The Supreme Court has directed the States of Bihar and Jharkhand to pay a one-time Rs 1 lakh to each daily-wage worker of five defunct State-owned corporations of erstwhile Bihar, along with 12% simple interest on delayed provident fund dues and 6% on delayed salary and other dues, while closing the exercise to trace the remaining employees and giving them 12 months to claim.
New Delhi: The Supreme Court on Monday disposed of a long-running writ petition by an employees’ association over the unpaid dues of workers of five defunct State-owned corporations of erstwhile Bihar, directing the States of Bihar and Jharkhand to pay each daily-wage worker a one-time sum of Rs 1,00,000 over and above the dues already computed, and to pay interest on delayed dues [Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh and Others v. State of Bihar and Others].
A Bench of Justice Vikram Nath and Justice Sandeep Mehta decided Writ Petition (Civil) No. 932 of 2022 [2026 INSC 1061], in a judgment authored by Justice Mehta, confined to the three issues left open by its order of May 29, 2026.
The background
The dispute arises from the reorganisation of erstwhile Bihar under the Bihar Reorganisation Act, 2000, which created Jharkhand and raised questions about the apportionment of liabilities and the service-related dues of employees of five State-owned inter-State corporations: the Bihar State Construction Corporation, the Bihar State Industrial Development Corporation, the Bihar State Electronic Development Corporation, the Bihar State Forest Development Corporation and the Bihar State Panchayati Raj Financial Corporation. The litigation has a long history, including the Supreme Court’s decision in Kapila Hingorani v. State of Bihar and the work of a Committee headed by Justice Dinesh Maheshwari, a retired Judge of the Supreme Court.
By its order of May 29, 2026, the Court accepted the Committee’s Final Report of April 30, 2026 to the extent indicated in that order, and left three issues open: the identification and verification of the remaining employees or their legal heirs, the entitlement of daily-wage workmen and legal heirs of deceased workmen to lump-sum compensation or other support, and the entitlement to interest on delayed salaries, retiral dues and provident fund amounts. In compliance affidavits filed in August 2026, the two States reported that, of a verified workforce of 2,274, about 2,074 had been paid their dues, while around 200 cases remained pending because the workmen could not be traced or lacked documents. The Court noted that the States had substantially complied, and expected them to complete the pending aspects at the earliest.
Untraced employees
Senior Advocate Priya Hingorani, for the petitioners, argued that the fact that some workmen are untraceable or lack documents cannot extinguish entitlements that are not in dispute, and that the amounts should be ascertained and earmarked in an escrow or designated corpus. Senior Advocates Ranjit Kumar for Bihar and Arunabh Chowdhury for Jharkhand said the States had made extensive efforts, through special messengers, registered post, coordination with district authorities and unions, and repeated newspaper notices, and asked that the residual cases be closed administratively.
The Court held that the States had taken all reasonable steps and could not be required to continue the exercise indefinitely, and put a quietus to the matter, but said the closure will not extinguish the workmen’s entitlement. The untraced workmen or their legal heirs may, within 12 months of the judgment, approach the Nodal Officer appointed for the respective corporation with the required documents, after which their claims will be processed and the amounts found due disbursed in accordance with law.
Daily-wage workers
The daily-wage issue concerns 598 workmen of the Bihar State Construction Corporation, of whom 270 fell to Bihar and 328 to Jharkhand on a location basis, with an aggregate liability of Rs 17.92 crore. Dues had been computed at a flat rate of Rs 42.50 per day from 1992 until the date of retirement, death or formal cessation of service, and Rs 14.21 crore had been paid to 467 of them. The petitioners argued that the doctrine of “no work, no pay” did not apply, since the Corporation treated them as workmen until formal terminations in October 2015, that a flat rate could not be applied over decades, and that the delay violated the right to life and dignity under Article 21. The States argued that daily-wagers have no vested right to later revisions of the minimum wage, that the service rules provide no death compensation, and that a claim of death by starvation would require determining the cause of death.
The Court said that the description of a person as a daily-wage worker cannot detract from the dignity of the work performed, although daily-wage employment differs in legal character from regular employment. It held that a fixed daily wage of Rs 42.50, adopted as a uniform basis from 1992 onwards, cannot be a fair and reasonable measure of the workmen’s entitlement, since it assumes that the value of labour stayed static despite changes in the cost of living and in statutory wage structures. It declined to remit the matter for fresh determination of each workman’s wage, since that would prolong a dispute pending for decades, and instead, to balance the equities and bring finality, directed Bihar and Jharkhand to pay a one-time sum of Rs 1,00,000 to each concerned daily-wage worker, in addition to the amounts already determined and disbursed. The judgment does not award any separate death compensation.
Interest on delayed dues
On provident fund dues, the Court held that Section 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 makes the employer liable to pay simple interest at 12% per annum from the date the amount became due until actual payment. Relying on Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner, it said this interest arises by operation of law and cannot be defeated merely because the liability was later discharged. It directed the two States to pay 12% simple interest on the EPF dues to which Section 7-Q applies, from the date each amount became due until actual payment.
On salary and other dues, the Court noted that no uniform statute fixes a rate. The States argued that the corporations were separate juristic entities, that the payments by Bihar were voluntary and humanitarian, and that the corporations had been defunct for decades. While accepting that the corporations were distinct entities, the Court held that the States, as welfare States under whose exclusive domain the corporations functioned, must ensure that employees’ entitlements are not rendered illusory. It observed:
In the peculiar facts and circumstances of the present case, the separate corporate personality of the erstwhile Corporations cannot be permitted to deprive the employees/workmen of their lawful dues which have remained unpaid for decades.
The Court added that interest in its equitable or constitutional jurisdiction must not become a punitive levy on the public exchequer, and must be reasonable and compensatory. Noting the Committee’s recommendation of 7.5% per annum, it directed simple interest at 6% per annum on salary and wage arrears and other non-EPF dues, from the date each amount became due until actual payment, to the extent of each State’s liability under the mechanism approved on May 29, 2026. The interest is to be computed with the principal dues and paid to the workmen or their legal heirs within three months of the judgment.
Other directions
To ensure transparency, the Court directed Bihar and Jharkhand to publish, within four weeks, updated particulars of all workmen on the websites of their Information and Public Relations Departments and of the parent administrative departments of the erstwhile corporations, and to update them periodically. For workmen whose dues have been paid, the particulars include name, designation, period of service, amount payable, amount disbursed and date of disbursement. For pending claims, they include the status, the reason for pendency, the documents required and the Nodal Officer’s contact details. The Court recorded its appreciation of the work of the Committee headed by Justice Dinesh Maheshwari, and disposed of the writ petition.
Why it matters
The judgment brings to a close a dispute over liabilities that date from the creation of Jharkhand in 2000, and it does so through a fixed one-time payment and fixed interest rates, and not through a fresh computation for each worker. It also holds that the separate legal identity of a defunct State corporation did not, in these circumstances, shield the States from paying interest on their employees’ dues.
The Court has stated that the reliefs rest on the peculiar facts of the case and the extraordinary period for which the claims remained unresolved.
The reliefs so granted are intended to bring finality to the claims arising in the present proceedings and shall not be construed as laying down any general or binding principle with regard to the entitlement to, or computation of, similar reliefs in cases arising in a different factual or legal setting.
Case Title: Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh and Others v. State of Bihar and Others [Writ Petition (Civil) No. 932 of 2022; 2026 INSC 1061]
Bench: Justice Vikram Nath and Justice Sandeep Mehta, Supreme Court of India
Date of Judgment: September 28, 2026
Appearances: Senior Advocate Priya Hingorani appeared for the petitioners, Senior Advocate Ranjit Kumar appeared for the State of Bihar, and Senior Advocate Arunabh Chowdhury appeared for the State of Jharkhand.