In a major relief to children of PSU employees, the Supreme Court of India has ruled that salary income alone cannot be used to decide whether a person falls in the OBC creamy layer. The decision was given in Union of India v. Rohith Nathan & Ors. (2026 INSC 230).
The case was related to candidates who appeared in the Civil Services Examination. Their parents were working in Public Sector Undertakings (PSUs). The Government treated these candidates as belonging to the creamy layer because their parents’ salary was above the income limit. Because of this, they were denied the benefit of OBC Non-Creamy Layer reservation.
The candidates challenged this decision before the Central Administrative Tribunal and different High Courts. The matter finally reached the Supreme Court.
Issue Before the Court
The main issue before the Court was whether salary income of parents working in PSUs can be used to determine creamy layer status of OBC candidates.
The Government relied on a clarificatory letter issued in 2004, which allowed consideration of salary income in certain situations. Based on this letter, the authorities treated the candidates as creamy layer.
Supreme Court’s Observation
The Supreme Court examined the 1993 Office Memorandum, which lays down the rules for identifying the creamy layer among OBCs.
The Court observed that under this policy, income from salary and agricultural land should not be included while applying the income or wealth test for determining creamy layer status.
The Court also held that the 2004 clarification cannot override or change the original policy issued in 1993. A clarificatory letter can only explain the existing rule, but it cannot introduce new conditions.
Equality Principle
The Court also discussed the principle of equality under Articles 14 and 16 of the Constitution.
It noted that children of Government employees in similar posts are not excluded from OBC reservation only because of salary income. Therefore, treating children of PSU or private sector employees differently only on the basis of salary would amount to hostile discrimination.
According to the Court, such unequal treatment of similarly placed persons is not allowed under the Constitution.
Decision of the Court
After considering the issue, the Supreme Court dismissed the appeals filed by the Union of India. The Court upheld the decisions of the tribunal and the High Courts.
The Government has been directed to reconsider the claims of the affected candidates in accordance with the correct interpretation of the OBC creamy layer rules. The Court also said that supernumerary posts can be created if required to accommodate eligible candidates.
Conclusion
This judgment clarifies an important point in reservation law. The Supreme Court has made it clear that creamy layer status cannot be decided only on the basis of salary income of parents working in PSUs or similar organisations. The status of the parent’s post and the original framework of the 1993 OBC policy must also be considered.
The ruling is expected to have an important impact on OBC reservation in Civil Services and other government recruitments, especially for candidates whose parents work in public sector undertakings.