The Supreme Court has issued important directions concerning long-pending salary, wage, provident fund and other monetary dues of employees and workmen of five erstwhile State-owned corporations of Bihar. In Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh and Others v. State of Bihar and Others, the Court dealt with claims that had remained unresolved for several decades following the reorganisation of Bihar and creation of Jharkhand.
The judgment addresses three principal questions: the identification and verification of remaining employees and legal heirs, the entitlements of daily-wage workers including additional compensation, and interest payable on delayed salary, wages, provident fund and other monetary dues.
The Court directed the States of Bihar and Jharkhand to pay ₹1 lakh as a one-time amount to each concerned daily-wage employee/workman, apart from the dues already determined. It also directed payment of 12% simple interest per annum on delayed EPF dues and 6% simple interest per annum on delayed salary, wages and other monetary dues, calculated from the date on which the respective amounts became due until actual payment.
The Court, however, expressly clarified that these directions were based on the peculiar facts and extraordinary delay involved in the case and should not automatically be treated as a general rule for different factual or legal situations.
Case Details
| Particular | Details |
|---|---|
| Case Name | Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh and Others v. State of Bihar and Others |
| Court | Supreme Court of India |
| Case Number | Writ Petition (Civil) No. 932 of 2022 |
| Judgment Date | 28 September 2026 |
| Bench | Justice Vikram Nath and Justice Sandeep Mehta |
| Jurisdiction | Civil Original Jurisdiction |
| Principal Statute | Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 |
| Important Provision | Section 7-Q |
| Principal Issues | Remaining employee claims, daily-wage entitlements, compensation and interest on delayed dues |
The judgment was delivered in New Delhi on 28 September 2026.
Five State-Owned Corporations Involved
The dispute arose from the reorganisation of the erstwhile State of Bihar under the Bihar Reorganisation Act, 2000, which resulted in the creation of Jharkhand.
The proceedings concerned employees and workmen connected with five State-owned inter-State corporations:
- Bihar State Construction Corporation Ltd. (BSCCL)
- Bihar State Industrial Development Corporation Ltd. (BSIDC)
- Bihar State Electronic Development Corporation Ltd. (BSEDC)
- Bihar State Forest Development Corporation Ltd. (BSFDC)
- Bihar State Panchayati Raj Financial Corporation Ltd. (BPRFC)
The Court noted that the controversy had a long history, including earlier proceedings in Kapila Hingorani v. State of Bihar and proceedings concerning the apportionment of liabilities between Bihar and Jharkhand.
Background and Facts of the Case
The underlying dispute arose because the reorganisation of Bihar resulted in questions concerning the allocation and discharge of liabilities relating to employees and workmen of the five corporations.
The litigation continued for years and required several rounds of judicial and administrative consideration.
The Supreme Court had earlier passed an order on 29 May 2026, after considering the Final Report dated 30 April 2026 submitted by a Committee headed by Justice Dinesh Maheshwari, former Judge of the Supreme Court.
The Court accepted the Committee’s recommendations to the extent specified in that earlier order. Bihar and Jharkhand subsequently filed compliance affidavits in August 2026 concerning the implementation of the Court’s directions.
The States reported that substantial amounts had already been disbursed to identified and verified employees and workmen, although certain cases remained pending because some claimants were untraceable or had not supplied the necessary documents.
What Were the Three Issues Before the Supreme Court?
The Court had specifically left three issues open for determination:
- Identification and verification of remaining employees/workmen and legal heirs of deceased employees.
- Entitlement of daily-wage workers and legal heirs to monetary, rehabilitative or welfare support, including wages and consequential benefits.
- Entitlement to and determination of appropriate interest on delayed salary, wages, retiral dues, provident fund and other monetary benefits.
Status of Employee Payments
The States’ compliance affidavits showed substantial progress.
Out of a verified baseline workforce of 2,274 employees/workmen, dues had been fully disbursed to 2,074 employees/workmen.
Approximately 200 cases remained unresolved because the employees/workmen could not be traced or because the required documentation for verification and payment had not been completed.
Arguments of the Employees and Workmen
Claims of remaining employees and legal heirs
The petitioners argued that merely because some employees or legal heirs were presently untraceable or had not completed documentation, their underlying entitlements should not disappear.
They suggested that amounts payable in such cases should be ascertained and separately earmarked so that they could subsequently be released once the claimant established the required identity and entitlement.
Arguments concerning daily-wage workers
The petitioners challenged the application of the principle of “no work, no pay” to the concerned daily-wage workers.
Their case was that the daily-wage workers had not voluntarily abandoned employment. According to the submissions, the absence of work resulted from the Corporation becoming non-functional, while formal termination orders were issued only later.
The petitioners also argued that it would be inappropriate to calculate their entitlements throughout the relevant period using the historical rate of ₹42.50 per day, without considering the applicable wage rates during different periods.
Claim for interest
The petitioners argued that interest should correspond to the period during which the employees were actually deprived of money that had become legally payable.
For EPF dues, reliance was placed upon the statutory interest contemplated under Section 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Arguments of Bihar and Jharkhand
The States submitted that approximately 2,074 out of 2,274 verified employees/workmen had been traced, verified and paid their principal and statutory dues.
They stated that approximately 200 residual cases remained because of difficulties in tracing claimants or obtaining the necessary documentation.
The States also described various measures undertaken to locate employees and legal heirs, including communications to last-known addresses, coordination with district authorities and labour unions, and publication of public notices.
With respect to daily-wage workers, the States defended the calculation based on the historical rate of ₹42.50 per day and opposed a claim for additional lump-sum compensation.
They also opposed the proposed interest rates of 7.5% on salary arrears and 12% on EPF dues, arguing that imposing substantial interest liability would place an additional burden upon the State exchequers.
Supreme Court’s Analysis and Reasoning
Identification and Verification of Remaining Employees
The Supreme Court noted that the States had made extensive efforts to trace the remaining employees and their legal heirs.
After considering the steps taken, including publication of public notices, the Court held that the States could not be required to continue the tracing exercise indefinitely.
However, closing the administrative exercise would not extinguish the underlying entitlement of the untraceable employees or their legal heirs.
The Court therefore allowed such employees or legal heirs to approach the concerned Nodal Officer within 12 months from the date of the judgment, with the required documents.
Once verification is completed, the claim is to be processed and the amount found payable is to be disbursed in accordance with law.
Daily-Wage Workers Cannot Be Treated Arbitrarily
The Court recognised that daily-wage employment is legally different from regular employment.
However, the Court emphasised that the status of a worker as a daily-wage employee cannot by itself justify arbitrary or inequitable treatment.
The fact that workers were employed on a daily-wage basis did not mean that the services actually rendered by them could simply be disregarded.
Why Did the Supreme Court Reject the Fixed ₹42.50 Calculation as the Complete Measure?
The Court examined the method used to calculate the dues of daily-wage workers.
The amount had been calculated at ₹42.50 per day for the relevant period beginning in 1992.
The Supreme Court held that a fixed daily wage of ₹42.50 could not constitute a fair and reasonable measure of monetary entitlement over a period extending across several decades.
The Court reasoned that such a calculation effectively treated the value of labour as static despite changes in the cost of living and statutory wage structures over time.
At the same time, the Court did not consider it appropriate to send the matter back for individual fresh wage determinations because doing so would cause another round of lengthy verification and determination.
Instead, the Court adopted a solution intended to bring finality to this aspect of the dispute.
Supreme Court Orders ₹1 Lakh One-Time Payment to Daily-Wage Workers
The Supreme Court directed Bihar and Jharkhand to pay an additional ₹1,00,000 to each concerned daily-wage employee/workman who was employed by the concerned Corporation during the relevant period.
This amount was directed to be paid in addition to the amounts already determined and disbursed.
This was a case-specific measure adopted by the Court to balance the equities and bring finality to a dispute that had continued for several decades.
Interest on Delayed EPF Dues
The Court separately considered provident fund dues because EPF benefits have a statutory character.
The Supreme Court explained that provident fund is a social-security benefit accruing during employment and intended to provide financial security after cessation of service.
Under Section 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, simple interest at 12% per annum, or such higher rate as may be specified under the Scheme subject to the statutory limitation, is payable on amounts due from the date they became due until actual payment.
The Court relied upon Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner & Ors., where the nature of Section 7-Q interest was discussed in the context of the beneficial and social-welfare purpose of the EPF legislation.
The Supreme Court held that statutory interest under Section 7-Q is a consequence of delayed payment and is not dependent upon a contractual agreement between employer and employee.
Accordingly, the States were directed to ensure payment of 12% simple interest per annum on applicable delayed EPF dues, calculated from the date on which the amount became due until actual payment.
Interest on Delayed Salary and Wages
The Court distinguished salary and other monetary dues from EPF dues.
Unlike Section 7-Q, there was no uniform statutory provision prescribing a particular rate of interest for all salary and other monetary dues involved in the case.
The Court therefore considered the nature of the dues, the duration of the delay, the circumstances responsible for the delay and the financial prejudice caused to the employees/workmen.
The Court observed that salary, retiral benefits and other lawfully payable emoluments constitute rightful monetary entitlements.
When such amounts are withheld for several years, the employee is deprived of the use of money that should have been available to him or her.
Interest Is Compensation for Deprivation of Money
The Supreme Court explained the legal concept of interest by referring to Central Bank of India v. Ravindra, along with other authorities.
The basic principle identified by the Court is that interest can operate as compensation for deprivation of the use of money that was lawfully due.
Where a monetary entitlement has crystallised and payment is delayed, the person entitled to that money suffers deprivation during the intervening period. Interest can therefore compensate for that deprivation.
Why Was 6% Interest Ordered on Salary and Other Monetary Dues?
The Court recognised that the extraordinary delay in the present case justified an award of reasonable interest.
However, the Court also held that interest under its equitable or constitutional jurisdiction should remain compensatory and should not become punitive against the public exchequer.
Considering the peculiar circumstances, the extraordinary duration of the delay and the Committee’s recommendation of 7.5%, the Court determined that 6% simple interest per annum was appropriate for salary/wage arrears and other non-EPF monetary dues.
The Court therefore directed payment of 6% simple interest per annum from the date the respective amounts became due and payable until actual payment.
Final Directions of the Supreme Court
The Supreme Court issued several directions to Bihar and Jharkhand.
1. Completion of pending implementation
The States were directed to complete the remaining implementation of the earlier directions of the Court.
2. Twelve-month period for untraceable claimants
Untraced or unverified employees/workmen or their legal heirs may approach the concerned Nodal Officer within 12 months from the date of the judgment with the necessary documents.
3. Publication of employee details
The States were directed to publish updated information concerning employees/workmen, including those whose dues had been paid and those whose claims remained pending.
For pending claims, the information must indicate the status, reason for pendency, documents or steps required and contact details of the concerned Nodal Officer.
The information is to be published on the official websites identified by the Court and updated periodically. The initial publication was directed to be completed within four weeks.
4. ₹1 lakh for each concerned daily-wage worker
The States were directed to pay ₹1,00,000 as a one-time amount to each concerned daily-wage employee/workman employed during the relevant period.
5. Interest on EPF dues
12% simple interest per annum is payable on delayed EPF dues governed by Section 7-Q, from the date the amount became due until actual payment.
6. Interest on salary and other monetary dues
6% simple interest per annum is payable on delayed salary, wages and other monetary entitlements, excluding EPF dues governed by Section 7-Q.
Ratio Decidendi
The principal legal principles emerging from the judgment are:
- Administrative closure of tracing/verification proceedings does not extinguish the underlying entitlement of an employee or legal heir where the Court has preserved a mechanism for later verification.
- Daily-wage status does not by itself justify arbitrary or inequitable treatment of workers.
- A historical fixed daily-wage rate may not provide a fair measure of monetary entitlement when claims extend across several decades and wage structures have changed.
- Statutory interest under Section 7-Q of the EPF Act follows from delayed payment of amounts governed by that provision.
- Interest can operate as compensation for prolonged deprivation of money lawfully due to an employee.
- In the peculiar circumstances of the case, reasonable interest on delayed salary and other monetary dues was justified.
- The reliefs granted were specifically tied to the exceptional facts and circumstances of this litigation and were not declared to be a general rule applicable to every future case.
Important Legal Provisions
Section 7-Q, Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
Section 7-Q deals with interest payable by an employer on amounts due under the EPF legislation.
The Supreme Court applied the provision to the delayed EPF dues in the present proceedings and directed payment of simple interest at 12% per annum from the date the amount became due until actual payment.
Article 21 of the Constitution
The petitioners had argued that the prolonged failure to recognise and discharge legitimate monetary entitlements had implications for the right to life and dignity under Article 21.
The Court’s ultimate directions, however, were framed around the specific issues left open in the earlier proceedings and the particular circumstances of the case.
Important Precedents
| Case | Legal Principle | Use in the Present Judgment |
|---|---|---|
| Kapila Hingorani v. State of Bihar, (2003) 6 SCC 1 | Earlier litigation concerning liabilities and employee-related claims arising from the affairs of Bihar’s State-owned corporations | Part of the historical background of the present proceedings |
| Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner, (2013) 16 SCC 1 | Nature and social-welfare purpose of interest under Section 7-Q | Relied upon in examining statutory EPF interest |
| Central Bank of India v. Ravindra, (2002) 1 SCC 367 | Interest can represent compensation for deprivation of the use of money | Used in explaining the rationale of interest |
| Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508 | Recognition of compensation for deprivation of legitimately entitled money | Referred to in the discussion of interest |
| Sham Lal Narula v. CIT | Interest relates to deprivation of use of money | Referred to while explaining the concept of interest |
The judgment itself identifies these authorities in its discussion.
What Does This Judgment Mean for Employees and Daily-Wage Workers?
The judgment is particularly significant for employees whose lawful monetary entitlements remain unpaid for long periods.
For the workers covered by this particular litigation, the judgment provides:
- A mechanism for untraced employees and legal heirs to pursue their claims.
- An additional one-time payment of ₹1 lakh to concerned daily-wage workers.
- 12% statutory interest on applicable delayed EPF dues.
- 6% interest on delayed salary, wages and other monetary dues.
- A requirement for greater public disclosure of the status of employee claims.
However, the Court expressly stated that the reliefs are based upon the peculiar facts and circumstances of this case and should not be understood as creating a general rule for cases arising in different factual or legal settings.
Practical Significance for Lawyers
For lawyers dealing with long-pending employment dues, the judgment highlights the importance of separately examining:
- The nature of the monetary entitlement.
- The date on which the amount became due.
- Whether the claim concerns EPF or non-EPF dues.
- The statutory framework applicable to the claim.
- The duration of withholding.
- The identity of the entity legally liable for the underlying dues.
- Any mechanism governing allocation of liability between successor States or entities.
The distinction between statutory EPF interest and interest on salary/wage arrears is particularly important.
Practical Significance for Law Students and Judiciary Aspirants
The judgment is useful for examination preparation because it combines several concepts:
- Article 21 and dignity.
- Rights of daily-wage workers.
- Principles concerning interest.
- Provident fund legislation.
- Statutory interest.
- Public-law remedies.
- State-owned corporations.
- Successor-State liabilities.
- Equitable relief.
- Case-specific constitutional jurisdiction.
The case also illustrates how a constitutional court may adopt a practical solution to bring finality to an exceptionally prolonged dispute.
Key Takeaways
- The Supreme Court dealt with decades-old employee claims arising from Bihar’s reorganisation and defunct State-owned corporations.
- Out of 2,274 verified employees/workmen, dues had been fully disbursed to 2,074, while around 200 cases remained unresolved.
- Untraceable employees or legal heirs were given 12 months to approach the concerned Nodal Officer with supporting documents.
- Daily-wage workers cannot be treated unfairly merely because they were daily-wage employees.
- The Court found the historical ₹42.50 daily rate inadequate as a complete measure over several decades.
- Each concerned daily-wage employee/workman is to receive an additional one-time amount of ₹1 lakh.
- Applicable delayed EPF dues attract 12% simple interest under Section 7-Q.
- Delayed salary, wages and other non-EPF monetary dues attract 6% simple interest in this case.
- Interest serves a compensatory purpose by addressing deprivation of the use of money lawfully due.
- The Court expressly limited the relief to the peculiar facts and circumstances of the present litigation.
Frequently Asked Questions
What did the Supreme Court hold in Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh v. State of Bihar?
The Supreme Court directed payment of ₹1 lakh as a one-time amount to concerned daily-wage workers and ordered interest on delayed dues, including 12% on applicable EPF dues and 6% on salary, wages and other monetary dues.
How much compensation did the Supreme Court grant to daily-wage workers?
The Court directed Bihar and Jharkhand to pay a one-time amount of ₹1,00,000 to each concerned daily-wage employee/workman employed by the concerned Corporation during the relevant period.
What interest did the Supreme Court award on delayed EPF dues?
The Court directed payment of 12% simple interest per annum on delayed EPF dues governed by Section 7-Q, calculated from the date the amount became due until actual payment.
What interest was awarded on delayed salary and wages?
The Supreme Court directed payment of 6% simple interest per annum on delayed salary, wages and other monetary dues, excluding EPF dues governed by Section 7-Q.
Can untraceable employees or their legal heirs still claim their dues?
Yes. The Court permitted untraced or unverified employees/workmen and their legal heirs to approach the concerned Nodal Officer within 12 months from the date of the judgment, with the requisite documents.
Why did the Supreme Court reject the fixed ₹42.50 daily-wage calculation?
The Court held that ₹42.50 could not reasonably serve as a uniform measure of monetary entitlement across several decades because the cost of living and statutory wage structures changed over time.
What is the significance of Section 7-Q of the EPF Act in this judgment?
Section 7-Q provides for statutory interest on amounts due under the EPF legislation. The Supreme Court held that applicable interest follows by operation of law when such amounts are delayed.
Is the ₹1 lakh payment a general right of all daily-wage workers?
No. The Supreme Court expressly clarified that the relief granted was based on the peculiar facts and circumstances of this case and should not be treated as a general or binding rule for different factual or legal situations.
What is the ratio decidendi of this judgment?
Among the principal legal principles is that prolonged deprivation of lawfully due monetary entitlements may justify reasonable compensatory interest, while statutory EPF interest follows the applicable statutory mandate.
When must the States pay the interest on salary and other dues?
The Court directed that the interest amount be computed with the principal dues and disbursed to the concerned employees/workmen or legal heirs within three months from the judgment.
