Union of India and Others v. Rohith Nathan and Another, Etc.

determined separately. If either the income of the parents from the salaries or the income of the parents from other sources [other than salaries and agricultural land] exceeds the limit of Rs.2.5 lakh per annum for a period of three consecutive years, the sons and daughters of such persons shall be treated to fall in creamy layer. But the sons and daughters of parents whose income from other sources is less than Rs.2.5 lakh per annum and income from other sources is also less than Rs.2.5 lakh per annum will not be treated as falling in creamy layer even if the sum of the income from salaries and the income from the other sources is more than Rs.2.5 lakh per annum for a period of three consecutive years. It may be noted that income from agricultural land is not taken into account while applying the Test.

10. In regard to clause (x) of para 4, it is clarified that while applying the Income/Wealth Test to determine creamy layer status of any candidate as given in Category VI of the Schedule to the OM, income from the salaries and income from the agricultural land shall not be taken into account. It means that if income from salaries of the parents of any candidate is more than Rs.2.5 lakh per annum, income from agricultural land is more than Rs.2.5 lakh per annum, but income from other sources is less than Rs.2.5 lakh per annum, the candidate shall not be treated to be falling in creamy layer on the basis of Income/Wealth Test provided his parent(s) do not possess wealth above the exemption limit as prescribed in the Wealth Tax Act for a period of three consecutive years.”

26. The above extract makes it clear that income from salaries, agriculture or other sources cannot be clubbed for the purpose of applying the income/wealth test to determine the creamy layer status of a candidate. It is also evident from a comprehensive reading of the 1993 OM along with the clarificatory letter dated 14.10.2004 that income from salaries alone cannot be the sole criterion to decide whether a candidate falls within the creamy layer. The status as well as the category of post to which a candidate’s parent or parents belong is essential. The exclusion under Categories I to III of the Schedule is

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status-based rather than purely income-based, reflecting the policy understanding that advancement within the governmental service hierarchy denotes social progression independent of fluctuating salary levels. Mere determination of the status of a candidate as to whether he/she falls within the creamy layer or the non-creamy layer of the OBCs cannot be decided solely on the basis of the income.

27. In fact, paragraph 7 of the 2004 Letter makes it amply clear that a mechanical application of income thresholds may in certain situations, produce inequitable outcomes. To that limited extent, the 2004 Letter may be understood as reinforcing the scheme of the 1993 OM provided it is construed as explanatory and not as altering the substantive framework.

28. In this context, a perusal of the 21st Report of the Parliamentary Committee on Welfare of Other Backward Classes (2018–19) elucidates the evolution of the guidelines governing exclusion from reservation by identification of the creamy layer. It is also necessary to point out that the 21st report records that the 2004 Letter has done more to confuse the position than to clarify it, which was its intended purpose.

29. The observations of the Parliamentary Committee lend institutional support to the view that paragraph 9 has generated interpretative ambiguity and may have been applied beyond its intended contours. The Report records that the 2004 Letter did not emanate from the DoPT Secretariat and that its origin could not be traced in terms of the initial note file. It further observes that determining exclusion from reservation solely on the basis of income from salaries, as indicated in the 2004 Letter, would not be consistent with the original framework. The entire architecture of paragraph 9 of the 2004 Letter is premised on a prior determination of equivalence. Income is intended to operate only as a surrogate measure in the absence of such equivalence; it cannot supplant the primary status-based framework embodied in the 1993 OM.

30. In light of the foregoing, any attempt to read paragraph 9 of the 2004 Letter in isolation, so as to dilute or override the substantive scheme of the 1993 OM would be legally untenable. Overemphasis on the 2004 Letter to the extent of making income alone determinative without regard to parental status or category of service would defeat the structural framework of exclusion envisaged under the 1993 OM.

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31. Thus, 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.

Issue No. 2

Whether there can be hostile discrimination between employees of the Government and those working in Public or Private Sector Undertakings, when both occupy posts of the same grade or class?

32. The second issue that needs to be decided here is whether caste, as a determining factor for entitlement to reservation, can be diluted or distorted by introducing invidious discrimination between similarly placed categories of persons.

33. At the outset, it must be noted that while caste may be an indicator of historical disadvantage, it cannot be treated as the sole determinant of backwardness. The exclusion of the creamy layer among the backward classes is not a matter of mere policy preference but a constitutional imperative intended to ensure that the benefits of reservation reach those who are socially and educationally backward in the true sense of the phrase. The principle seeks to prevent relatively advanced segments within the backward classes from siphoning off the advantages of affirmative action, so that the objective and purpose of the constitutional scheme of affirmative action, of which reservation is a reflection, are adhered to.

34. It is in this context that the Tribunal as well as the High Courts have held that Group C and Group D employees who, by virtue of promotion and efflux of time, surpass the income levels as stated in the excluded categories of persons in the Schedule to the Office Memorandum, which applies to Group A and Group B Government employees (direct recruits), and who by virtue of such income from salary alone do not stand excluded from reservation, cannot be treated differently from those employees of PSUs and private undertakings who also belong to or are equivalent to such Group C and Group D categories of posts. Treating them differently, or in other words, treating the children of those employed in PSUs or private employment, etc., as being excluded from the benefit of reservation

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only on the basis of their income derived from salaries, and without reference to their posts (whether Group A or B, or Group C or D) would certainly lead to hostile discrimination between parties who are similarly placed and would amount to equals being treated unequally, thereby attracting the rigour of the equality doctrine under Articles 14, 15 and 16, of which reservation is a facet.

35. It is well settled that a classification, to withstand scrutiny under Article 14, must satisfy the twin requirements of (i) intelligible differentia distinguishing persons grouped together from others left out, and (ii) a rational nexus with the object sought to be achieved. If similarly situated persons are subjected to differential treatment without a constitutionally sustainable basis, such action would fall foul of Article 14.

36. The object of excluding the creamy layer is to ensure that socially advanced sections within the OBCs do not appropriate benefits meant for the genuinely backward; it is not to create artificial distinctions between equally placed members of the same social class.

37. The principle laid down in Indra Sawhney and others v. Union of India and others29 that “To continue to confer upon such advanced sections special benefits would amount to treating equals unequally; to rank them with the rest of the backward classes would amount to treating the unequals equally” would stand attracted equally to a case where proper identification of a section or class of persons or a person belonging to OBC as being either socially advanced or backward is not carried out by the Government. In fact, it would not be an overstatement to say that if this exercise is not undertaken in a manner that is rational, non-arbitrary, reasonable and equal, it would lead to the illegal exclusion of genuine claimants and deserving persons within the OBC category from the benefit of reservation, which, being a facet of equality, is a right protected by the Constitution, as made amply clear by the judgments in State of Kerala and Others v. N.M. Thomas and Others30 as well as Indra Sawhney v. Union of India. To state it in other words, Article 16(4) is a structural reflection and a conceptualized representation of the principle of substantive equality embodied and envisaged under Article

29 (1992) Supp. 3 SCC 217 30 MANU/SC/0479/1975 : 19.09.1975 - SC

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16(1) of the Constitution. Therefore, any interpretation of the 1993 OM or the 2004 Letter that results in unequal treatment of similarly placed OBC candidates would not only be legally erroneous but constitutionally impermissible.

38. Relevant portion of the judgment in State of Kerala v. N.M. Thomas (supra) is extracted for reference: “44. Our Constitution aims at equality of status and opportunity for all citizens including those who are socially, economically and educationally backward. The claims of members of backward classes require adequate representation in legislative and executive bodies. If members of Scheduled Castes and Tribes, who are said by this Court to be backward classes, can maintain minimum necessary requirement of administrative efficiency, not only representation but also preference may be given to them to enforce equality and to eliminate inequality. Articles 15(4) and 16(4) bring out the position of backward classes to merit equality. Special provisions are made for the advancement of backward classes and reservations of appointments and posts for them to secure adequate representation. These provisions will bring out the content of equality guaranteed by Articles 14, 15(1) and 16(1). The basic concept of equality is equality of opportunity for appointment. Preferential treatment for members of backward classes with due regard to administrative efficiency alone can mean equality of opportunity for all citizens. Equality under Article 16 could not have a different content from equality under Article 14. Equality of opportunity for unequals can only mean aggravation of inequality. Equality of opportunity admits discrimination with reason and prohibits discrimination without reason. Discrimination with reasons means rational classification for differential treatment having nexus to the Constitutionally permissible object. Preferential representation for the backward classes in services with due regard to administrative efficiency is permissible object and backward classes are a rational classification recognised by our Constitution. Therefore, differential treatment in standards of selection are within the concept of equality.

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45. A rule in favour of an under-represented backward community specifying the basic needs of efficiency of administration will not contravene Articles 14, 16(1) and 16(2). The rule in the present case does not impair the test of efficiency in administration inasmuch as members of Scheduled Castes and Tribes who are promoted have to acquire the qualification of passing the test. The only relaxation which is done in their case is that they are granted two years more time than others to acquire the qualification. Scheduled Castes and Tribes are descriptive of backwardness. It is the aim of our Constitution to bring them up from handicapped position to improvement. If classification is permissible under Article 14. it is equally permissible under Article 16, because both the Articles lay down equality. The quality and concept of equality is that if persons are dissimilarly placed they cannot be made equal by having the same treatment. Promotion of members of Scheduled Castes and Tribes under the impeached rules and orders is based on the classification with the object of securing representation to members of Scheduled Castes and Tribes. Efficiency has been kept to view and not sacrificed.

46. All legitimate methods are available for equality of opportunity in services under Article 16(1). Article 16(1) is affirmative whereas Article 14 is negative in language. Article 16(4) indicates one of the methods of achieving equality embodied in Article 16(1). Article 16(1) using the expression “equality” makes it relatable to all matters of employment from appointment through promotion and termination to payment of pension and gratuity. Article 16(1) permits classification on the basis of object and purpose of law or State action except classification involving discrimination prohibited by Article 16(2). Equal protection of laws necessarily involves classification. The validity of the classification must be adjudged with reference to the purpose of law. The classification in the present case is justified because the purpose of classification is to enable members of Scheduled Castes and Tribes to find representation by promotion to a limited extent. From the

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point of view of time a differential treatment is given to members of Scheduled Castes and Tribes for the purpose of giving them equality consistent with efficiency.”

39. Approving the decision in N.M. Thomas, this Court held in Indra Sawhney and Others v. Union of India and Others31 as follows: “741. In Balaji it was held - “there is no doubt that Article 15(4) has to be read as a proviso or an exception to Articles 15(1) and 29(2)”. It was observed that Article 15(4) was inserted by the First Amendment in the light of the decision in Champakam, with a view to remove the defect pointed out by this Court namely, the absence of a provision in Article 15 corresponding to Clause (4) of Article

16. Following Balaji it was held by another Constitution Bench (by majority) in Devadasan - “further this Court has already held that Clause (4) of Article 16 is by way of a proviso or an exception to Clause (1)”. Subbarao, J., however, opined in his dissenting opinion that Article 16(4) is not an exception to Article 16(1) but that it is only an emphatic way of stating the principle inherent in the main provision itself. Be that as it may, since the decision in Devadasan, it was assumed by this Court that Article 16(4) is an exception to Article 16(1). This view, however, received a severe set-back from the majority decision in State of Kerala and Ors. v. N.M. Thomas MANU/SC/0479/1975 : (1976) I LLJ 376 SC. Though the minority (H.R. Khanna and A.C. Gupta, JJ.) stuck to the view that Article 16(4) is an exception, the majority (Ray, C.J., Mathew, Krishna Iyer and Fazal Ali, JJ.) held that Article 16(4) is not an exception to Article 16(1) but that it was merely an emphatic way of stating a principle implicit in Article 16(1). (Beg. J. took a slightly different view which it is not necessary to mention here). The said four learned Judges - whose views have been referred to in para 41 - held that Article 16(1) being a facet of the doctrine of equality enshrined in Article 14 permits reasonable classification just as Article 14 does. In our respectful opinion, the view taken by the

31 (1992) Supp. 3 SCC 217

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majority in Thomas is the correct one. We too believe that Article 16(1) does permit reasonable classification for ensuring attainment of the equality of opportunity assured by it. For assuring equality of opportunity, it may well be necessary in certain situations to treat unequally situated persons unequally. Not doing so, would perpetuate and accentuate inequality. Article 16(4) is an instance of such classification, put in to place the matter beyond controversy. The “backward class of citizens” are classified as a separate category deserving a special treatment in the nature of reservation of appointments/posts in the services of the State. Accordingly, we hold that Clause (4) of Article 16 is not exception to Clause (1) of Article 16. It is an instance of classification implicit in and permitted by Clause (1). The speech of Dr. Ambedkar during the debate on draft Article 10(3) [corresponding to Article 16(4)] in the Constituent Assembly - referred to in para 28 - shows that a substantial number of members of the Constituent Assembly insisted upon a “provision (being) made for the entry of certain communities which have so far been outside the administration”, and that draft Clause (3) was put in recognition and acceptance of the said demand. It is a provision which must be read along with and in harmony with Clause (1). Indeed, even without Clause (4), it would have been permissible for the State to have evolved such a classification and made a provision for reservation of appointments/posts in their favour. Clause (4) merely puts the matter beyond any doubt in specific terms.

742. Regarding the view expressed in Balaji and Devadasan, it must be remembered that at that time it was not yet recognised by this Court that Article 16(1) being a facet of Article 14 does implicitly permit classification. Once this feature was recognised the theory of Clause (4) being an exception to Clause (1) became untenable. It had to be accepted that Clause (4) is an instance of classification inherent in Clause (1). Now, just as Article 16(1) is a facet or an elaboration of the principle underlying Article 14, Clause (2) of Article 16 is also an elaboration of a facet of Clause (1). If Clause (4) is an exception to

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Clause (1) then it is equally an exception to Clause (2). Question then arises, in what respect is Clause (4) an exception to Clause (2), if ‘class’ does not means ‘caste’. Neither Clause (1) nor Clause (2) speak of class. Does the contention mean that Clause (1) does not permit classification and therefore Clause (4) is an exception to it. Thus, from any point of view, the contention of the petitioners has no merit”.

40. Adopting an interpretation that disadvantages one segment of the same backward class without rational justification would amount to treating equals as unequals and would thus become the antithesis of equality, the corner stone of our Republic. Having regard to the peculiar facts of the present cases, the reasoning adopted by the High Court that treating similarly placed employees of private entities and PSUs differently from Government employees and their wards, while deciding their entitlement to reservation, would amount to hostile discrimination, is certainly one that inspires the confidence of this Court.

41. Thus, we find no infirmity in the judgments impugned before us. The civil appeals accordingly fail.

42. As regards the intervention applications, we find that several candidates who were successful in the Civil Services Examination of different years sought permission to intervene the present proceedings to advance their respective contentions. They submit, in substance, contentions similar to those urged by the respondent candidates in the civil appeals, asserting that they belong to the Non-Creamy Layer of the Other Backward Classes. It is their case that their applications, representations, or proceedings are presently pending consideration before the Department of Personnel and Training (DoPT), the High Courts or the Central Administrative Tribunal, and that any decision rendered in the present batch of matters would have a direct bearing upon their entitlement. Accordingly, they seek appropriate orders in the present proceedings.

43. At this juncture, it is to be noted that supernumerary posts have already been assured by the DoPT and this position stands recorded in the 21st Report of the Parliamentary Committee on the Welfare of Other Backward Classes. In view thereof, we find no difficulty

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in directing the appellants to create such supernumerary posts, as required, to accommodate the candidates who satisfy the non-creamy layer criteria as clarified in the present judgment, subject to their otherwise fulfilling eligibility conditions.

CONCLUSION

44. To sum up (i) All the Civil Appeals are dismissed. (ii) The appellants are directed to consider the claims of the respondent candidates and intervenors in accordance with the principles laid down in this judgment, and to implement the same within a period of six months from the date of this judgment. (iii) There shall be no order as to costs. (iv) Pending application(s) including Intervention Applications, stand disposed of accordingly.

Result of the case: Appeals dismissed.