Some workmen's dues disputes outlive the states that generated them, in the sense that an undivided Bihar created the obligation and a divided Bihar and Jharkhand were left arguing, decades later, over who was supposed to pay it. The Supreme Court brought a measure of finality to one such dispute on 28 September 2026, in a writ petition that traced its roots to the Bihar Reorganisation Act, 2000, and the carve-out of Jharkhand from undivided Bihar.
The petition, filed by the Bihar State Ardh Sarkari Arajpati Karamchari Maha Sangh, concerned daily-wage workmen employed by five defunct state-owned inter-State corporations whose liabilities, following the state's bifurcation, fell into a jurisdictional no-man's-land between the two successor states. Each side could point to the other as the entity responsible for discharging what the workmen were owed, while the workmen themselves, many of whom had worked for these corporations since the early 1990s, went without full payment for a quarter of a century.
At the centre of the dispute was a daily wage rate of ₹42.50, fixed and applied from 1992 through to each workman's retirement, death or formal cessation of service, a rate that had plainly been overtaken by inflation and by any reasonable measure of fair compensation over the following decades. The two states' position, implicit in their resistance to the claim, was that whatever liability existed belonged to the defunct corporations as separate legal entities, and that the states themselves, as shareholders or sponsors of those corporations, bore no personal obligation once the corporate vehicle had ceased to function.
Justices Vikram Nath and Sandeep Mehta were unwilling to let that argument carry the day. Bihar and Jharkhand, the Court held, functioned as welfare states in whose domain these corporations operated, and that status carried with it a responsibility to ensure that workmen's entitlements were not rendered illusory merely because the corporate structure through which they were employed no longer existed. The separate corporate personality of a defunct state-owned corporation is a familiar shield in company law, but the Court was not prepared to let it be used to defeat basic wage entitlements owed to the people who actually did the work the corporation was created to carry out.
The relief granted combines a fixed one-time payment with ongoing interest obligations calculated to compensate for decades of delay. Both states were directed to pay a one-time sum of ₹1,00,000 to each daily-wage workman, over and above whatever amounts had already been disbursed to them over the years. On top of that lump sum, the Court directed simple interest at twelve per cent per annum on delayed EPF dues and six per cent per annum on delayed salary and other dues, a differential rate that treats provident fund arrears, often a worker's only real retirement security, more seriously than ordinary wage arrears.
A practical problem gets the judgment's attention too: tracing workmen across twenty-five years, during which many will have died, relocated, or simply become difficult to locate through the corporations' old employment records. Untraced workmen, or their legal heirs where the workman has since died, may approach the Nodal Officer appointed for the relevant corporation within twelve months of the judgment, armed with the documentation needed to establish their entitlement, rather than being left to track down a cause of action that predates most of their working lives.
For state governments and their public sector undertakings generally, the ruling is a pointed warning against treating the corporate form as a permanent shield once a state-owned entity winds down or ceases to function. Workmen's claims against defunct corporations do not simply evaporate with the corporation's own demise, and a state that sponsored or controlled the corporation during its operative years can be made to answer for unpaid dues even decades afterward, particularly where the delay itself has compounded the harm through decades of inflation eating into a wage rate frozen at 1992 levels.
The reorganisation-era liability questions this case raises are not unique to Bihar and Jharkhand, and other states that split during the same period, or have since wound down state corporations, face comparable factual exposure. The Court itself, however, framed its specific reliefs as resting on the peculiar facts before it rather than as a general or binding principle for claims arising in different settings, so other states should not assume the same Rs 1 lakh payment or interest formula applies automatically to their own legacy disputes.