The Supreme Court has asserted that where employees/workmen of defunct State-owned corporations are deprived of their lawful monetary entitlements for decades, the welfare-State obligation requires compensation through reasonable interest. At the same time, the Court held that interest on salary arrears and other non-EPF dues, in the absence of a uniform statutory rate, must be compensatory and not punitive, bearing a reasonable relationship to the nature, duration, and extent of the deprivation suffered by the employees/workmen.
Statutory interest under Section 7-Q of the EPF Act operates by force of law upon delayed payment of provident fund dues and cannot be defeated merely because the principal liability was subsequently discharged, clarified the Court.
The Apex Court directed one-time sum of Rs. 1 lakh to each daily-wage employee/workman engaged during the relevant period, in addition to amounts already disbursed, to balance equities and bring finality without prolonging the dispute further. The Court also directed the State to publish updated particulars of all employees/workmen on official websites within four weeks, including status of claims, amounts disbursed, and contact details of Nodal Officers; interest amounts to be computed and disbursed within three months.
A Two-Judge Bench comprising Justice Sandeep Mehta and Justice Vikram Nath observed that while substantial compliance with the directions issued on 29th May 2026, has been reported, certain aspects of implementation continue to remain pending and are being attended to by the respective States. The Court noted that the States of Bihar and Jharkhand have undertaken extensive and repeated measures to trace the untraceable employees/workmen and their legal heirs, including publication of notices in newspapers and other modes of communication, and that all such efforts have been noted and acknowledged by the Committee.
On the question of daily-wage workers, the Court observed that daily-wage workers constitute a significant segment of the workforce and, notwithstanding the nature of their engagement, perform services which contribute to the functioning of the establishment. The mere description of a person as a daily-wage worker cannot, by itself, detract from the dignity of the work performed or the services actually rendered. The Court further observed that a fixed daily wage of Rs.42.50, adopted as a uniform basis for computing the dues of workmen over a prolonged period extending from 1992 onwards, cannot constitute a fair and reasonable measure of their monetary entitlement, as it proceeds on the premise that the value of labour and the wages payable therefor remained static over a period spanning several decades.
On the question of interest on EPF dues, the Court observed that the amount standing to the credit of an employee by way of provident fund constitutes a statutory benefit accrued during the course of employment and is intended to provide financial security to the employee upon cessation of service, and such amount cannot be treated as an ordinary monetary claim capable of being withheld without the consequences prescribed by law. The Court also observed that interest, in its ordinary legal sense, represents compensation for the deprivation of the use of money to which a person is otherwise lawfully entitled, and the concept of interest is not confined to a return upon money borrowed or advanced, but extends to compensation for the unjust deprivation occasioned by the withholding of money beyond the time when it becomes due and payable.
The Court further observed that the States of Bihar and Jharkhand, as welfare States, under whose exclusive domain the Corporations existed and functioned, are equally required to ensure that the legitimate rights and entitlements of their employees/workmen are not rendered illusory by the subsequent failure or cessation of functioning of State-owned instrumentalities. At the same time, the Court observed that the award of interest in exercise of its equitable or constitutional jurisdiction cannot be permitted to assume the character of a punitive levy upon the public exchequer, and the rate of interest must bear a reasonable relationship to the nature of the deprivation, the period for which the dues remained unpaid, and the prevailing economic conditions.
Briefly, the present proceedings trace their origin to the reorganisation of the erstwhile State of Bihar under the Bihar Reorganisation Act, 2000, which led to the constitution of the State of Jharkhand. The reorganisation gave rise to disputes concerning the apportionment and discharge of liabilities, dues, and service-related claims of employees/workmen of five State-owned inter-State corporations, namely, 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), and Bihar State Panchayati Raj Financial Corporation Ltd. (BPRFC).
The litigation history, including the proceedings in Kapila Hingorani v. State of Bihar [(2003) 6 SCC 1] and the constitution of a Committee under the Chairmanship of Justice Dinesh Maheshwari, Judge (Retd.), Supreme Court of India, was dealt with in detail in the Court’s order dated 29th May 2026. By the said order, the Court accepted the Committee’s Final Report dated 30th April 2026, thereby bringing finality to those matters. Pursuant to that order, the States of Bihar and Jharkhand filed compliance affidavits in August 2026, reporting disbursement of principal dues to the identified and verified employees/workmen.
Out of the total 2,274 verified employees/workmen, dues have been fully disbursed to 2,074 employees/workmen, while approximately 200 residual cases remain pending on account of employees being untraceable or for want of requisite documentation. Three issues were left open for determination by the Court in the 29th May 2026 order, namely: (i) identification and verification of remaining employees/workmen; (ii) entitlement of daily-wage workmen to lump-sum compensation and welfare/death compensation; and (iii) entitlement to and rate of interest on delayed payment of salaries/wages, retiral dues, provident fund amounts, and other consequential emoluments.
