Holding

The terms of reference of the Narendran Commission were illegal, its report cannot be accepted, and the Kerala notification is set aside with a fresh commission to be appointed.

Summary

The Supreme Court examined the validity of the Kerala government's notification dated 27 May 2000, which accepted the Narendran Commission report on identifying the ‘creamy layer’ among Other Backward Classes. The petitioners, Nair Service Society, argued that the notification violated the Supreme Court’s earlier directives in Indra Sawnhy‑1 and Indra Sawnhy‑11, which require a realistic, scientifically‑based income ceiling and prohibit granting ‘maximum protection’ to backward classes. The Court held that the terms of reference of the Narendran Commission were illegal because they sought to give greater protection than mandated and arbitrarily raised the income limit to Rs 3 lakhs without justification. It observed that the State had ignored the Joseph Committee report, which had been accepted by this Court, and that the Narendran Commission’s departure from that report was untenable. Consequently, the Court set aside the notification, directed the State to appoint a fresh commission, and allowed the writ petition while leaving the contempt proceedings pending.

Issues considered

The constitutionality of the terms of reference of the Narendran Commission which sought to give ‘maximum protection’ to backward classes
Whether the Rs 3 lakhs income ceiling fixed by the Narendran Commission is arbitrary and violative of Articles 14, 15 and 16
Whether the Kerala notification accepting the Narendran Commission report complies with the Supreme Court’s directions in Indra Sawnhy‑1 and Indra Sawnhy‑11
Whether the State’s failure to implement the Joseph Committee report amounts to contempt of court
What appropriate relief should be granted – setting aside the notification and ordering a fresh commission

Legislation cited

Constitution of Indias. Article 14, s. Article 15, s. Article 16

Subjects

creamy layerreservationbackward classesArticle 14Article 16judicial reviewterms of referencestate contemptaffirmative actionequality clause

Judgment

NAIR SERVICE SOCIETY A
"
STATE OF KERALA

FEBRUARY 23, 2007

[S.B. SINHA AND P.P. NAOLEKAR, JJ.) B

Consitution of India, 1950.

Articles 14, 15, & 16-Mandal Commission Report- 'Creamy layer'-
Guide/ines issued in Indra Sawhney-1 directing States to identify 'Creamy C
layer' amongst backward classes to exclude them from purview of
reservation-State of Kera/a not complying with the said directions-
Committee constituted by Chief Justice of Kera/a High Court at the request
of Supreme Court-Report of Committee accepted in Indra Sawhney-11 and
State directed to implement recommendations of Committee till State D
determines its own criteria for determining 'creamy layer-State not
complying with the said directions and appointing another committee-
., Terms ofreference ofcommittee providing that maximum protection be granted
to backward classes-Committee submitting report-Notification accepting
report challenged-Held, terms of reference while appointing commission is E
subject to judicial report-Maximum protection to backward classes not
contemplated in Indra Sawhney-1-Determination of creamy layer is part of
constillltional scheme-Terms. of reference of subsequent committee held bad
in law-Subsequent committee raising annual income to Rs. 3 lakhs from Rs.
1.5 lakhs by earlier committee-Subsequent committee not proceeding
scientifically in fixing annual income-Unwarranted criticism of report of F
earlier committee by subsequent committee-Jn the facts and circumstances,
report of subsequent committee set aside and State directed to appoint fresh
commission.

Manda! Commission Report was accepted by Union oflndia. Writ petition
was filed in Supreme Court questioning the said action on the part of the G
Union of India. The Supreme Court in Indra Sawhney & Ors. v. Union ofIndia
& Ors., (1992) Supp. 3 SCC 217 (Indra Sawhney-1) inter alia directed the
States to identify 'creamy layer' amongst the backward classes and exclude
them from the purview of reservation.

149
H
ISO SUPREME COURT REPORTS [2007] 3 S.C.R.

A The State of Kera la did not comply with the said directions of the
Supreme Court. The Supreme Court by order dated 10.7.1995 in Indra
Sawhney v. Union of India & Ors., reported in 119951 5 SCC 429 while
holding the State of Kerala to be guilty of contempt of this Court, gave it two
month's time to purge the same and report its compliance. The legislature of
the State of Kerala thereafter enacted the Kerala State Backward Classes
B (Reservation of Appointments or Posts in the Services Under the State) Act,
1995 in terms whereof it was declared that there was no socially advanced
section in the State and that reservation, which had been in operation since
1958, shall continue to operate. Petitioner Society filed writ petition before
Kerala High Court questioning the validity of the State Act. The Supreme
C Court passed an Order dated 4.11.1996 requesting the Chief Justice of the
Kerala High Court to appoint a High Powered Committee to determine the
criteria for identification of 'creamy layer' and accordingly, 'the Joseph
Committee' headed by Justice K.J. Joseph was constituted which submitted
its report on 4.8.1997. The Supreme Court in Indra Sawhney v. Union ofIndia
D & Ors., (2000) I SCC 168 (Indra Sawhney-11) while holding Sections 3, 4 and
6 of the 1995 State Act to be unconstitutional accepted the report of the Joseph
Committee in toto subject to certain additions of communities and sub-castes
and passed strictures against the State Government for contemptuous acts in
deliberately violating the orders of the Court, It was directed that the ·-
recommendations of the Joseph Committee Should be implemented forthwith
E until such time the State comes up with its own criteria for determining
'creamy layer'. It was further directed that the suo motu contempt previously
initiated by the Court be kept pending and the State should purge its contempt
only by complying with the directions contained in Indra Sawhney-11. The
recommendations made by the Joseph Committee in its report, however, were
F not implemented forthwith in terms of the directions of the Supreme Court
in Indra Sawhney-11. The State, on the other hand, appointed another
Commission headed by Justice K.K. Narendran and issued Notification dated
27.5.2000 accepting the report of the Narendran Commission with certain
..
modifications. The Narendran Commission report inter alia provided that
income limit should be raised to Rs. 3 lakhs, advocated change of age from
G 40 to 35, exclusion of backward classes in category Nos. I, II, III, V and V-A
on the basis of status and not on the basis of annual income, and exclusion of
salary and agricultural income in calculating annual income in respect of
category VI for determining the category of 'creamy layer'. The Joseph
Committee in its report had !ncluded income from agriculture and salary.
H The petitioner Society has challenged the validity of the said notification in
the present writ petition.
NAIR SERVICE SOCIETY v. STA TE OF KERA LA 151
Petitioner inter alia contended that the State in accepting the report of A
·-.:t the Narendran Commission violated the judgments of the Supreme Court
emphasizing the requirements to exclude those categories, which ceased to
be backward classes so as to obtain the benefit of reservation; that attempt in
the said report was to include more and more people thereunder and even by
the terms of rtference alone the Commission had been directed to give more
thar. the maximum protection otherwise available to them ; and that whereas
B
those who continue hereditary occupations had been sought to be protected,
the State made an attempt to modify the same by bringing in those categories
of persons whose fore-fathers were carrying on such occupations regardless
of the fact as to what occupations they have been carrying out now.
c
Respondent-State inter alia contended that income is not static and
recommendations of the Narendran Commission in regard to the annual
income being Rs. 3 lakhs should not be interfered with; that exclusion of
salary and agricultural income from annual income would apply only to people
falling in category VI taking into account Central Government office
memorandum ; and that Court should not interfere with policy decision of the D
State.

... Allowing the writ petition, the Court
"\
HELD: 1. The concept of identification of 'creamy layer' came up for
consideration in Indra Sawhney-1 and this Court has issued certain directions
E
in this behalf. Criteria were adopted by the States so as to avoid implementation
of this Court's judgments and the criteria laid down by the State of Bihar and
U.P. have been struck down by this Court being violative of Articles 14 and
16(4) of the Constitution of India. The State of Kerala did not follow the said
direction as a result whereof it was found to be guilty of contempt of this Court. F
A stern action thereupon was proposed to be taken up against the State of
Kerala in view of its contemptuous conduct. It was in the aforementioned
backdrop, the legislation passed by the legislature of Kerala was not only
struck down during the pendency of the proceedings by this Court, a
Committee was also directed to be constituted. The recommendations of the
Joseph Committee were accepted in toto. The State, without any demur,
G
accepted the recommendations thereof with modifications by addition ofone
caste or sub-caste. It is, therefore, difficult to appreciate as to on what basis
-"';
Narendran Commission was appointed. (Para 24) (165-B, C, E, DJ

Indra Sawhney and Ors. v. Union of India & Ors., [1992] Supp. 3 SCC H
152 SUPREME COURT REPORTS (2007] 3 S.C.R.

A 217, followed.
Ashoka Kumar Thakur v. State of Bihar & Ors., (1995) 5 SCC 403, Indra
Sawhney v. Union of India & Ors., (2000) 1 SCC 168 and Indra Sawhney v.
Union of India & Ors., [19951 5 SCC 429, relied on.

B 2. It is, furthermore, difficult to comprehend as to on what basis, while
appointing Narendran Commission, in the terms of reference, the State of
Kerala could say that the maximum benefit should be given to a particular
Section of People. It is no longer res integra that the terms of reference while
· appointing a commission may be subject to judicial review. For the purpose of
C construing a judgment, it is well-Known that the .same must be read in its
entirety. The validity of the terms of reference of the Narendran Commission
and the report submitted by it would, thus fall for consideration not only on
the anvil of certain observations of this Court but also on reading the
judgment in its entirety as also the criteria laid down in the subsequent
judgments. The judgment of this Court in Indra Sawhney-1 clearly lays down
D that what is necessary is identification of a class which had never been
backward or ceased to be backward during the passage of time, but it would
rise to a question as to whether in making such identification the class should
be equated with other socially and economically forward classes. The Central
Government to the State Government, evidently, had not laid down any criteria
E from that angle. It is, however, beyond any cavil of doubt that Indra Sawhney-
1 categorically states that identification of such a class should be done on a
realistic basis. [Paras 25 and 261 [165-E, F, G, H; 166-A, B, CJ

Indra Sawhney & Ors. v. Union of India & Ors., [19921 Supp. 3 SCC
217, followed.
F
Rama Krishna Dalmia & Ors. v. Shri Justice S.R. Tendolkar & Ors.,
[1959) SCR 279, relied on.

3. Maximum protection to the backward classes, was not contemplated
in Indra Sawhney - I It is also relevant to notice that in Indra Sawhney-1 this
G Court directed both the Central Government as also the states that where
reservation in favour of all the backward classes was already in operation,
they should evolve a suitable criteria within a period of six months and apply
the same to the socially advanced persons/sections from the designated other r~
backward classes. This Court did not say that maximum protection was to be
H granted to the backward classes. It was expected that the endeavour of the
- NAIR SERVICE SOCIETY v. ST ATE OF KERALA

State should have been to evolve a criterion in tune with the underlying A
153

constitutional scheme that the protection is required to be given only to those
who remain socially and educationally backward and not to those who have
ceased to be. Those who are no longer members of the socially and
educationally backward class are not to be permitted to obtain the benefit of
the reservation. Thus while laying down the criteria, the State was required
to give effect to the underlying principles envisaged in the constitutional B
scheme as interpreted in Indra Sawhney-1. It is trite that those, who have
reached the status of general category, cannot be permitted to defeat the
purport and object of the concept of 'creamy layer' as the idea of creamy layer
was conceptualized on that philosophy. It is also trite that the State can also
lay down a legislative policy as regards the extent of reservation to be made C
for different members of the backward class, provided they remain as such.
The terms of reference in the afore-mentioned premises should be held to be
bad in law. (Paras 27, 28, 29, 31and34) (166-D, E, F, G, H; 168-E; 169-DI

Indra Sawhney & Ors. v. Union of India & Ors.. (1992) Supp. 3 SCC
217, followed. D
Ashoka Kumar Thakur v. State of Bihar & Ors., [20051 5 SCC 403,
__, relied on.

E. V. Chinnaiah etc. v. State ofA.P. & Ors., (1995) 1 SCC 394, referred
to. E
4.1. The Narendran Commission sat in appeal over the Joseph
Committee report despite the fact that the same has been accepted in toto by
this Court It did not assign any reason to justify its stand as to on what
basis the income limit of Rs. 1.5 lakhs fixed by the Joseph Committee in 1997 F
was doubled to Rs. 3 lakhs within a period of three years; particularly, in
view of the fact that even the Central Government, having regard to the rate
of inflation prevailing throughout the Country in 2004, came to the conclusion
that the income limit should be raised upto 2.5 lakhs. [Para 371 (170-F, G, H[

4.2. While fixing the income limit, although a State is entitled to take G
into consideration the level of literacy, the village income, the rise of living
index and other relevant factors into consideration, it should not have accepted
a report of the Committee which did not proceed scientifically, particularly,
having regard to the constitutional scheme as explained by this Court in its
judgments. There is no justification for fixing the income limit at Rs. 3 lakhs.
This Court places on record its displeasure as to the manner in which Joseph H
154 SUPREME COURT REPORTS (2007) 3 S.C.R.

A Committee report received severe criticism by the Narendran Committee,
most of which were wholly unwarranted. The tests adopted by the Joseph
Committee could not have been given a complete go-by, by the Narendran
Commission. The findings of a Commission in respect of a matter of such
grave significance and importance should have been based on scientific data
B as alw evidence of experts. If Government tends to consider without adequate
data and inquiry, a stage would come when the whole system of reservation
will become farcical and negation of constitutional provisions. Hence, before
arriving at the final conclusion, it should have noticed the rate if inflation
and other relevant factors. Economic growth ofa country, as a result of the
village income of citizens of India, keep on changing, although while
C determining an issue as to whether persons who have attained economic
sufficiency so as not to furthermore describe them as economically backward,
is required to be taken into consideration. [Paras 41 and 42)
(174-F, G, H; 175-A-B-CI

Indra Sawhney v. Union af India & Ors., [2001) l SCC 168, relied on.
D
Indra Sawhney & Ors. v. Union of India & Ors., [1992) Supp. 3 SCC
217, referred to.

5. Equality clauses contained in Articles 14, 15 and 16 of the ·-
Constitution of India may in certain situations constitute the heart and soul
E of the Constitution of India. When a law is patently arbitrary, Such
infringement of the equality clause contained in Article 14 or Article 16
would be violative of the equality clause of the Constitution. [Para 44) [175-E)

Waman Rao v. Union of India, [1981) 2 SCC 362, Maharao Saheb Shri
Bhim Singhji, etc. v. Union ofIndia & Ors, AIR (1981) SC 234; Minerva Mills
p Ltd. & Ors. v. Union ofIndia & Ors., [1980) 3 SCC 625 and Mithu v. State of
Punjab, AIR (1983) SC 473, referred to.

6. A Statute Professing division amongst citizens, subject to Articles
15 and 16 of the Constitution of India may be considered to be a suspect
legislatnon. A suspect legislation must pass the test of strict scrutiny. Articles
G 15(4) and Article 16(4) Profess to bring the socially and educationally
backward people to the forefront. Only for the purpose of invoking equality
clause, the makers of the Constitution thought of protective discrimination ~·
and affirmative action. Such recourse to protective discrimination and
affirmative action had been thought ofto do away with social disparitie. Solong
as social dispanities among groups of people are patent and one class of
H citizens in spite of best efforts cannot effectively avail equality of opportunity
NAIR SERVICE SOCIETY v. ST ATE OF KERALA 155
A

-
due to social and economic handicaps, the policy of affirmative action must
.(' receive the approval of the constitutional courts. For the said purpose, however,
the conditions precedent laid down therefore in the Constitution must be held
to be sine qua non. Thus, affirmative action in essence and spirit involves
classification of People as backward class of citizens and those who are not
backward class of citizens. A group of persons although are not as such B
backward or have by passage of time ceased to be backward would come within
the purview of the creamy layer doctrine evolved by this Court. The court by
evolving said doctrine intended to lay a law that in terms of our constitutional
scheme no groups of persons should be held to be more equal than the other
group. This Court rationalized the creamy layer rule as necessary between
the competing ends of caste based reservations and the principle of secularism.
c
This Court, thus, has categorically laid down the law that determination of
creamy layer is a part of the constitutional scheme.
[Paras 44, 48, 491 [175-G-H; 176-A-B-C; 179-C-E)

Indra Sawhney & Ors. v. Union of India & Ors., [19921 Supp. 3 SCC D
217, followed.

Indra Sawhney v. Union of India & Ors., [2000) I SCC 168, Ashoka
-I
Kumar Thakur v. State of Bihar & Ors., (1995) 5 SCC 403, Secretary, State of
~
Karnataka & Ors. v. Umadevi (3) & Ors., [20(16) 4 SCC I and M Nagaraj
and Ors. v. Union ofIndia and Ors., [2006[ 8 SCC 212, relied on. E
T.MA. Pai Foundation v. State of Karnataka, (2002) 8 SCC 481, Islamic
Academy of Education v. State of Karnataka, [2003) 6 SCC 697 and P.A.
lnamdar v. State of Maharashtra, (2005) 6 SCC 537, referred to.

7. Interpretation and application of constitutional law particularly, in F
regard to the equality clause contained in Articles 14 to Article 16 of the
_, Constitution, have never been limited by this Court. If a measure tends to
perpetuate inequality and makes the goel of equality a mirage, such measure
should not receive the approval of the Court. Directions have been issued by
this Court in a number of cases where the question involves greater public
interest or public good, including enforcement of fundamental rights. The
G
Court never hesitates to express its opinion on the interpretation of the
Constitution despite political thicket. (Para 511 (180-A, Bl
~ ....1
Islamic Academy ofEducation v. State of Karnataka, [2003) 6 SCC 697,
Ani/ Kum'ar Jha v. Union of India & Ors., 120051 3 SCC 150, Rameshwar H
156 SUPREME COURT REPORTS [2007) 3 S.C.R.

A Prasad (JV) & Ors. v. Union of India & Anr., (2005] 7 SCC 157, WB. Freedom
fighters' Organisation v. Union of India, (2004) 7 SCC 716 and Bombay
Dyeing & Mfg. Co. Ltd v. Bombay Environmental Action Group & Ors., (2006)
3 sec 434, referred to.
-
8. While setting aside the report of the Narendran Commission, the
B State is directed to appoint a fresh Commission who should go into all these
aspects of the matter and submit its report. [Para 56) (181-B)

CIVIL ORIGINAL JURISDICTION: Writ Petitiom (Civil) No. 598 of2002.

(Under Article 32 of the Constitution of India)
c WITH

Contempt Petition (Civil) No. 108 of2000.
And
Contempt Petition (Civil) No. I09 of 2000.
D
WITH
Suo Motu Contempt petition (Civil) No ..... 2006.

In writ Petition (Civil) No. 930of1990.

E K.K. Venugopal, Krishnan Venugopal, Prasad Vijay Kumar, Haripriya,
K.V. Balakrishnan, K.V. Mohan, and T. Raja for the Petitioner and Indra
Sawhney, Petitioner-In-Person (NP).

Addi. Advocate General Beeran, T.L.V. Iyer, L. Nageswara Rao, K.R.
Sasiprabhu, M.K. Sreegesh, Roy Abraham, Seema Jain, Himinder Lal, S. Uday
F Kumar Sagar, E.M.S. Anam, Lily Isabel Thomas and Arvind Kumar Sharma for
the Respondent.

The Judgment of the Court was delivered by

S.B. SINHA, J. I. In these petitions, interpretation of this Court's
G judgment as regards identification of 'creamy layer' amongst the backward
classes and their exclusion from the purview of reservation, vis-a-vis, the
report of Justice K.K. Narendran Commission (hereinafter referred to as
'Narendran Commission') and acceptance thereof by the State of Kerala in
issuing the impugned notification dated 27.5.2000, falls for our consideration
H in this writ petition by the Nair Service Society ('the Society'), a Society which
NAIR SERVICE SOCIETYv. STATE OF KERALA [S.B. SINHA, J.] 157

was initially registered under Section 26 of the Travancore Companies Act, A
..., ~' 1914 and after coming into force the Companies Act, 1956, it would be deemed
to have been registered under Section 25 thereof. The objects of the Society
are said to be :

(i) to remove the difference prevailing from places to places amongst
Nairs in their social customs and usages as well as the unhealthy B
practices prevalent among them;

(ii) to participate in the efforts of other communities for the betterment
of their lot and to maintain and foster communal amity;

(iii) to work for the uplift of the depressed classes; c
(iv) to start and maintain such institutions as are found necessary to
promote the objects of the society.

2. It is not in dispute that it had filed a writ petition before the Kerala
High Court questioning the validity of the report commonly known as Manda! D
Commission Report. The writ petition was later on transferred to this Court.
It also took part in the proceedings before Narendran Commission. Manda!
Commission Report was accepted by Union of India.

3. A writ petition was filed before this Court, questioning the said action
on the part of the Union of India by one Indra Sawhney. This Court, in its E
judgment in Indra Sawhney & Ors. v. Union of India & Ors., [19921 Supp.
3 SCC 217 (hereinafter referred to as 'Indra Sawhney-1'), inter alia, directed the
States to identify 'creamy layer' amongst the backward classes and exclude
them from the purview of reservation.

4. Indisputably, pursuant to or in furtherance of the said directions, the F
Union of India appointed a Commission. It issued an Office Memorandum
being dated September 8, 1993 laying down guidelines for identifying 'creamy
layer', inter alia, stipulating that the sons and daughters of persons having
gross annual income of Rs. I lakh or above would be excluded.

5. The State of Kerala, it is not in dispute, did not comply with the said G
direction of this Court.
·i
6. At this juncture, it may be noticed that the constitutional validity of
the criteria for determining the 'creamy layer' for the purpose of exclusion from
backward classes laid down by the States of Bihar and Uttar Pradesh came H
158 SUPREME COURT REPORTS (2007] 3 S.C.R .

. A up for consideration before this Court in Ashoka Kumar Thakur v. State of
Bihar & Ors., [1995) 5 SCC 403. This Court held that having regard to the
observations made in Indra Sawhney-I, the said criteria were ultra vires
stating :

"This Court in Manda! case Indra Sawhney v. Union of India, [1992)
B Supp.3 SCC 217 has clearly and authoritatively laid down that the
affluent part of a backward class called "creamy layer" has to be
excluded from the said class and the benefit of Article 16(4) can only
be given to the 'class' which remains after the exclusion of the "creamy
layer". The backward class under Article 16(4) means the class which
has no element of "creamy layer" in it. It is mandatory under Article
c 16(4) - as interpreted by this Court - that the State must identify the
"creamy layer" in a backward class and thereafter by excluding the
"creamy layer" extend the benefit of reservation to the 'class' which
remains after such exclusion. This Court has laid down, clear and easy
to follow, guidelines for the identification of "creamy layer". The
D States of Bihar and Uttar Pradesh have acted wholly arbitrary and in
utter violation of the law laid down by this Court in Manda! case ... "

7. By an order dated 10th July, 1995, this Court, while holding the State ..
of Kerala to be guilty of contempt of this Court, gave it two month's time to
purge the same and report its compliance. The Chief Secretary of the State,
E pursuant to said order appeared before this Court.
8. In its order dated 10th July, 1995, this Court, in Indra Sawhney v.
Union of India & Ors., reported in [1995) 5 SCC 429, observed :

"We are, therefore, of the opinion that this is a case for taking action
F in contempt. We hold the respondent guilty of contempt. However, in
order to give the respondent an opportunity to purge the contempt
before \Xe pass the sentence, we adjourn the matter by two months
to enable the State Government to report compliance before 11-9-1995,
failing which this Court will proceed to pass appropriate orders in
respect of the contempt. The Chief Secretary will remain present at the
·G next date of hearing i.e. on 11-9-1995 to inform this Court whether or
not the order has been complied with. If not, he runs the risk of being
sentenced. Let the !As Nos. 35 and 36 come up on 11-9-1995."

9. The legislature of the State of Kerala thereafter enacted the Kerala
H State Backward Classes (Reservation of Appointments or Posts in the Services
NAIR SERVICE SOCIETY v. ST ATE OF KERALA [S.B. SINHA,J.] J59

Under the State) Act, 1995 ('the State Act'), in terms whereof it was declared A
that there was no socially advanced section in the State. Section 4 of the
State Act contemplates that nothing contained in the law or in any judgment,
decree or order of any Court or any other authority, the reservation, which
had been in operation since 1958, shall continue to operate. The Society filed
a writ petition before the Kerala High Court questioning the validity of the B
State Act. This Court admittedly passed an order dated 4.11.1996 requesting
the Chief Justice of the Kerala High Court to appoint a High Powered Committee
to determine the criteria for identification of 'creamy layer'.

10. Pursuant to the directions of the Chief Justice of Kerala High Court,
a Committee headed by Justice K.J. Joseph (hereinafter referred to as 'the C
Joseph Committee') was constituted. The Committee submitted its report on
4.8.1997. Objections to the said report were filed before this Court. By
judgment and order dated 13.12.1999 in Indra Sawhney v. Union of India &
Ors., since reported in (2000] I SCC 168 (hereinafter referred to as 'Indra
Sawhney-II~, this Court, while holding the provisions of Sections 3, 4 and 6
of the State Act to be unconstitutional, upon consideration of the objections D
to the report of the Joseph Committee, accepted the same in toto, subject to
certain additions of communities and sub-castes, in the following terms:
_)

"In the result, we accept the Justice Joseph Committee Report in toto
subject to the addition of communities and sub-castes as pointed out
in the affidavit of the State dated 16-1-1998, referred to above." E
1I. The Court furthermore noticed the contemptuous acts on the part
of the authorities of State of Kerala and held that they had deliberately been
violating the orders of this Court. Some strictures were also passed against
the State Government. It was directed that the recommendations of the
Joseph Committee should be implemented forthwith until such time the State F
comes up with its own criteria for determining 'creamy layer'. It further
directed that the suo motu contempt previously initiated by the Court would
be kept pending and the State should purge its contempt only by complying
with the directions contained in Indra Sawhney-Il.
G
12. The recommendations made by the Joseph Committee in its report,
.
.,\ however, were not implemented forthwith in terms of the directions of this
Court. The State, on the other hand, appointed another Commission headed
by Justice K.K. Narendran. The terms of reference for the said Commission
were as under:
H
160 SUPREME COURT REPORTS [2007] 3 S.C.R.

A "(a) What should by the criteria to be adopted to exclude those
~
belong to the creamy layer among Other Backward Classes from
the benefits of reservation in accordance with the observations
in the judgment of the Supreme Court or what criteria should be
adopted to provide maximum protection to those belonging to
such communities in accordance with the above mentioned
B judgment.
(b) Whether there is any class which may be excluded from the
creamy layer on the basis of hereditary occupation or otherwise. _,,_

(c) (i) Whether there should be different criteria regarding income/
c property for different categories coming within the creamy layer.
(ii) If so, what should be the ceiling for such income/property.
(iia) While calculating the income, whether it is necessary to
exclude income from any particular source or sources.
(iii) While making its recommendations, the Commission will take
D
into account the existing socio-economic conditions and the
special features of the Other Backward Classes in the State.
(iv) The Commission should submit its report to Government
within one month. f

E (v) The Officer of the Commission will be at Thiruvananthapuram
and its Headquarters at Emakulam.
(vi) The Commission will have the salary, allowances and other
perquisites as admissible to a sitting Judge of the High Court."

F 13. The Commission submitted an interim report. Its request seeking
extension of time was accepted. At the instance of the petitioner-Society the
Commission, however, in its interim report directed the State to implement the
report of the Joseph Committee. The Committee sought for certain records
of 9.2.2000. On 16.2.2000 the State issued fresh guidelines for identifying
creamy layer in accordance with the Joseph Committee report. The Commission
G submitted its final report on 11.4.2000. In this writ petition filed by the
Society, the validity of the said notification is in question.
'r
I -
14. Mr. Krishan Venugopal, learned counsel appearing on behalf of the
petitioner would submit that the State in accepting the said report violated
the underlying principles contained in the judgments of this Court in Indra
H
NAIR SERVICE SOCIETY v. STATE OF KERALA [S.B. SINHA, J.] 161
Sawhney-1 & II (supra) as also in Ashoka Kumar Thakur (supra). According A
to the learned counsel, therein this Court emphasized the requirements to
exclude those categories, which ceased to be backward classes so as to
obtain the benefit of reservation. Attempt in the said report was to include
more and more people thereunder. It would be evident from the fact, argued
Mr. Venugopal, that even by the terms of reference alone the Commission has
been directed to give more than the maximum protection otherwise available B
to them. It was furthermore submitted that whereas those who continue
hereditary occupations had been sought to be protected, the State made an
.... attempt to modify the same by bringing in those categories of persons whose
fore-fathers were carrying on such occupations regardless of the foct as to
what occupations they have been carrying out now. C
15. Mr. T.L.V. Iyer, learned senior counsel appearing on behalf of the
State of_ Kerala, on the other hand, would submit that the Society represents
the members of the forward classes and even if the recommendations of the
Narendran Commission are set aside, the same would not make much difference
as the rights of the members of the Society would not be affected. It was D
submitted that the society is not in any way concerned with the correctness
or otherwise of the report submitted by Narendran Commission or the order
issued by the State on 27.5.2000 inasmuch as it is not the case of the
petitioner-Society that their members would become entitled to the benefit of
reservation in terms of Article 16(4) of the Constitution of India.
E
16. Our attention has been drawn to the notification dated 12.6.2000
wherein guidelines were issued, which, inter alia, are on the following terms:

7. The rule of exclusion made mention in the schedule attached to
these guidelines will not apply to persons working as artisans or F
engaged in hereditary occupations, calling and included in Annexure
'B' appended herewith and person/group of persons coming within the
definition of the expression "Fishermen Community" in Annexure C
appended to these guidelines."

17. It was submitted that such guidelines have been issued by the G
Central Government as would appear from the office memorandum issued by
the Government of India, as was noticed in Ashoka Kumar Thakur v. State
...
I of Bihar & Ors., [1995] 5 sec 403 which is on the same terms.

18. Our attention was further drawn to Annexure B to the said guidelines
wherein seven categories of hereditary occupations/calling, which had been H
162 SUPREME COURT REPORTS [2007) 3 S.C.R.

A excluded from the category of 'creamy layer', have been identified. It was
urged that it would not be correct to contend that even where the persons
concerned have left their hereditary occupation, still they would be entitled
to the benefit of the reservation inasmuch as such benefit is to be granted
so long as they are engaged in such occupations. As regards the quantum
B of income, it was submitted that limit thereof is not static and even in Ashoka
Kumar Thakur (supra), this Court pointed out that the income criteria in terms
of the report was required to be modified taking into account the change of
per capita annual income and having regard to report of the Narendran
Commission constituted in the year 2003. Recommendations of the Narendran
Commission in regard to the annual income being Rs. 3 lakhs, thus, Mr. Iyer
C submitted, should not be interfered with. While excluding salary and agricultural
income, it was contended, that the Central Government office memorandum
had been taken into consideration, which would apply only to people falling
in category YI. It was furthermore submitted that as regards gross annual
income, reasons have been assigned by the Commission. The learned counsel
would contend that this Court should not interfere with the policy decision
D of the Government and it is presumed to be aware of the requirements of the
people and having regard to the change in social and economic conditions
of people in each State, no accurate assessment is possible. It was urged that
for the purpose of consideration of the criteria in regard to the persons who
should be included in the group of creamy layer, the question which is J

E required to be posed and answered is as to whether they have reached the
status of the people belonging to the general category. It was argued that
jurisdiction of the court ir this behalf is to find out if there is any evidence
in the matter and if there is some evidence, ii may not exercise its jurisdiction ..
Furthermore, the State had made changes only in regard to occupation and
merely added one community in Schedule B, i.e., Kudumbi community. Mr.
F L. Nageshwara Rao, learned senior counsel appearing on behalf of the
impleaded party would adopt the submissions of Mr. Iyer and furthermore
submit that the reference is not bad in law warranting interference by this
Court.

19. It stands admitted that the income limit in terms of the Joseph
G Committee Report, which was published in the year 1996, was Rs.1.5 lakhs;
whereas the same according to the Narendran Commission Report, which was
published in the year 2000, should be raised to Rs.3 lakhs. In the year 2004 r
the Central Government opined that the income limit should be fixed at Rs.2.5
lakhs. The Commission received a vast majority of representations, including
H one from the petitioner-Society. The purport and object of the said report
NAIR SERVICESOCIETYv. STATEOFKERALA [S.B. SINHA,J.] 163

- sought for is stated in paragraph I0.4 thereof. According to the Commission,
the only question was as to what criteria should be adopted for identifying
the 'creamy layer'. It criticized the Joseph Committee Report in paragraph 11.3
of its Report observing that the former did not assign any reason nor was
A

there any justification for making the provision stricter in the matter of
exclusion from 'creamy layer' of backward classes.
B
20. It also advocated the change of age from 40 to 35. Although, it
noticed that a few representations have been submitted by the forward classes,
the same have not been dealt with at all. While identifying the backward
classes in several categories, i.e. category Nos. I, II, III, V and VA, the
exclusion was recorded only on the basis of status and not on the basis of C
annual income. However, in addition to category No. VI it was stated that in
calculating the annual income, the salary income or income from agriculture
would not be taken into account. No reason, however, has been assigned
as to why salary income or income from agriculture would not be included
for determining the category of 'creamy layer'. The intention of the State
Government as revealed from the terms of reference, i.e., "giving maximum D
protection" has been taken note of in paragraph 15.1 of the report. The
Committee recommended:

"I. Term (b) of the terms ofreference:

Only persons of a backward class traditionally engaged in the hereditary E
occupation of that backward class will be excluded from Creamy Layer.
There will not be any endblock exclusion of any backward class on
the basis of the hereditary occupation of that backward class.
2. Terms of reference (a) & (c) of the terms of reference :

The gross annual income for exclusion of backward classes as creamy F
layer is fixed as Rs.3 lakhs or above. The scheme of criteria for
exclusion as creamy layer is that under categories I,11,Ill and VA, the
exclusion is on the basis of status and not in terms of gross annual
income. In the case of a category for which the gross annual income
as mentioned in category VI is the criterion income from salary or G
income from agricultural holdings should not be taken into account.

On the ground of social backwardness persons traditionally engaged
i_n the hereditary occupation of all backward classes are excluded from
Creamy layer.

On the ground of educational backwardness, all backward classes H
164 SUPREME COURT REPORTS (2007] 3 S.C.R.

A who have not successfully completed Lower Primary education are
excluded from Creamy layer.

Recruitments to all posts where the salary is paid from the consolidated
fund of the State will be governed by the Principles of reservation for
backward classes.
B
When there are persons, in the rank list or supplementary list waiting
for appointment nobody temporarily recruited should be allowed to
continue to work.

Clear instructions regarding the criteria for exclusion of Creamy Layer
C should be issued to the Revenue Authorities. At any rate a Creamy
Layer certificate will have to be issued or refused within ten days of
the receipt of application for the same."

21. The State, as indicated hereinbefore, by and large accepted the said
report and issued a Government. order dated 27.5.2000. However, the
D recommendations had not been accepted in toto, but certain modifications
have been made therein. It is in the aforementioned context the correctness
of the report of the Narendran Commission is required to be considered.

22. At the outset, we may mention that it is not possible for us to
dismiss the writ petition summarily on the ground of lack of locus standi on
E the part of the petitioners. It is not disputed that in terms of Kerala State and
Subordinate Services Rules, 1958, although, reservation for backward classes
under the scheme is to be carried out in the following years, even if thereafter
no backward candidates are available, such posts are left unfilled. Ultimately,
the selection would be made on merit. Furthermore, the writ petition has been
F filed in public interest. As noticed hereinbefore, the petitioner-Society has
raised this question again and again and had been taking part in the
proceedings before the Narendran Commission. In any view of the matter,
when the question of such grave importance has been brought to the notice
of this Court, having regard to the principle underlying the purport and object
for which the 'creamy layer' was sought to be excluded, this Court cannot shut
G its eyes and refuse to determine the question.
23. It is not in dispute that the Central Government had issued an office
memorandum on 9.3.2004. It is furthennore not in dispute that Joseph Committee
in its report included the income from agricultural income and salary, whereas
in Narendran Commission it excluded the same. It is furthermore not in
H dispute that before this Court the State of Kerala did not raise any objection
NAIR SERVICESOCIETYv. STATE OF KERALA [S.B. SINHA, J.) 165

- thereto.

24. The concept of identification of 'creamy layer' came up for
consideration in Indra Sawhney-1 and this Court has issued certain directions
A

in this behalf. Criteria were adopted by the States so as to avoid implementation
of this Court's judgments and thus in Ashoka Kumar Thakur (supra), the
criteria laid down by the State of Bihar and U.P. have been struck down by B
this Court being violative of Articles I4 and I6(4) of the Constitution of India.
The State of Kerala did not follow the said direction as a result whereof it was
_..._ found to be guilty of contempt of this Court. A stem action thereupon was
proposed to be taken up against the State of Kerala in view of its contemptuous
conduct, as is evident from the order of this Court in Indra Sawhney v. Union C
of India & Ors., reported in [1995] 5 SCC 429. It was in the afore-mentioned
backdrop, the legislation passed by the legislature of Kerala was not only
struck down during the pendency of the proceedings by this Court, a Committee
was also directed to be constituted. We have noticed hereinbefore that the
recommendations of the Joseph Committee were accepted in toto. We have
furthermore noticed that the State, without any demur, accepted the D
recommendations thereof with modification by addition of one caste or sub-
caste. It is, therefore, difficult for us to appreciate as to on what basis
Narendran Commission was appointed.

25. It is, furthermore, difficult for us to comprehend as to on what basis,
while appointing Narendran Commission, in the terms of reference, the State E
of Kerala could say that the maximum benefit should be given to a particular
section of people. In view of the decision of this Court in Rama Krishna
Dalmia & Ors. v. Shri Justice S.R. Tendolkar & Ors., [1959] SCR 279, it is
no longer res integra that the terms of reference while appointing a commission
may be subject to judicial review. We may also notice the following F
observations made in Indra Sawhney-1:

" ... The very concept of a class denotes a number of persons having
certain common traits which distinguish them from the others. In a
backward class under clause (4) of Article 16, if the connecting link
is the social backwardness, it should broadly be the same in a given G
class. If some of the members are far too advanced socially (which
in the context, necessarily means economically and, may also mean
educationally) the connecting thread between them and the remaining
class snaps. They would be misfits in the class. After excluding them
alone, would the class be a compact class ... " .
H
166 SUPREME COURT REPORTS (2007] 3 S.C.R.

A 26. The observations aforementioned are not to be read in isolation. For
the purpose of construing a judgment, it is well-known that the same must
be read in its entirety. The validity of the terms of reference of the Narendran
Commission and the report submitted by it would, thus, fall for our
consideration not only on the anvil of the aforementioned observations of
-
B this Court but also on reading the judgment in its entirety as also the criteria
laid down in the subsequent judgments. The judg111ent of this Court in Indra
Sawhney-1 clearly lays down that what is necessary is identification of a class
which had never been backward or ceased to be backward during the passage
of time, but it would give rise to a question as to whether in making such
identification the class should be equated with other socially and economically
C forward classes. The Central Government or the State Government, evidently,
had not laid down any criteria from that angle. It is, however, beyond any
cavil of doubt that Indra Sawhney-1 categorically states that identification of
such a class should be done on a realistic basis.

27. Maximum protection to the backward classes, in our opinion, was
D not contemplated in Indra Sawhney - /, Only because observations to the
following effect had been made therein:

"while drawing the line, it should be ensured that it does not result in .._
taking away with one hand what is given by the other" !

E 28. It is also relevant to notice that in Indra Sawhney-1 this Court
directed both the Central Government as also the States that where 1 servation
in favour of all the backward classes was already in operation, they should
evolve a suitable criteria within a period of six months and apply the same
to the socially advanced persons/sections from the designated other backward
F classes. This Court did not say that maximum protection was to be granted
to the backward classes.

29. It was expected that the endeavour of the State should have been
to evolve a criterion in tune with the underlying constitutional scheme that
the protection is required to be given only to those who remain socially and
G educationally backward and not to those who have ceased to be. Those who
are no longer members of the socially and educationally backward class are
not to be permitted to obtain the benefit of the reservation. Thus, while >
I -
laying down the criteria, the State was required to give effect to the underlying
principles envisaged in the constitutional scheme as interpreted in Indra
Sawhney-1.
H
NAIR SERVICE SOCIETYv. STATE OFKERALA [S.B. SINHA, J.] 167

..., 30. It would be useful to notice a converse case which came up for A
consideration before a Constitution Bench of this Court in E. V. Chinnaiah
etc. v. State of A.P. & Ors., [2005] 1 SCC 394. The question therein was as
to whether in view of the provisions of Article 341 of the Constitution oflndia
and the Constitution (Scheduled Castes) Order, 1950, it was permissible in law
to identify groups amongst Scheduled Castes which itself constitutes a group
within the meaning thereof. This Court negatived such a classification holding: B

" ... It is also difficult to agree with the High Court that for the purpose
of identifying backwardness, a further inquiry can be made by
appointing a commission as to who amongst the members of the
Scheduled Castes is more backward. If benefits of reservation are not
percolating to them equitably, measures should be taken to see that
c
they are given such adequate or additional training so as to enable

- them to compete with the others but the same would not mean that
in the process of rationalising the reservation to the Scheduled Castes
the constitutional mandate of Articles 14, 15 and 16 could be violated."

Therein, noticing Indra Sawhney-1, it was observed:
D

_,. "Jeevan Reddy, J. incidentally who wrote the majority judgment
in Indra Sawhney made a reference to his judgment in V. Narayana
.>:
Rao v. State of A.P wherein the learned Judge opined: (AIR pp.95-96,
para 94) E
"94 .... Article 15(4) or Article 16(4) are not designed to achieve
abolition of caste system much less to remove the meanness or other
evils in the society. They are designed to provide opportunities in
education, services and other fields to raise the educational, social
and economic levels of those lagging behind, and once this is achieved, F
_. these articles must be deemed to have served their purpose. If so,
' excluding those who have already attained such economic well-being
(interlinked as it is with social and educational advancement) from the
special benefits provided under these clauses cannot be called
unreasonable or discriminatory or arbitrary much less contrary to the
intention of the Founding Fathers. It can be reasonably presumed that G
these people have ceased to be socially if not educationally backward
- "' and hence do not require the preferential treatment contemplated by
Articles 15(4) and 16(4). Moreover, in the face of the repeated
pronouncements of the Supreme Court referred to above, these
arguments cannot be countenanced. Not only it does not amount to H
168 SUPREME COURT REPORTS [2007] 3 S.C.R.

A creating a class within a class, it is a proper delineation of classes."
Those observations were confined to backward classes and not SCs
and STs. The learned Judge in Indra Sawhney also stuck to the said
view.

The impugned Act as also the judgment of the High Court are
B premised on the observations in Indra Sawhney that there is no
constitutional or legal bar for a State in categorising the backward
classes as backward and more backward class. This Court,
however, while referring to Article 16(4) of the Constitution stated
that it recognised only one class viz. backward class of citizens
in the following terms: (SCC p. 716, para 781)
c
"781. At the outset, we may state that for the purpose of this
discussion, we keep aside the Scheduled Tribes and Scheduled
Castes (since they are admittedly included within the backward
classes), except to remark that backward classes contemplated by
Article 16(4) do comprise some castes - for it cannot be denied
D that Scheduled Castes include quite a few castes."

31. It is trite that those, who have reached the status of general category,
cannot be permitted to defeat the purport and object of the concept of 'creamy
layer' as the idea of creamy layer was conceptualized on that philosophy. It
E is also trite that the State can also lay down a legislative policy as regards
the extent of reservation to be made for different members of the backward
class, provided they remain as such.

32. Even legislations based on equity must answer the tests of the
equality clauses contained in Articles 14 and 16 of the Constitution of India.
F Article 14 of the Constitution of India enjoins upon the State not to deny to
any person 'equality before law' or 'equal protection of laws' within the
territory of India. The two expressions although do not lead to the same
conclusion, we may notice that Section I of the XIV Amendment to the U.S.
Constitution uses only the latter expression whereas the Irish Constitution
(1937) and the West German Constitution (1949) use the expression "equal
G before law" alone. Both these expressions are used together in the Universal
Declaration of Human Rights, 1948, Article 7 whereof says "All are equal
before the law and are entitled without any discrimination to equal protection
of the law." The said expressions are of great significance. Equality before
law is a dynamic concept having many facets. Despite Article 38 of the
H Constitution of India, the courts are bound to interpret a law which seeks to
NAIR SERVICE SOCIETY,._ STATE OF KER./\LA [S.B. SINHA, .1.J l 69
achieve the said purpose not only on the anvil of the Articles 14 and 16 but A
also having regard to the international law. We, however, do not mean to say
that international law shall ipso facto be applied for interpretation of our
domestic laws but then relevance thereof, we reiterate, in a grey area, cannot
be lost sight of.

33. It was, thus, imperative on the part of the State to evolve such B
guidelines which would be commensurate with the following observations of
this Court in Ashoka Kumar Thakur's case (supra) :

" .. .It is difficult to accept that in India where the per capita national
income is Rs.6929 ( 1993-94), a person who is a member of the IAS and C
a professional who is earning less than Rs. I 0 lakhs per annum is
socially and educationally backward. We are of the view that the
criteria laid down by the States of Bihar and Uttar Pradesh for
identifying the "creamy layer" on the face of it is arbitrary and has
to be rejected."

34. The terms of reference in the afore-mentioned premise, in our
D
considered opinion, should be held to be bad in law.

35. We have noticed hereinbefore that in the impugned Government
Order, categories of persons to whom the rule of inclusion would apply on
the basis that they form part of the 'creamy layer' among the backward E
classes, are said to be as under:

Category I: Sons and daughters of persons holding constitutional posts
Constitutional such as President, Vice President, Judges of the Supreme
Posts Court and the High Courts, Chairman and Members of
UPSC, State Public Service Commissions, etc. F
Category II: Sons and daughters of parents, either or both of whom are
Service Class I officers (e.g., IAS officers) or Class II officers or
Category officers of public sector undertakings subject to certain
exceptions including cases where one or both of the parents
die or suffer permanent incapacity. G
Category III: Sons and daughters of parents in the rank of Colonel or
Armed or equivalent in the Army, Navy, Air Force, Paramilitary Forces,
Paramilitary again subject to certain exceptions.
Forces
H
170 SUPREME COURT REPORTS [2007] 3 S.C.R.

A Category IV: Subject to the income limit specified in Category VI:
Professionals Includes doctors, lawyers, chartered accountants, etc.,
& those as well as those engaged in trade, business and industry.
engaged in
Trade and
Industry
B
Category V: Includes agricultural holdings, plantations and vacant land
Property and/or buildings in urban areas. In the case of plantations
Owners and urban areas. In the case of plantations and urban land,
the income limit specified in Category VI will apply.
c Category VI: Sons and daughters of persons having gross annual income
Income/Wealth over Rs. I lakh or possessing wealth above the exemption
test limit as prescribed in the Wealth Tax Act.

36. Categories I, II and III afore-mentioned are excluded on the basis of
D the status held .by the persons concerned. Category IV is subject to the
income limit specified in Category VI. We may, at this stage, however, state
that we do not find any merit in the submission of Mr Venugopal that
bringing down the age limit from 40 to 35, vis-a-vis, the Office MemoranJum
issued by the Central Government fixing age limit as 40 is bad in law in view
of the fact that age of superannuation of the employees in the State of Kerala
E is 55, as compared to the age of superannuation of the Central Government
employee is 60.

37. So far as the income/wealth test is concerned, the same has been
considered in Indra Sawhney-II. We would refer to the findings of this Court
a little later, but indisputably, it is of some importance. In the Joseph Committee
F report the actual increases in the Consumer Price Index was considered in a
scientific manner and it was noticed from the "Economic Review 1996" published
by the Government that the Central Government has specified the income limit
in its Offo:e Memorandum from Rs. l lakh in 1993 to Rs.I.SO lakhs in 1997. We
have hereinbefore noticed how Narendran Commission sat in appeal over the
G Joseph Committee report despite the fact that the same has been accepted in
toto by this Court. It did not assign any reason to justify its stand as to on
what basis the income limit of Rs.1.5 lakhs fixed by the Joseph Committee in
1997 was doubled to Rs.3 lakhs within a period of three years; particularly,
in view of the fact that even the Central Government, having regard to the
rate of inflation prevailing throughout the country in 2004, came to the
H
NAIRSERVICESOCIETYv. STATEOFKERALA [S.B. SINHA. .J.] 171

conclusion that the income limit should be raised upto 2.5 lakhs. A
38. In Indra Sawhney-1, while applying the "means-test" and "creamy-
layer test", it was opined:

"'Means-test' in this discussion signifies imposition of an income
limit, for the purpose of excluding persons (from the bacKward class) B
whose income is above the said limit. This submission is very often
referred to as the "creamy layer" argument. Petitioners submit that
... some members of the designated backward classes are highly advanced
socially as well as economically and educationally. It is submitted that
they constitute the forward section of that particular backward class
- as forward as any other forward class member - and that they are c
lapping up all the benefits of reservations meant for that class, without
allowing the benefits to reach the truly backward members of that
class. These persons are by no means backward and with them a class
cannot be treated as backward. It is pointed out that since Jayasree
[K.S. Jayasree v. State of Kera/a, [ 1976] 3 SCC 730] almost every D
decision has accepted the validity of this submission.

_. On the other hand, the learned counsel for the States of Bihar,
Tamil Nadu, Kerala ar.d other counsel for respondents strongly
oppose any such distinction. It is submitted that once a class is
identified as a backward class after applying the relevant criteria E
including the economic one, it is not permissible to apply the
economic criteria once again and sub-divide a backward class
into two sub-categories. Counsel for the State of Tamil Nadu
submitted further that at one stage (in July 1979) the State of
Tamil Nadu did indeed prescribe such an income limit but had to
delete it in view of the practical difficulties encountered and also F
__ ., in view of the representations received. In this behalf, the learned
counsel invited our attention to Chapter 7-H (pages 60 to 62) of
the Ambashankar Commission (Tamil Nadu Second Backward
Classes Commission) Report. According to the respondents the
argument of 'creamy layer' is but a mere ruse, a trick, to deprive G
the backward classes of the benefit of reservations. It is submitted
,..
. that no member of backward class has come forward with this
plea and that it ill becomes the members of forward classes to
raise this point."

Referring to K.C. Vasanth Kumar v. State of Karnataka, [1985] Supp. H
172 SUPREME COURT REPORTS [2007] 3 S.C.R.

A sec 714, it was opined :
,•,
"In our opinion, it is not a question of permissibility or desirability
of such test but one of proper and more appropriate identification of
a class - a backward class. lhe very concept of a class denotes a
number of persons having certain common traits which distinguish
B them from the others. In a backward class under clause (4) of Article
16, ifthe connecting link is the social backwardness, it should broadly
be the same in a given class. If some of the members are far too
advanced socially (which in the context, necessarily means economically
....._
and, may also mean educationally) the connecting thread between
them and the remaining class snaps. They would be misfits in the
c class. After excluding them alone, would the class be a compact class.
In fact, such exclusion benefits the truly backward. Difficulty, however,
really lies in drawing the line - how and where to draw the line? For,
while drawing th<: line, it should be ensured that it does not result in
taking away with one hand what is given by the other. The basis of
D exclusion should not merely be economic, unless, of course, the
economic advancement is so high that it necessarily means social
advancement. Let us illustrate the point. A member of backward class,
say a member of carpenter caste, goes to Middle East and works there ..__
as a carpenter. If you take his annual income in rupees, it would be
fairly high from the Indian standard. ls he to be excluded from the
E Backward Class? Are his children in India to be deprived of the
benefit of Article 16(4)? Situation may, however, be different, if he
rises so high economically as to become - say a factory owner himself. ...
In such a situation, his social status also rises. He himself would be
in a position to provide employment to others. In such a case, his
F income is merely a measure of his social status. Even otherwise there
are several practical difficulties too in imposing an income ceiling. For
example, annual income of Rs. 36,000 may not count for much in a city )'·

like Bombay, Delhi or Calcutta whereas it may be a handsome income
in rural India anywhere. The line to be drawn must be a realistic one.
Another question would be, should such a line be uniform for the
G entire country or a given State or should it differ from rural to urban
areas and so on. Further, income from agriculture may be difficult to
assess and, therefore, in the case of agriculturists, the line may have ...
I .
to be drawn with reference to the extent of holding. While the income
of a person can be taken as a measure of his social advancement, the
H limit to be prescribed should not be such as to result in taking away
NAIR SERVICE SOCIETY v. STATE OF KERALA [S.B. SINHA, J.) 173

with one hand what is given with the other. The income limit must be A
such as to mean and signify social advancement. At the same time,
it must be recognised that there are certain positions, the occupants
of which can be treated as socially advanced without any further
enquiry. For example, if a member of a designated backward class
becomes a member of IAS or IPS or any other All India Service, his B
status is society (social status) rises; he is no longer socially
disadvantaged. His children get full opportunity to realise their
potential. They are in no way handicapped in the race of life. His
salary is also such that he is above want. It is but logical that in such
a situation, his children are not given the benefit of reservation. For
by giving them the benefit ofreservation, other disadvantaged members C
of that backward class may be deprived of that benefit. It is then
argued for the respondents that 'one swallow doesn't make the summer',
and that merely because a few members of a caste or class become
socially advanced, the class/caste as such does not cease to be
backward. It is pointed out that clause (4) of Article 16 aims at group D
backwardness and not individual backwardness. While we agree that
clause (4) aims at group backwardness, we feel that exclusion of such
socially advanced members will make the 'class' a truly backward class
and would more appropriately serve the purpose and object of clause
(4). (This discussion is confined to Other Backward Classes only and
has no relevance in the case of Scheduled Tribes and Scheduled E
Castes).

Keeping in mind all these considerations, we direct the Government
of India to specify the basis of exclusion - whether on the basis of
income, extent of holding or otherwise - of 'creamy layer'. This shall
be done as early as possible, but not exceeding four months. On such F
specification persons falling within the net of exclusionary rule shall
cease to be the members of the Other Backward Classes (covered by
the expression 'backward class of citizens') for the purpose of Article
16(4). The impugned Office Memorandums dated August 13, 1990 and
September 25, 1991 shall be implemented subject only to such G
specification and exclusion of socially advanced persons from the
backward classes contemplated by the said O.M. In other words, after
the expiry of four months from today, the implementation of the said
.
_ }-
O.M. shall be subject to the exclusion of the 'creamy layer' in accordance
with the criteria to be specified by the Government of India and not
otherwise." H
174 SUPREME COURT REPORTS [2007) 3 S.C.R.

A In Indra Sawhney-11, it was further observed:

"As appears from the judgments of six out of the eight Judges, viz.
Jeevan Reddy (for himself and three others), Sawant and Sahai, JJ. -
(i.e. six learned Judges out of nine), - they specifically refer to those
in higher services like !AS, JPS and All India Services or near about
B as persons who have reached a higher level of social advancement
and economic status and therefore as a matter of law, such persons
are declared not entitled to be treated as backward. They are to be
treated as creamy layer "without further inquiry". Likewise, persons
living in sufficient affluence who are able to provide employ~ent to
others are to be treated as having reached a higher social status on
c account of their affluence, and therefore outside the backward class.
Those holding higher levels of agricultural landholdings or getting
income from property, beyond a limit, have to be excluded from the
backward classes. This, in our opinion, is a Judicial "declaration"
made by this Court."
D
[See also WB. Freedom Fighters' Organisation v. Union of India, [2004) 7
sec 716, at 721(para16))
.39. In Indra Sawhney-ll , "Means test" and "creamy-layer test" were
held to be beyond the domain of the State but evidently in relation to the
E backward classes, the same is applicable.
40. Keeping in view the legal history, as also the directions made by this
Court in a series of judgments referred to hereinbefore, it was obligatory on
the part of the Narendran Commission to consider seriously that aspect of the
matter. In any event the same could not have been ignored.
F
41. While fixing the income limit, although a State is entitled to take into
consideration the level of literacy, the village income, the rise of living index
and other relevant factors into consideration, it should not have accepted a
report of the Committee which did not proceed scientifically, particularly,
G having regard to the constitutional scheme as explained by the Court in the
judgments referred to hereinbefore.

42. We, therefore, do not find any justification for fixing the income limit
--..
at Rs.3 lakhs. We may furthermore place on record our displeasure as to the I

manner in which Joseph Committee report received severe criticism by the
H Narendran Committee, most of which were wholly unwarranted. The tests
NAIRSERVICESOCIETYv. STATEOFKERALA [S.B. SINHA, J.] 175

adopted by the Joseph Committee could not have been given a complete go- A
by the Narendran Commission. The findings of a Commission in respect of
a matter of such grave significance and importance should have been based
on scientific data as also evidence of experts. If Government tends to
consider without adequate data and inquiry, a stage would come when the
whole system ofreservation will become farcical and negation of constitutional B
provisions. Hence, before arriving at the final conclusion, it should have
noticed the rate of inflation and other relevant factors. Economic growth of
a country, as a result of the village income of citizens of India, keep on
changing, although while determining an issue as to whether persons who
have attained economic sufficiency so as not to furthermore describe them
as economically backward, is required to be taken into consideration. C
43. So far as exclusion of salary and agricultural income is concerned,
it is true that the Central Government has accepted the same and the sanction
of the Central Government has also been accepted by this Court, but we
should also notice that the report of the Joseph Committee had also been
accepted by this Court. It is not for us, at this stage, to render our final D
opinion in this matter as to whether preference should be given to Joseph
Committee or Narendran· Commission, but there is no reason as to why a
_, successor committee, without any just and cogent reason, ignored the
recommendations of the former committee.

44. Equality clauses contained in Articles 14, I 5 and I 6 of the E
Constitution of India may in certain situations constitute the heart and soul
of the Constitution oflndia. When a law is patently arbitrary, such infringement
of the equality clause contained in Article 14 or Article 16 would be violative
of the equality clause of the Constitution. {See Waman Rao v. Union of
India, [1981] 2 SCC 362, Maharao Saheb Shri Bhim Singhji, etc. v. Union of p
India & Ors., AIR (1981) SC 234 and Minerva Mills Ltd. & Ors. v. Union of
India & Ors., [1980] 3 SCC 625.} It is interesting to note that in Mithu v. State
ofPunjab AIR (1983) SC 473] Section 303 of the Indian Penal Code was struck
down as unconstitutional invoking the equality clause contained in Article I4
of the Constitution of India. A statute professing division amongst citizens,
subject to Articles 15 and 16 of the Constitution of India may be considered G
to be a suspect legislation. A suspect legislation must pass the test of strict
scrutiny. Articles 15(4) and Article 16(4) profess to bring the socially and
educationally backward people to the forefront. Only for the purpose of
invoking equality clause, the makers of the Constitution thought of protective
discrimination and affirmative action. Such recourse to protective discrimination H
176 SUPREME COURT REPORTS [2007] 3 S.C.R.

A and affirmative action had been thought of to do away with social disparities.
So long as social disparities among groups of people are patent and one class
of citizens in spite of best efforts cannot effectively avail equality of
opportunity due to social and economic handicaps, the policy of affirmative
action must receive the approval of the constitutional courts. For the said
B purpose, however, the conditions precedent laid down therefor in the
Constitution must be held to be sine qua non. Thus, affirmative action in
essence and spirit involves classification of people as backward class of
citizens and those who are not backward class of citizens. A group of
persons although are not as such backward or have by passage of time
ceased to backward would come within the purview of the creamy layer
C doctrine evolved by this court. The court by evolving said doctrine intended
to lay a law that in terms of our constitutional scheme no group of persons
should be held to be more equal than the other group. In relation to the
minorities, a I I-Judge Bench of this Court in T.MA. Pai Foundation v. State
of Karnataka, [2002] 8 SCC 48 I categorically held that protection is required
D to be given to the minority so as to apply the equality clauses to them vis-
a-vis the majority. In Islamic Academy of Education v. State of Karnataka
[2003] 6 sec 697, it was opined that the minority have more rights than the
majority. To the said extent Islamic Academy of Education (supra) was
overruled by a 7-Judge Bench of this Court in P.A. lnamdar v. State of
Maharashtra, [2005] 6 SCC 537. An executive action or a legislative Act
E should be commensurate, in our opinion, with the aforementioned dicta laid
down by this Court in Indra Sawhney-1 (supra) and followed in Ashoka
Kumar Thakur (supra) and Indra Sawhney-11 (supra).

45. In Secretary, State of Karnataka & Ors. v. Umadevi (3) & Ors.,
[2006] 4 SCC I, a Constitution Bench of this Court has stated the law in the
F following terms :

"I I. In addition to the equality clause represented by Article I 4 of the
Constitution, Article I 6 has specifically provided for equality of
opportunity in matters of public employment. Buttressing these
fundamental rights, Article 309 provides that subject to the provisions
G of the Constitution, Acts of the legislature may regulate the recruitment
and conditions of service of persons appointed to public services and
posts in conriection with the affairs of the Union or of a State. In view
of the interpretation placed on Article 12 of the Constitution by this
Court, obviously, these principles also govern the instrumentalities
H that come within the purview of Article I2 of the Constitution. With
NAIR SERVICE SOCIETY v. ST ATE OF KERALA [S.B. SINHA, J.] 177

.. a view to make the procedure for selection fair, the Constitution by A
Article 315 has also created a Public Service Commission for the
Union and the Public Service Commissions for the States. Article 320
deals with the functions of the Public Service Commissions and
mandates consultation with the Commission on all matters relating to
methods of recruitment to civil services and for civil posts and other
related matters. As a part of the affirmative action recognised by B
Article 16 of the Constitution, Article 335 provides for special
consideration in the matter of claims of the members of the Scheduled
-·" Castes and Scheduled Tribes for employment. The States have made
Acts, rules or regulations for implementing the above constitutional
guarantees and any recruitment to the service in the State or in the c
Union is governed by such Acts, rules and regulations. The
Constitution does not envisage any employment outside this
constitutional scheme and without following the requirements set
down therein.

It was furthermore held : D
"43. Thus, it is clear that adherence to the rule of equality in public
employment is a basic feature of our Constitution and since the rule
)- of law is the core of our Constitution, a court would certainly be·
disabled from passing an order upholding a violation of Article 14 or
in ordering the overlooking of the need to comply with the requirements E
of Article 14 read with Article 16 of the Constitution ... "

Yet again it was stated :

" ...The rule oflaw compels the State to make appointments as envisaged
by the Constitution and in the manner we have indicated earlier. In F
most of these cases, no doubt, the employees had worked for some
length of time but this has also been brought about by the pendency
of proceedings in tribunals and courts initiated at the instance of the
employees. Moreover, accepting an argument of this nature would
mean that the State would be permitted to perpetuate an illegality in
the matter of public employment and that would be a negation of the G

-· constitutional scheme adopted by us, the people oflndia. It is therefore
not possible to accept the argument that there must be a direction to
make permanent all the persons employed on daily wages. When the
court is approached for relief by way of a writ, the court has necessarily
to ask itself whether the person before it had any legal right to be H
178 SUPREME COURT REPORTS [2007] 3 S.C.R.

A enforced. Considered in the light of the very clear constitutional
scheme, it cannot be said that the employees have been able to
..
establish a legal right to be made permanent even though they have
never been appointed in terms of the relevant rules or in adherence
of Articles 14 and 16 of the Constitution."

B 46. Recently, a Constitution Bench of this Court in MNagaraj and Ors.
v. Union of India and Ors., (2006] 8 SCC 212 has reaffirmed the importance
of the creamy layer principle in the scheme of equality under the constitution.
This Court held that the creamy layer principle was on of the important limits A..
on state power under the Equality Clause enshrined under Articles 14 and 16
and any violation or dilution of the same would render the state action invalid.
c More precisely this Court held:

"As stated above, the boundaries of the width of the power, namely,
the ceiling-limit of 50% (the numerical benchmark), the principle of
creamy layer, the compelling reasons, namely, backwardness,
D inadequacy of representation and the overall administrative efficiency
are not obliterated by the impugned amendments. At the appropriate
time, we have to consider the law as enacted by various States
providing for reservation if challenged. At that time we have to see
whether limitations on the exercise of power are violated. The State -I
is free to exercise its discretion of providing for reservation subject
E to limitation, namely, that there must exist compelling reasons of
backwardness, inadequacy of representation in a class of post(s)
keeping in mind the overall administrative efficiency. It is made clear
that even if the State has reasons to make reservation, as stated
above, if the impugned law violates any of the above substantive
limits on the width of the power the same would be liable to be set
F
aside."

47. This Court reiterated the limit on state power imposed by the creamy
layer rule and the invalidity of any state action in violation of the same by
concluding as follows:
G "We reiterate that the ceiling-limit of 50%, the concept of creamy layer
and the compelling reasons, namely, backwardness, inadequacy of
representation and overall administrative efficiency are all constitutional 1.- '

requirements without which the structure of equality of opportunity
in Article 16 would collapse. However, in this case, as stated, the main
H issue concerns the "extent of reservation". In this regard the concerned
NAIRSERVICESOCIETYv. STATEOFKERALA[S.B. SINHA,].] 179

State will have to show in each case the existence of the compelling A
reasons, namely, backwardness, inadequacy of representation and
overall administrative efficiency before making provision for reservation.
As stated above, the impugned provision is an enabling provision.
The State is not bound to make reservation for SC/ST in matter of
promotions. However if they wish to exercise their discretion and
make such provision, the State has to collect quantifiable data showing B
bm;kwardness of the class and inadequacy of representation of that
class in public employment in addition to compliance of Article 335 .
. )
It is made clear that even if the State has compelling reasons, as
stated above, the State will have to see that its reservation provision
does not lead to excessiveness so as to breach the ceiling-limit of 50% C
or obliterate the creamy layer or extend the reservation indefinitely."

·~
48. This Court rationalized the creamy layer rule as a necessary bargain
between the competing ends of caste based reservations and the principle of
secularism. The Court opined:
D
"In Indra Sawhney this Court has, therefore, accepted caste as
determinant of backwardness and yet it has struck a balance with the
principle of secularism which is the basic feature of the Constitution
by bringing in the concept of creamy layer."

49. This Court, thus, has categorically laid down the law that E
determination of creamy layer is a part of the constitutional scheme.

Constitutional provisions are required to be construed harmoniously.

50. It is difficult for us to accept the submission of Mr. Iyer that this
Court should not exercise its power of judicial review. What should be the F
criteria for achieving the constitutional goal set out by the founding fathers,
not only involves interpretation of constitutional provisions, but being the
subject matter of decisions by this Court, it will be improper for us to refuse
to undertake judicial exercise in such matters. The level of scrutiny would
be more intrinsic than the doctrine of Wednesbury unreasonableness. In
terms of Article 141 of the Constitution of India, the declaration of law made G
by this Court is binding on all courts, a' fortiori such directions would also
be binding on all authorities. Article 142 empowers this Court to pass such
order as is necessary to do complete justice to any cause or matter pending
before it and Article 144 enjoins all authorities, civil and judicial, to act in aid
of the Supreme Court. H
180 SUPREME COURT REPORTS [2007) 3 S.C.R.

A 51. Interpretation and application of constitutional law particularly, in
regard to the equality clause contained in Article 14 to Article 16 of the
Constitution, have never been limited by this Court. If a measure tends to
perpetuate inequality and makes the goal of equality a mirage, such measure
should not receive the approval of the Court. {See Islamic Academy of
Education (supra)} Directions have been issued by this Court in a number
B of cases where the question involves greater public interest or public good,
including enforcement of fundamental rights. The Court never hesitates to
express its opinion on the interpretation of the Constitution despite political
thicket. {See Anil Kumar Jha v. Union of India & Ors., reported in (2005]
3 SCC 150, Rameshwar Prasad (IV) & Ors. v. Union of India & Anr., reported
C in (2005] 7 SCC 157, WB. Freedom Fighters' Organisation (supra) and Bombay
Dyeing & Mfg. Co. Ltd. v. Bombay Environmental Action Group & Ors.,
reported in (2006] 3 sec 434].}

52. This Court has repeatedly held that under Article 144, the state was
bound to act strictly in terms of the decisions of this Court and even, it has
D reservation about some of its directions, it could approach this Court and
could not have acted otherwise.

53. However, the question, which arise for consideration is as to what
relief could be granted by this Court.

E 54. Nothing has been brought on record to show that the paragraph
2(l)(c) of G.O. dated 27th May, 2000 had been given a go-by.

55. The State did not accept even the Narendran Commission report in
its entirety. Although, as noticed hereinbefore, Mr. Iyer submitted that the
benefit would be granted only to those persons who are engaged in hereditary
F occupation and not to them who are not so engaged, the State, however,
states that there would be no restriction as proposed by the Commission for
exclusion from the 'creamy layer' of backward class with hereditary occupations,
i.e, black smiths and gold smiths should be engaged in such occupations. If
the State has not made any amendment, it is eminently fit and proper that an
G amendment or clarification should be issued in this behalf inasmuch as even
if a person is otherwise excluded by reason of holding a constitutional post
or otherwise, he may still claim the benefit being a descendent of a person ;... -
whose predecessors, being a member of the backward class, had hereditary
occupation like black smith or gold smith etc. Accordingly, notification dated
27th May, 2000 being merely for notification of general public and the guidelines
H
NAIR SERVICE SOCIETY v. ST ATE OF KERALA [S.B. SINHA, J.) 181

issued for the concerned officers, it is necessary that the State should amend A
the guidelines also.

56. In this view of the matter, although while setting aside the report
of the Narendran Commission, we direct the State to appoint a fresh
Commission who should go into all these aspects of the matter and submit
~~~ B
57. The writ petition is allowed with the aforementioned directions and
,) observations. We, however, for the present do not intend to pass any order
on the contempt petitions. They shall remain pending.

58. No costs. C

A.K.T. Writ Petition allowed and Contempt Petition Pending.

- ~