Economic Criterion Cannot Be The Sole Basis For Identifying 'Creamy Layer': Supreme Court

The Supreme Court has observed that economic criterion cannot be the sole basis for identifying 'creamy layer'.

"..the State of Haryana has sought to determine 'creamy layer' from backward classes solely on the basis of economic criterion and has committed a grave error in doing so. On this ground alone, the notification dated 17.08.2016 requires to be set aside", the Supreme Court observed.

Holding so, a bench of Justices L. Nageswara Rao and Aniruddha Bose quashed a notification issued by the State of Haryana specifying the criteria for exclusion of 'creamy layer' within the backward classes.

"We quash the notification dated 17.08.2016, giving liberty to the State Government to issue a fresh notification within a period of 3 months from today after taking into account the principles laid down by this Court in Indra Sawhney-I and the criteria mentioned in Section 5(2) of the 2016 Act for determining 'creamy layer'.", the bench said.

The Court, however, clarified that admissions to educational institutions and appointment to state services on the basis of the notifications dated 17.08.2016 and 28.08.2018 shall not be disturbed.

Background facts

The Government of the State of Haryana had issued a notification on 17.08.2016 specifying the criteria for exclusion of 'creamy layer' within the backward classes. As per the said notification, children of persons having gross annual income up to Rs. 3 lakh shall first of all get the benefit of reservation in services and admission in educational institutions. The left-out quota shall go to that class of backward classes of citizens who earn more than Rs. 3 lakh but up to Rs. 6 lakh per annum.

The sections of backward classes earning above Rs. 6 lakh per annum shall be considered as 'creamy layer' under Section 5 of the Haryana Backward Classes (Reservation in Services and Admission in Educational Institutions) Act.

The Punjab and Haryana High Court, while considering the petition challenging this notification, held the Government notification making a sub-classification within the non-creamy layer segment as annual income below Rs 3 lakhs and annual income within Rs 3 -6 lakhs as unconstitutional. The High Court held that there was no data to justify the sub-classification within the non-creamy layer.

An organization named "Pichra Warg Kalyan Mahasabha Haryana" approached the Apex Court challenging this notification.  They contended that according to the Act, social, economic and other factors are to be taken into account for specifying the criteria for exclusion and identification of persons belonging to the backward classes as 'creamy layer'. Since the same has not been done, the notification is invalid.

The Supreme Court, referring to Indra Sawhney judgments, observed:

This Court in Indra Sawhney v. Union of India 'Indra Sawhney-II' examined certain questions relating to the recommendations made by the said High-Level Committee. After thoroughly examining the factors which were given emphasis in the various opinions rendered in Indra Sawhney-I for determining 'creamy layer' amongst the backward classes, this Court held that persons from backward classes who occupied posts in higher services like IAS, IPS and All India Services had reached a higher level of social advancement and economic status and therefore, were not entitled to be treated as backward. Such persons were to be treated as 'creamy layer' without any further inquiry.

Likewise, people with sufficient income who were in a position to provide employment to others should also be taken to have reached a higher social status and therefore, should be treated as outside the backward class. Similarly, persons from backward classes who had higher agricultural holdings or were receiving income from properties, beyond a prescribed limit, do not deserve the benefit of reservation. The above-mentioned categories were necessarily to be excluded from backward classes. This Court in Indra Sawhney-II held that the exclusion of the above-mentioned categories is a 'judicial declaration' made in Indra Sawhney-I

The court observed that the notification dated 17.08.2016 is in flagrant violation of the directions issued in Indra Sawhney-I and is at variance with the memorandum dated 08.09.1993 issued by the Union of India

"The criteria mentioned for identifying such of those persons who are socially advanced have not been taken into account by the Government of Haryana while issuing the notification dated 17.08.2016. While issuing the notification dated 07.06.1995, the State Government had followed the criteria laid out in the memorandum issued by the Union of India on 08.09.1993, which was in tune with the directions given by this Court in Indra Sawhney-I.

In spite of Section 5(2) of the 2016 Act making it mandatory for identification and exclusion of 'creamy layer' to be on the basis of social, economic and other relevant factors, the State of Haryana has sought to determine 'creamy layer' from backward classes solely on the basis of economic criterion and has committed a grave error in doing so. On this ground alone, the notification dated 17.08.2016 requires to be set aside.

Therefore, we quash the notification dated 17.08.2016, giving liberty to the State Government to issue a fresh notification within a period of 3 months from today after taking into account the principles laid down by this Court in Indra Sawhney-I and the criteria mentioned in Section 5(2) of the 2016 Act for determining 'creamy layer'.", the court observed.

Case: Pichra Warg Kalyan Mahasabha Haryana vs. State of Haryana ; WP(C)  60 of 2019
Coram: Justices L. Nageswara Rao and Aniruddha Bose
Citation: LL 2021 SC 398

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