary posts, noting DoPT's parliamentary assurance.

Unpacking the Constitutional Layers: From Mandal to Modern Equity

The bench traced OBC policy from Article 16(4)'s affirmative action to Indra Sawhney 's creamy layer mandate, upheld in Ashok Kumar Thakur . The 1993 OM's Schedule prioritizes status (Group A/B entry) over pure income; Category II-C applies government criteria mutatis mutandis post-equivalence, else Category VI (income test excluding salary).

The 2004 letter's Para 9 was deemed explanatory, not overriding—can't club or standalone-use salary to oust wards of lower PSU posts akin to government Group C/D. Parliamentary reports criticized it for confusion; R.P. Bhardwaj (2005) bars letters amending OMs. Equivalence delay can't penalize candidates ( Madhuri Patil , 1994, on certificate scrutiny).

State of Kerala v. N.M. Thomas (1976) and Indra Sawhney clarified reservation as substantive equality under Article 16(1), not exception. Hostile discrimination—PSU vs government employees in same grade—fails Article 14's intelligible differentia.

Key Observations from the Bench

> "The clarificatory letter must... be construed strictly as one explaining or supplementing the foundational guidelines laid down in the 1993 OM... and not as altering its substantive framework."

> "Treating the children of those employed in PSUs or private employment... as being excluded... only on the basis of their income derived from salaries... would certainly lead to hostile discrimination between parties who are similarly placed."

> "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."

A Clear Verdict: Back to 1993 OM, Forward with Fairness

All appeals dismissed. DoPT must re-verify/reallocate respondents and eligible intervenors as OBC-NCL per 1993 OM, creating supernumerary posts if needed, within six months. No costs.

This binds future CSEs: Salary stays out for Category II-C until equivalence; parity for PSU/government lower posts. It averts administrative chaos, honors Indra Sawhney 's social advancement focus, and ensures reservation's true backward reach—potentially freeing reserved slots for needier OBCs while protecting valid claimants.