Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh and Others v. State of Bihar and Others | 2026 INSC 1061 | 28 September 2026
What the case was about
The dispute stretches back to the bifurcation of Bihar under the Bihar Reorganisation Act, 2000, which created the new State of Jharkhand. Among the many administrative loose ends left by the split was the fate of thousands of employees and workmen attached to five State-owned inter-State corporations that later became defunct. For decades, their salary arrears, retiral dues and Employees’ Provident Fund (EPF) contributions remained unpaid, leaving workers and their families in prolonged financial distress. After years of litigation, including the landmark Kapila Hingorani v. State of Bihar [(2003) 6 SCC 1], a Committee headed by Justice (Retd.) Dinesh Maheshwari was constituted to untangle the mess. By its order dated 29 May 2026, the Supreme Court accepted most of the Committee’s recommendations and directed the States to disburse the bulk of the principal dues. When Bihar and Jharkhand filed compliance affidavits in August 2026 reporting that the traced workers had been paid, three difficult issues remained deliberately left open for final adjudication: what to do about untraceable claimants, how to treat daily-wage workers paid at a flat historical rate, and whether interest should run on the decades-old delays (para 8).
The key facts
The five corporations at the heart of the matter are the Bihar State Construction Corporation Ltd., Bihar State Industrial Development Corporation Ltd., Bihar State Electronic Development Corporation Ltd., Bihar State Forest Development Corporation Ltd., and Bihar State Panchayati Raj Financial Corporation Ltd. Their liabilities were apportioned between the successor States after 2000. Out of a verified baseline of 2,274 employees and workmen, the two States had traced and paid the principal dues of 2,074 by August 2026. Roughly 200 cases remained stuck because the individuals were untraceable or lacked the requisite documentation to establish their claims.
A particularly vexed subset involved daily-wage workers of the Bihar State Construction Corporation Ltd. Their dues had been computed at a flat rate of Rs.42.50 per day from 1992 onwards, a figure that remained unchanged despite the passage of decades. EPF contributions and other wage arrears had not been paid for years, leaving workers and their families in prolonged financial distress. Faced with these lingering grievances, the Supreme Court was asked to settle the rights of the remaining claimants and fix the financial consequences of the extraordinary delay.
The questions before the Court
The judgment addresses three specific questions framed by the Court in its earlier order:
- How should the remaining untraceable employees, workmen and the legal heirs of deceased employees be identified and verified?
- Are daily-wage workmen and the legal heirs of deceased employees entitled to any lump-sum compensation, rehabilitative support or other monetary benefits beyond the principal amounts already determined?
- What, if any, interest is payable on the delayed settlement of salaries, wages, retiral benefits and provident fund dues, and at what rate?
What the Court decided and why
Untraceable claimants: The Court recorded that the States had undertaken extensive and repeated tracing measures, including the publication of notices in newspapers and other modes of communication, and that the Committee had acknowledged these efforts (para 34). Satisfied that the States had taken all reasonable steps, the Court held that they could not be asked to search indefinitely. It declared the process administratively closed, but stressed that this would not extinguish the underlying entitlement. The Court agreed with the assessment that no substantive dispute existed about the entitlement itself; the impediment was purely one of identification and paperwork. Any concerned employee, workman or legal heir now has a firm window of 12 months from the date of the order to approach the respective Nodal Officer with the requisite documents for verification and disbursement (para 35).
Daily-wage workers and equity: The Court found that applying a uniform flat rate of Rs.42.50 per day from 1992 onward produced an inequitable result, because it ignored changes in the cost of living and prevailing wage structures over several decades (para 39). Yet ordering a fresh, individual recomputation for each worker would only compound the delay. To balance equities and bring finality, the Court directed the two States to pay a one-time additional sum of Rs.1,00,000 to each concerned daily-wage employee or workman employed during the relevant period, over and above the amounts already disbursed (para 42). The Court also rejected demands for lump-sum death compensation, noting that no statutory provision or service rule created such an entitlement.
Mandatory EPF interest: On EPF dues, the Court held that Section 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, is a social-welfare mandate, not a discretionary concession. It requires simple interest at 12 per cent per annum from the date the amount fell due until the date of actual payment. The liability arises by operation of law and cannot be defeated merely because the principal was eventually discharged (paras 43–48). The States were directed to compute and pay this statutory interest forthwith (para 48).
Interest on salaries and other dues: For non-EPF monetary dues, the Court reasoned that interest serves as compensation for the unjust deprivation of money lawfully due. Citing precedents such as Central Bank of India v. Ravindra & Ors. [(2002) 1 SCC 367], it observed that a person kept out of his rightful earnings for years suffers real financial prejudice, even if the original employer was a defunct corporation with a separate legal personality (paras 50–53). At the same time, the award must remain compensatory and not punitive. Weighing these factors, the Court fixed simple interest at 6 per cent per annum on salary and wage arrears from the date each amount became due until actual payment, to be disbursed within three months along with the principal (paras 57–58).
Why it matters
The ruling closes one of the longest-running chapters of post-reorganisation labour injustice in India. For the workers and families who have waited since before the turn of the century, the judgment secures not only the principal but also meaningful compensation for the delay. By holding that EPF statutory interest is immutable and cannot be waived away by administrative convenience, the Court reinforces the protective intent of social-security legislation. The additional Rs.1,00,000 payment for daily-wage workers acknowledges that rigid historical rates cannot be allowed to freeze equity. Equally significant is the pragmatic compromise on untraceable claims: the door is not slammed shut, but a definitive deadline now applies. The distinction drawn between the statutory 12 per cent on EPF dues and the equitable 6 per cent on wage arrears also offers a template for future cases involving long-delayed public-sector payments. Finally, the judgment sends a clear signal that while States may inherit complex corporate liabilities after bifurcation, they cannot allow the lawful dues of workers to become illusory, and that the separate juristic personality of defunct State-owned corporations cannot be invoked to defeat substantive justice.