The Supreme Court has recorded substantial progress in resolving the claims of employees of five defunct Bihar state-owned corporations who have been awaiting salaries, retiral benefits, provident fund dues and other emoluments since the bifurcation of Bihar and creation of Jharkhand in 2000. 

The bench of Justice Vikram Nath and Justice Sandeep Mehta however, has kept several crucial issues open for further adjudication, including compensation to families of deceased employees and payment of interest on delayed dues. 

The bench directed that the matter be listed as a part-heard case on September 1, 2026 for adjudication of the remaining unresolved issues. 

Humanitarian Crisis Spanning More Than Two Decades

The case concerns employees of five Bihar government corporations:

• Bihar State Construction Corporation Ltd.
• Bihar State Industrial Development Corporation Ltd.
• Bihar State Electronics Development Corporation Ltd.
• Bihar State Forest Development Corporation Ltd.
• Bihar State Panchayati Raj Financial Corporation Ltd.

Following the enactment of the Bihar Reorganisation Act, 2000 and creation of Jharkhand, the assets and liabilities of these corporations were required to be divided between the two successor States. However, the process remained unresolved for nearly 25 years, leaving thousands of employees without salaries, pensionary benefits and retiral dues. 

The Supreme Court noted that the dispute evolved beyond a mere financial disagreement between two States and assumed the character of a serious constitutional and human rights issue involving the right to livelihood and dignity under Article 21 of the Constitution. The record before the Court referred to allegations of severe deprivation, starvation and even suicides among affected employees and their family members due to prolonged non-payment of lawful dues. 

Background: From Kapila Hingorani to Present Proceedings

The controversy had earlier reached the Supreme Court in the landmark Kapila Hingorani v. State of Bihar litigation, where the Court intervened between 2003 and 2005 to address the plight of employees of Bihar state corporations. At that stage, the Court directed the deposit of ₹125 crore for partial settlement of dues through a committee headed by Justice Uday Sinha (Retd.). However, that amount could clear arrears only up to February 1997, leaving subsequent claims unresolved. 

The present writ petition was filed in 2022 seeking completion of the bifurcation process and payment of outstanding salaries and retiral benefits. 

Justice Dinesh Maheshwari Committee Constituted

Recognising the extraordinary complexity of the dispute, the Supreme Court constituted a Committee under the chairmanship of former Supreme Court Judge Justice Dinesh Maheshwari to undertake a comprehensive examination of the claims and suggest a workable solution. The Committee was tasked with:

• Fixing liabilities of Bihar and Jharkhand.
• Identifying employees and legal heirs entitled to dues.
• Determining entitlement to salary and retiral benefits.
• Examining other connected issues. 

The Committee conducted 25 meetings between April 2025 and January 2026 and ultimately submitted its final report on April 30, 2026. 

Over 2,000 Employees Paid

One of the most significant findings recorded by the Court relates to the progress achieved in identification and payment of employees.

The Committee reported that out of 2,274 verified employees and workmen, dues had already been disbursed to 2,017 employees. Only a small number of cases remain pending due to documentation and verification issues. 

The report revealed:

The Committee found that authorities had undertaken extensive efforts to trace missing employees and their legal heirs through newspaper advertisements, local enquiries and field verification exercises. The remaining cases were not disputed claims but cases where beneficiaries or heirs could not be located. 

Court Accepts Liability Apportionment Between Bihar and Jharkhand

The Supreme Court accepted the Committee’s conclusion that the issue of apportionment of liabilities between Bihar and Jharkhand substantially stood resolved.

The Court held that liabilities would be governed by the allocation framework reflected in the Union Government’s affidavit dated December 22, 2023, which had apportioned financial responsibility between the two States in relation to the five corporations. Both States were directed to discharge their respective liabilities accordingly. 

No Benefit of Subsequent Pay Revision Commissions

A major issue before the Committee concerned employees’ claims for benefits arising from later Pay Revision Commissions.

The Committee found that the corporations had adopted only the Fourth Pay Revision Commission recommendations, and in one corporation, the Fifth Pay Revision Commission. No subsequent pay revisions had ever been formally adopted before the corporations became defunct. 

Accepting this view, the Supreme Court held that employees cannot claim benefits under later Pay Revision Commissions that were never adopted by the corporations. Accordingly, pay fixation would remain restricted to the revisions actually adopted before the corporations ceased functioning. 

Provident Fund Held to be a Vested Statutory Right

The Committee strongly emphasized that provident fund dues constitute a vested statutory right that cannot be defeated because of administrative failures or financial collapse of the corporations. 

It recommended a mechanism under which:

• Settled EPF claims would be treated as final subject to any discrepancies.
• In pending cases, States would directly pay both employer and employee contributions along with statutory interest under Section 7Q of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. 

The Supreme Court accepted these recommendations and directed authorities to ensure expeditious payment of provident fund dues to employees and their legal heirs. 

Compensation and Interest Claims Still Open

While several issues have been substantially resolved, the Court has kept important questions open for final adjudication.

The Committee noted that there is no specific statutory provision granting compensation to families of employees who died during the prolonged period of financial distress. However, given the extraordinary humanitarian circumstances, it suggested that the Supreme Court may consider awarding compensation to legal heirs where deaths can be linked to deprivation caused by non-payment of dues. 

The Committee also recommended:

• Interest at 7.5% per annum on delayed salary arrears.
• Interest at 12% per annum on delayed provident fund dues. 

These recommendations have not yet been finally decided by the Court.

Issues Remaining for Final Hearing

The Supreme Court identified three surviving issues requiring judicial determination:

1. Verification of remaining employees and legal heirs whose claims are still pending.
2. Entitlement of daily-wage workers and families of deceased employees to compensation, welfare support and other consequential benefits.
3. Entitlement to interest on delayed salaries, retiral benefits, provident fund amounts and other dues. 

Court Appreciates Committee’s Work

The Bench recorded its appreciation for Justice Dinesh Maheshwari (Retd.), members of the Committee, counsel and officials involved in resolving the dispute. The Court also directed payment of an additional honorarium of ₹35 lakh to Justice Maheshwari, to be shared equally by the States of Bihar and Jharkhand.

Case Details

Case Title: Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh And Ors. Versus State Of Bihar And Ors.

Citation: JURISHOUR-1480-SC-2026

Case No.: Writ Petition (C) No.932 Of 2022

Date: 29/05/2026

Read More: Supreme Court Pulls Up Jaipur Civic Officials for Defying De-Sealing Order, Warns Against Disregard of Judicial Directions