The Supreme Court has directed the States of Bihar and Jharkhand to pay 12% annual simple interest on delayed provident fund dues governed by Section 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and 6% annual simple interest on delayed salary, wages and other monetary entitlements of employees of five State-owned corporations.
Bringing a decades-long dispute towards closure, the bench of Justice Vikram Nath and Justice Sandeep Mehta also ordered an additional one-time payment of ₹1 lakh to each concerned daily-wage worker. It found that calculating their dues at a uniform rate of ₹42.50 per day over several decades failed to reasonably account for changes in the cost of living and the applicable wage structure.
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The Court also protected the claims of employees and legal heirs who remain untraced or whose documents are incomplete, granting them 12 months from the judgment to approach the designated nodal officers.
The proceedings arose from the reorganisation of the erstwhile State of Bihar under the Bihar Reorganisation Act, 2000, which led to the creation of Jharkhand. The division generated disputes over the allocation and discharge of employee liabilities of five State-owned inter-State corporations.
These were 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.
The litigation followed a prolonged course involving successive judicial interventions, including the proceedings in Kapila Hingorani v. State of Bihar. A committee headed by retired Supreme Court judge Justice Dinesh Maheshwari was subsequently tasked with examining the outstanding claims.
By an order dated May 29, 2026, the Supreme Court accepted the committee’s recommendations to the extent specified in that order. The Court made clear that the issues settled through that order had attained finality and could not be reopened.
Three matters remained for determination: the treatment of untraced or unverified claimants, additional relief for daily-wage workers and related welfare claims, and interest on delayed employee dues.
The Court recorded that, out of a verified baseline workforce of 2,274 employees and workers, dues had been fully disbursed to 2,074. Around 200 cases remained unresolved because the claimants could not be traced or had not furnished the documents required for verification.
The compliance affidavits filed by Bihar and Jharkhand in August 2026 reported substantial implementation of the earlier directions.
For Bihar State Construction Corporation, Bihar reported disbursing ₹84.10 crore to 1,054 employees and workers, comprising 587 regular employees and 467 daily-wage workers, against an assessed liability of ₹97.50 crore for 1,256 employees and workers. Jharkhand reported transferring ₹36.01 crore of its allotted liability of ₹38.41 crore to Bihar for disbursement.
Payments were also reported across the other corporations, although some cases remained pending because of missing succession or death certificates, bank account discrepancies and other verification requirements.
The Supreme Court directed both States to complete the remaining implementation and bring the pending matters to their logical conclusion.
Senior advocate Priya Hingorani, appearing for the petitioners, argued that an employee’s inability to be traced, or the absence of documents, could not extinguish an entitlement already found payable. She sought separate earmarking of the amounts due to such claimants.
The States submitted that they had made repeated attempts to locate employees and legal heirs through public notices, postal communications, special messengers, district authorities and labour union representatives.
Accepting that reasonable tracing efforts had been undertaken, the Court held that the States could not be required to continue the identification exercise indefinitely.
However, it expressly clarified that closing that exercise would not extinguish or prejudice the underlying entitlement. Untraced or unverified employees, or their legal heirs, may approach the concerned corporation’s nodal officer within 12 months from September 28, 2026, with the necessary documents. Their claims must then be verified, processed and paid in accordance with law.
To facilitate verification and ensure transparency, the Court directed Bihar and Jharkhand to publish updated particulars of the employees and workers concerned.
For cases in which dues have been paid or liabilities discharged, the published information must include the claimant’s name, designation, period of service, amount payable, amount disbursed and date of disbursement, along with other relevant particulars.
For pending cases, the States must disclose the current claim status, the reason for pendency, the documents or steps required for processing, and the contact details of the relevant nodal officer.
The information must appear on the official websites of the States’ Information and Public Relations Departments and the parent administrative departments of the corporations. Publication must be completed within four weeks of the judgment, with periodic updates thereafter.
The Court separately examined the position of 598 daily-wage workers of Bihar State Construction Corporation. According to the compliance material, ₹14.21 crore had been paid to 467 of them.
Their dues had been calculated at ₹42.50 per day for the period beginning in 1992 and continuing until the respective dates of retirement, death or formal cessation of service.
The petitioners challenged that approach, arguing that workers’ entitlements could not remain frozen at a historical rate despite changes in statutory wages and living costs. They also submitted that the absence of work resulted from the corporation’s non-functioning rather than any refusal by the workers to perform their duties.
The Court observed that daily-wage employment differs legally from regular employment, but that distinction does not justify arbitrary or inequitable treatment. A worker’s status could not be used to disregard services rendered or lawful entitlements arising from the engagement.
It found that applying an unchanged daily rate over several decades effectively assumed that the value of labour remained static throughout that period.
Despite finding the uniform wage calculation unreasonable, the Court declined to send the matter back for individual reassessment of the wage rates applicable across different periods.
Such an exercise, it reasoned, would require another round of determination and verification, prolonging a dispute that had already remained unresolved for decades.
To balance the equities and bring finality, the Court directed Bihar and Jharkhand to pay an additional one-time sum of ₹1 lakh to each concerned daily-wage employee or worker engaged during the relevant period.
The payment is additional to the amounts already determined and disbursed. The Court did not direct a fresh worker-by-worker calculation of historical wage rates.
On provident fund dues, the Court emphasised that provident fund is a statutory social-security benefit intended to provide financial security when employment ends.
It held that delayed payment of amounts governed by the Employees’ Provident Funds and Miscellaneous Provisions Act attracts the statutory consequences prescribed by law. Section 7-Q provides for simple interest at 12% per annum, or a higher rate specified in the scheme subject to the statutory limit, from the date the amount becomes due until actual payment.
Referring to Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner, the Court explained that this interest liability arises by operation of law and is distinct from a discretionary award of additional compensation.
Consequently, later payment of the principal amount does not eliminate the interest liability arising from the delay.
The States were directed to ensure payment of 12% annual simple interest on EPF dues to which Section 7-Q applies, calculated from their respective due dates until actual payment. The interest must be paid to the employees or, where applicable, their legal heirs as part of the final provident fund dues.
The Court distinguished salary arrears and other monetary dues from provident fund amounts governed by Section 7-Q. It noted that there was no uniform statutory provision prescribing a particular interest rate for the non-EPF claims involved in these proceedings.
Nevertheless, employees had been deprived of money lawfully payable to them for exceptionally long periods, extending in several cases over decades. The Court found that this delay could not be attributed to any act or omission of the individual employees.
Drawing on Central Bank of India v. Ravindra, it explained that interest compensates a person for being deprived of the use of money that should have been available when due.
Although the committee had recommended interest at 7.5% per annum on delayed payments, the Court fixed the rate at 6% annual simple interest for salary and wage arrears and other monetary dues, excluding EPF dues governed by Section 7-Q.
The interest will run from the date each amount became due and payable until actual payment. The Court directed computation and disbursement of the non-EPF interest, along with the principal dues, to the employees or their legal heirs within three months of the judgment.
Bihar and Jharkhand opposed the interest claims, citing the financial burden on the public exchequer, the complexity of allocating inter-State liabilities and the corporations’ separate legal identities.
Bihar also argued that its payments were voluntary and humanitarian, rather than the discharge of an enforceable State liability.
The Court acknowledged that liabilities of a government-owned corporation cannot automatically be imposed on a State merely because of ownership or control.
However, in the particular circumstances before it, the States’ responsibilities as welfare States also required consideration. The corporations had operated within their exclusive domain, and the subsequent failure of those entities could not be allowed to render employees’ legitimate entitlements ineffective.
At the same time, the Court stressed that interest should reasonably compensate for deprivation rather than become a punitive levy on public funds.
The respective liabilities of Bihar and Jharkhand will be allocated under the mechanism already approved by the Court on May 29, 2026.
The Supreme Court clarified that its directions were based on the extraordinary delay, the specific circumstances of the corporations and the manner in which their liabilities had been addressed through earlier judicial orders.
It expressly stated that the reliefs should not be construed as establishing a general or binding principle governing entitlement to, or computation of, similar relief in a different factual or legal setting.
The Court disposed of the writ petition and pending applications, while recording its appreciation for the work of the Justice Dinesh Maheshwari committee and the assistance provided by counsel.
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