Context: The Supreme Court asked the Attorney General to compile the various issues being raised by States with regard to the application of a Constitution Bench judgment of 2006 in M. Nagaraj case.

  • The Nagraj judgment upheld the application of creamy layer principle to members of the Scheduled Caste/Scheduled Tribe communities in promotions.
  • The case is based on a plea by the Centre to refer to a seven-judge Bench the question whether creamy layer should apply or not to the Scheduled Caste/Scheduled Tribe community while providing them reservation in government promotions.

What is creamy layer?

  • “Creamy layer” concept involves application of a means test or imposition of an income limit, for the purpose of excluding people whose income is above the limit from the backward class.
  • This was earlier only applicable for reservations only under the Other Backward Classes quota
  • Dalits and Adivasis were excluded since it was argued that their backwardness was based purely on untouchability, for which economic improvement was not a remedy.
  • The creamy layer concept was first applied in the Indra Sawhney case, or the Mandal case, as the judgment said that the creamy Layer must be identified and excluded from the backward classes to serve the purpose and object of reservation.

Background: Reservation in promotions

  • Article 335 recognises that special measures need to be adopted for considering the claims of SCs and STs in order to bring them to a level-playing field.
  • The Constitution  (77th Amendment) Act, 1995 was passed by parliament, inserting Article 16(4A), which enables the state to make any law regarding reservation in promotion for SCs and STs.
    • The amendment introduced the words “with consequential seniority” after “in matters of promotion” in Article 16(4A).
  • Other amendments followed. Article 16(4B) provides that reserved promotion posts for SCs and STs that remain unfilled can be carried forward to the subsequent year. 
    • Article 16(4B) ensures that the ceiling on the reservation quota – capped at 50% by Indra Sawhney – for these carried forward unfilled posts does not apply to subsequent years.

M. Nagaraj v. Union of India case, 2006:

  • The Constitutional Bench in Nagaraj validated the constitutional amendments made by Parliament.
  • The court had held that the state is not bound to make reservations for Scheduled Castes and Scheduled Tribes in promotions in government jobs. But if the government wishes to introduce such quotas, it needs to collect quantifiable data showing the backwardness of these classes.
  • The order said that if reservation is brought in, it must not breach the 50% ceiling or “obliterate” the “creamy layer”.
  • The Nagaraj judgement laid down three controlling conditions that the State must meet prior to granting a SC/ST a reservation in promotion. 
    • First, the State must show the backwardness of the class. 
    • Second, it must show that the class is inadequately represented in the position/service for which reservations in promotion will be granted. 
  • Finally, it must show that the reservations are in the interest of administrative efficiency.

Jarnail Singh & Ors vs. Lacchmi Narain Gupta & Ors case: Various States along with the Centre challenged the Court's 2006 Nagaraj judgment. The petitioners’ maintained that Nagaraj had made it unjustly difficult to grant reservations in promotion. 

  • Firstly, the judgment held that the Supreme Court's 2006 Nagaraj judgment does not need reconsideration by a 7-judge Bench.
  • It also added that the principle of creamy layer exclusion applies to SC/STs. 
    • It rejected the Centre’s argument that Nagaraj misread the creamy layer concept by applying it to SC/ST.
  • It had modified the part of the Nagaraj verdict which required States to show quantifiable data to prove the ‘backwardness’ of a Scheduled Caste/Scheduled Tribe community to provide quota in promotion in public employment.