Supreme Court Resolves Decades-Long Salary Dispute for Bihar State Corporation Employees

In a significant move to end a twenty-five-year humanitarian crisis, the Supreme Court has accepted the final recommendations of a high-level committee concerning the payment of long-overdue salaries and retirement benefits to thousands of employees of five State-owned corporations in Bihar. The court emphasized that the prolonged denial of lawful dues, following the bifurcation of the State under the Bihar Reorganisation Act, 2000, had escalated into a grave human rights concern affecting the right to livelihood under the Constitution of India, 1950.

A bench comprising Justice Vikram Nath and Justice Sandeep Mehta deliberated on the final report submitted by the Justice Dinesh Maheshwari Committee. The bench noted that while substantial progress has been made in identifying and paying thousands of employees, specific residual issues regarding interest and daily-wage compensation still require final judicial adjudication.

Court's Rationale on Liability and Pay Revision

The Court accepted the committee's findings that the apportionment of liabilities between Bihar and Jharkhand should be based on an affidavit filed by the Union of India. On the issue of pay scales, the Court clarified that employees are only entitled to revisions formally adopted by the Corporations before they became defunct. The Court, in its reasoning, observed: "In the absence of a subsisting employer-employee framework and in the absence of any statutory or contractual mandate extending such revisions, no enforceable legal right can accrue in favour of the employees for grant of benefits under subsequent Pay Revision Commissions."

Mandatory Directives for Provident Fund and Interest

Addressing the critical issue of retirement benefits, the Court highlighted that provident fund accumulations are protected rights. The Court has the following directions:

"i. The apportionment and fixation of the inter se liability of the respective States towards payment of salaries, retiral dues and other consequential emoluments payable to the employees of the erstwhile corporations shall stand resolved in terms of the allocation and computation determined by the Committee in paragraph No. 8.2 of the Final Report, namely, on the basis of the Affidavit dated 22nd December, 2023 furnished on behalf of the Union of India, which shall govern the respective liabilities of both the States. The concerned States shall remain bound to discharge their respective liabilities accordingly, if already not discharged.

ii. The determination of the applicable Pay Revision Commission shall stand confined to the Pay Revision Commission(s) duly adopted by the concerned Corporations prior to their becoming defunct, and consequently, no entitlement shall accrue in favour of the employees towards benefits arising from any subsequent Pay Revision Commissions which were never formally adopted by the competent authorities of the respective Corporations.

iii. The determination, computation and disbursal of dues payable towards Employees’ Provident Fund contributions and allied statutory benefits shall be undertaken in accordance with the structured mechanism recommended by the Committee and noted hereinabove, and the concerned authorities shall ensure expeditious and effective disbursal of the admissible amounts to the eligible employees and/or their legal heirs in accordance therewith."

Background:

The controversy originated from the bifurcation of Bihar in 2000, which left the assets and liabilities of several State Corporations unresolved. For nearly 25 years, employees of entities like the Bihar State Construction Corporation Ltd. and Bihar State Industrial Development Corporation Ltd. remained without salaries. The matter first reached the apex court in Kapila Hingorani v. State of Bihar ( "(2003) 6 SCC 1": 2003 CaseBase(SC) 353), where the court noted that the State cannot ignore such a humanitarian crisis. Despite interim funds, the crisis persisted, leading to the current writ petition filed by the Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh. The Court eventually appointed a committee headed by Justice Dinesh Maheshwari (Retd.) to verify 2,274 employees and fix proportional liabilities between the successor states. While 2,017 employees have now been paid, the Court has scheduled further hearings for September 2026 to resolve the status of "untraceable" employees and the exact interest rates for delayed payments.

Case Details:
Case No.: WRIT PETITION (C) No.932 OF 2022
NeutralCitation: 2026 INSC 607
Case Title: BIHAR STATE ARDH SARKARI ARAJPATI KARAMCHARI MAHA SANGH AND ORS. VERSUS STATE OF BIHAR AND ORS.
Source: 2026 CaseBase(SC) 515