Creamy layer classification of OBCs: critical comment on income criteria for employees of

PSUs and government entities and comparative analysis of Supreme Court and High court
judgements on issue of creamy layer classification for private employees.

Introduction

The term “creamy Layer” was first used by the Apex court in the judgement of Indira sawhaney
v. UOI1also known as the Mandal commission case.

Creamy layer is a term used in the political system to mention members of other backward
classes (OBCs) who are comparatively forward, economically stable and more educated and
therefore not eligible for government sponsored educational and professional benefits.

The term creamy layer was supposed to be introduced to differentiate among the OBCs, and the
criteria used for this differentiation was financial status. Ones who are more financially stable
will come under creamy layer and will be excluded from availing benefits of reservation and
ones who are not financially stable will be eligible for availing benefits of reservation.

Chronology and history of creamy layer classification

The Constitution of India is the highest authority that governs the multitude of concerns. The
constitution's fundamental rights are of utmost significance since they are accountable for
protecting the rights of the citizens. The topic of reservations has long been contentious and
sensitive in our nation, and both academics and citizens have questioned it. However, the judicial
system has consistently worked to standardize in-law disputes and settle them.

The reservation system in India, which gives the underprivileged segment of people a
representation in the fields of education, work, and politics, is a hotly disputed topic. By giving
disadvantaged groups of individuals in the nation unique privileges, the reservation's primary
goal is to foster social equality. According to Article 16 of the Indian Constitution, this idea is
permitted. Equal privileges are guaranteed to all citizens by Article 16 (1) of the Constitution in
matters pertaining to employment or appointment in any office held by the State. However, the
beginning of 1976 witnessed a significant advancement in the resolution of Articles 14, 15, and
166 of the Constitution. The courts had earlier concluded that Article 16(1), which guarantees
"equality of opportunity to all citizens," is an exception to Article 16(4), which calls for
"affirmative action by the state in favour of SC/STs."

This was before the verdict in NM Thomas 2. This Supreme Court decision, which maintained the
practice of reservations in promotions, was the first to use the phrase "creamy layer." Justice
Krishna Iyer issued a warning against wealthy members of backward castes seizing the
1
AIR 1993 SC 477, 1992 Supp 2 SCR 454
2
State of Kerala v. NM Thomas 1976 AIR 490
advantages of reservations. The "weak" members of the same groups suffered as a result since
they were unable to take advantage of reservations. The Court addressed the creamy layer issue
over a 15-year period, notwithstanding the fact that they were only the Court's opinions and not
binding legislation.

Justice Ray held that, “the rule of differentiation deals with enacting the laws that differentiate
between different persons or things in, unlike circumstances. Further, the circumstances that
govern a set of persons may not necessarily be alike as those governing another group of
persons, so the question arising out of unequal treatment does not really arise between the
persons governed by varying conditions and varying sets of situations.”

Later in year 1992, The Supreme Court of India handed down a historic decision in 1992 in
response to a petition filed by the journalist Indra Sawhney. One of the largest judge benches in
Indian history, a nine-judge bench was created to examine the case's issues. Reservations Only
The Indian constitution has always allowed for reservation for members of the Scheduled Castes,
Scheduled Tribes, and Other Backward Classes in specific positions, parliamentary seats, and
other sectors (OBCs)

Indra Sawhney presented three arguments for the petition:

1. Consistent reservation expansion violated certain individuals' entitlement to equal opportunity.

2. Caste is not an appropriate measure of backwardness.

3. Public institutions' functioning and effectiveness will be compromised if it still continued.

It was observed in The 77th Amendment inserted a new language to article 16(4) that allowed
the states to tighten the reservation requirements if the representation of ST, SC, and OBC
members was still uneven. The Supreme Court's 50% limit was violated by this change.

Article 16(4) of the constitution was amended with a new language in the 81st amendment,
which now clarified that the backlog of vacancies from the prior year is distinct from the 50%
reservation ceiling. Therefore, in such a case, the number of reserved seats each year would be
equal to 50% of all seats for that year plus any backlog vacancies from the previous year. Due to
the considerable rise in reservations that resulted from this, the general category was evidently
adversely impacted.

According to Justice KG Balakrishnan, “Caste should be taken into account as a key factor in
determining backwardness, India has had a caste system in place since the beginning of time.
Every person is a member of a caste in some way. People's backwardness in India can be
attributed to the caste to which they belonged. Every caste has a certain vocation that they are
connected to. That connection couldn't be broken. As an illustration, the learned Counsel
Ravivarma Kumar, who was representing the Union of India, stated that in 6.5 lakh villages
across the nation, only the barber communities continue the custom of doing haircuts, and no
other group has stepped in to fill the void.” \

Therefore, caste as a factor cannot be unquestionably ignored. People from these castes who are
fortunate economically and educationally would be considered to be in the creamy layer and
would not be eligible for reservation as a result. No one would thereby receive the opportunities
of reservation in an unfair manner. As far as creating a casteless society is concerned, it is
unrealistic to anticipate achieving this aim anytime soon. Affirmative action must be used up to
that point to advance disadvantaged castes. Caste as a measure of backwardness might be
abandoned whenever it is considered that certain castes have evolved enough. In the case of
Ashok Kumar Thakur v. Union of India, this was by far the most crucial point that the Supreme
Court had to decide. The English version of the Reservation Act, which did not exclude creamy
layer from the benefit of reservation, was approved by the Parliament but the Hindi version of
the Reservation Act was rejected because it did. Therefore, the Parliament's desire to add creamy
layer for the purpose of reservation was evident. The elite from the lowest caste are referred to as
the "creamy layer" in simple terms. According to common perception, this phrase was originally
used in Indra Sawhney v. Union of India.

‘creamy layer’ Contrary to popular conviction, Justice Krishna Iyer was the one who first used
the term when he wrote in State of Kerela v. N.M. Thomas that "benefits of the reservation shall
be snatched away by the top creamy layer of the backward class, thus leaving the weakest among
the weak and leaving the fortunate layers to consume the whole cake." Justice Krishna Iyer
referenced this phrase once again to raise similar issues in Akhil Bhartiya Soshit Karamchari
Sangh v. Union of India and Justice Chinnapa Reddy did the same in K.C. Vasanth Kumar v.
State of Karnataka.

However, the Supreme Court went into great detail on the "creamy layer" in Indra Sawhney v.
Union of India. In that instance, the issue of class discrimination in public employment was
raised. The "creamy layer" can be and must be excluded from the scope of reservation, according
to Justice Jeevan Reddy. He highlighted that once a member of a backward class attained a high
level of social standing or position, they would no longer be considered members of that class
and would need to be eliminated. The class would become compact after eliminating the creamy
layer alone, and this exclusion would help the really disadvantaged.

Foundation of creamy layer

The concept of creamy layer classification of OBCs was based on recommendations proposed by
the second backward classes commission also known as Mandal commission. In 1990 the
government issued notification regarding 27% reservation to socially and educationally
backward classes. This was challenged in the case of Indira Sawhney v. UOI in which the apex
court upheld the 27% reservation for OBCs in addition to exclusion of creamy layer. After the
judgement given by apex court an expert committee was formed headed by retd. justice R.N
Prasad to decide the criteria for determining the creamy layer.

In 1993 the department of personnel and training issued a list of various categories of people
based on their income whose children cannot avail the benefit of reservation.

Income criteria for employees of PSUs and government entities: Critical analysis

The persons belonging to group ‘A’/class I and group B/ class II officers of all India, central and
state services; the employees holding equivalent posts in PSU, Banks, universities, etc

The concept of creamy layer when introduced excluded few OBCs from availing the benefit on
reservation. In which the employees of government entities and PSUs were also included.

The criteria enumerated in the service category IIA and category IIB will apply mutatis mutandis
(with necessary changes) to officers holding equivalent or comparable posts in PSUs, Banks,
insurance organisations, universities etc3

The exclusion was done on the basis of income wealth test4 which is applicable to children of

1. Persons whose gross annual income is above Rs. 8 Lakhs P income criteria for employees
of PSUs and government entities for three consecutive years.

The justification behind exclusion of government and PSUs employees is that they fall outside
all the criteria (economic, social, status,etc) which are required to make one eligible for availing
benefits of reservation.

Standing Committee Report Summary; Rationalisation of Creamy Layer in Employment for

OBCs

The Standing Committee on Welfare of Other Backward Classes (Chair: Mr. Ganesh Singh)
submitted its report on the ‘Rationalisation of Creamy Layer in Employment for OBCs in
Services and Posts under the control of Government of India, including Union Territories, PSUs
etc.’The “creamy layer” refers to the socially and economically advanced members of the Other
Backward Classes (OBCs). At present, an Office Memorandum (revised in 2017) released by the
Department of Personnel Training (DoPT) includes the criteria based on which OBC government
employees can be excluded from reservations and be considered a part of the creamy layer. In its
report, the Committee examined various issues related to the implementation of reservation for
OBCs in government positions.5 Key recommendation give by the committee:

3
GI DOPT OM category II-C of the schedule, sept 9, 1993
4
GI DOPT OM VI(a) of category VI of the schedule, sept 8 1993
5
PRS Legislative Research Standing Committee Report Summary; Rationalisation of Creamy Layer in
Employment for OBCs
Applicability of the Income/Wealth Test:

The Income/Wealth Test is used to determine whether an OBC individual may be deemed as part
of the creamy layer or excluded from it. In its revised 2017 OM, the DoPT stated that children of
individuals with a Gross Annual Income of Rs 8 lakh or above shall be excluded from
reservations. The Committee noted that the Supreme Court has held that income from salaries or
agriculture alone cannot be used as a criterion for determining the creamy layer among OBC
individuals. The Committee also observed that individuals falling under Category IIC of the
DoPT OM (employees in equivalent posts) should not be disentitled to the benefit of reservation.
Hence, the Committee recommended that while applying the Income/Wealth Test, only income
from sources other than salaries and agriculture should be taken into account.6

6
PRS Legislative Research Standing Committee Report Summary; Rationalisation of Creamy Layer in
Employment for OBCs