Can child of a person earning ₹1.12 crore annually in private sector get non-creamy layer status? Kerala High Court answers

The Kerala High Court on Wednesday held that salary income of private sector employees cannot be excluded while determining eligibility for a non-creamy layer certificate [XXX v Union of India & ors and connected case].

The Court ruled that children of affluent private sector employees cannot claim reservation benefits merely because the government has notified only certain government sector posts as ineligible for non-creamy layer and has not notified equivalent private sector posts.

In such cases, the income from the private sector job would be the relevant criteria to determine backwardness and consequently eligibility for being considered as non-creamy layer.

Even if the government had not notified posts in the private sector as equivalent or comparable to government posts, private sector employees are not automatically entitled to be treated as belonging to the non-creamy layer.

"It is evident that the gross annual income is the factor to be reckoned for the persons employed in the private sector, where the equivalent or comparable posts have not been notified. In view of the binding declaration of the Supreme Court in the two Indira Sawhney cases, there cannot be a situation where merely because equivalent posts in the private sector have not been notified, all those working in the private sector would automatically become eligible to be included in the Non-Creamy Layer," the Court held.

Justice Bechu Kurian Thomas delivered the judgement while dismissing petitions filed by two students belonging to Other Backward Classes (OBCs) who were seeking non-creamy layer status for application to National Eligibility cum Entrance Test (NEET) and Kerala Engineering Architectural Medical Entrance Examination (KEAM).

Their applications for non-creamy layer certificate had been rejected after revenue authorities found that their parents income exceeded the prescribed limits.

A non-creamy layer certificate is granted to candidates belonging to OBC, eligible to get reservation benefits for admissions to educational institutions and public employment.

A Government Order (GO) dated January 1, 2015, laid down the criteria for excluding candidates that fell within the creamy layer for admissions to professional degree courses.

The order classified candidates based on the parent's occupation and status and whether such candidates belonged to the family of constitutional functionaries, government servants and employees of public sector undertaking.

For candidates whose parents are private sector employees and where such posts have not been declared equivalent or comparable to government posts, the assessment is done under the income and wealth test.

"When such comparable or equivalent posts have not been notified, as per the scheme of the Government Order dated 01.01.2015, it cannot lead to a situation where there is no creamy layer at all in private employment. The stipulation is that when equivalent posts have not been notified, the method to identify the non-creamy layer is the income or wealth test. The decision in Rohith Nathan's case does not state that the income or wealth test should not at all be considered," the Court added.

The dispute revolved around the interpretation of the income and wealth test provided in the GO.

The petitioners had relied on an explanation attached to the test under category VI which states that, 'Income from salaries or agricultural land shall not be clubbed.'

They argued that this meant the salary income earned by their parents in private employment could not be taken into account while determining whether they belonged to the Creamy Layer.

One of the petitioners stated that even though her father earned a salary of ₹1.12 crore annually the same should be excluded while calculating gross annual income, making her eligible for reservation benefits.

Similarly, the other petitioner whose father worked in a UK Consumer Bank, earning around ₹33 lakh annually as income, argued that since his family had no significant income apart from his father's salary, he would also fall within the non-creamy layer.

The State opposed the pleas, pointing out that the father who earned ₹1.12 crore as salary also owned two apartments, two cars, including an Audi and persons with such income and assets could not claim to belong to the non-creamy layer merely because their income from other sources fell below ₹8 lakh.

The Court after going through the contentions, rejected the petitioners argument and stated that the explanation in the GO relied upon by the petitioners applies to government employees who are not disentitled to reservation but who are earning income from other sources which will bring them within the income criteria.

For such persons, income from salaries or agricultural land shall not be clubbed.

The explanation is not meant for those employed in private sector, the Court said.

"Income/Wealth Test has two categories of which the first is (a) i.e., a person with gross annual income of more than Rs.8 lakhs or possessing wealth above the exemption limit. The second is (b). i.e., persons who are employed in Categories I,II, III and V(A) (those holding constitutional posts, Group A & B Officers, Officers of Armed Force and those property owners who hold more than 5 hectare of agricultural holdings). Persons, who, though falling under the said categories, and are yet not disentitled for benefit of reservation, will still be disentitled, if they have income from other sources of wealth. Taking note of the principles laid down in the First Indira Sawhney case and the scheme of Government Order referred above, it is evident that the ‘explanation’ can apply only to the category of persons mentioned in category VI(b) and not to category VI(a)," the Court said.

It clarified that interpreting it as excluding the private salary income altogether would permit even affluent private sector employees, earning crores of rupees annually to claim reservation benefits, thereby defeating the very purpose of excluding the creamy layer.

"It cannot be deciphered either from the scheme of the Government Order or from the principles relating to exclusion of Creamy Layer as laid down in the First Indira Sawhney Case, that while calculating the annual income, the income from salary should be excluded. While calculating the gross annual income of a person, to exclude the salary income for identifying the Non-Creamy Layer, will lead to absurd and anomalous situations, contrary to the principles for exclusion of Creamy Layer," the Court added.

Thus, holding that the parents of both the petitioners possessed income and assets well beyond the prescribed limits, the Court found no reason to interfere with the decision of the authorities refusing to issue non-creamy layer certificates and dismissed both petitions.

The petitioners were represented by advocates KS Aneesh, Renish Raveendran, CS Geethu, Priyanka Saju, SP Aravindakshan Pillay, Peter Jose Christo, SA Anand, KN Remya, L Annapoorna, Aswathy N and Liya Mol Baby.

Central government counsel Rahul Venugopal represented the union

Government pleaders Laya Mary Joseph and Unni Sebastian Kappan appeared for the state.

[Read Judgment]