March 11 OBC creamy layer quota order would not apply retrospectively: Supreme Court

The Supreme Court on Friday clarified that its March 11 judgment, which said Other Backward Classes (OBC) candidates cannot be excluded from reservation benefits solely based on their parents' salary income, will not apply to past appointments after the government opposed the retrospective operation.

It said that the judgment was passed in favour of the parties who approached it. Regarding retrospective operation, a bench of Justices PS Narasimha and R Mahadevan said the decided ratio will not lead to reopening of appointments already made.

The court said the government is at liberty to have its own policy. It held that its judgment will govern service allocation under the 2025 civil services examination, since the process was ongoing when the judgment was pronounced.

The government filed an application in August, saying that the judgment's operation to all past appointments and admissions would lead to complete administrative chaos. It requested two years to work out equivalent posts similar to Group A and B officers in the government for identifying the creamy layer among those employed in public sector undertakings (PSUs) and private employment.

The March 11 judgment gave the government six months to implement it.

Solicitor general Tushar Mehta and additional solicitor general Aishwarya Bhati argued that the application does not question the judgment. "The Union government is only praying for a limited deferral of the operationalisation of the law laid down by this court for a period of two years so that the competing rights can be adjusted consistent with the administrative contingencies and an effective equivalence exercise is carried out," Bhati argued.

"The application of the present judgment to past and ongoing recruitments will gravely prejudice the competing rights of persons who were not even a party to the present litigation and will result in reopening of seniority, cadre allocation of appointees and candidates and result in complete administrative chaos."

Bhati pointed out that the civil service exam recruitment rules for the past year and this year have been issued. She added that some candidates are citing this judgment to seek enhanced allocation opportunities based on the benefits under the March 11 judgment.

She said some candidates whose parents are earning even over ₹1 crore annually would benefit and be considered as OBC non-creamy layer category by virtue of the implementation of the judgment.

The court passed judgment in March on the Union government's appeals against Madras high court orders. The high court permitted an OBC candidate to be treated as a non-creamy layer candidate, which furthered his career prospects. The candidate recommended for the Indian Police Service under the OBC reservation became entitled to allocation under the Indian Foreign Service.

The Supreme Court approved the high court order. It discarded the Union government's objection that his father worked with a multinational, had a high income, and would come under the creamy layer. It said another candidate was entitled to OBC reservation in the civil services after he was initially refused it because of his father's PSU employment, which fetched a higher income. Both candidates argued that their parents were excluded on income criteria. They said creamy layer classification was based on posts, and Group A or B, C or D officers were excluded as creamy layer. They argued that similar "equalisation" based on posts should apply to OBC parents working in PSUs and private employment.

The March judgment said treating the children of those employed in PSUs or private employment as being excluded from the benefit of reservation only based on their salary income, and without reference to their posts (whether Group A or B, or Group C or D), would lead to hostile discrimination between parties similarly placed. It added that this would amount to equals being treated unequally.

The creamy layer notification was issued in 1993 following the landmark Indra Sawhney judgment of 1992. The 1992 judgment allowed 27% reservation for OBCs, subject to exclusion of the creamy layer. The 1993 order identified five occupational categories as the creamy layer. A sixth category was based on an income and wealth test.

In 2004, the government issued a clarificatory order. It explained that income from salaries and from other sources (excluding salaries and agricultural land) are to be assessed separately. The 2004 order said exclusion would follow only if either component exceeds the prescribed limit for three consecutive years.

The March judgment held that the evolution of the non-creamy layer principle demonstrates that both the 1993 office memorandum and 2004 letter preserve the primacy of status- based exclusion. It said they confine economic exclusion to those falling under the sixth category. "Salary income cannot be mechanically aggregated in a manner that defeats the constitutional objective articulated in Indra Sawhney," the court said.