The Jharkhand High Court has ruled that State Financial Corporations can independently decide employee salaries and service conditions without requiring prior approval from state governments. The judgment came from a Division Bench led by MS Sonak and Rajesh Shankar, reinforcing the autonomy granted under the State Financial Corporations Act, 1951.
The case stemmed from a dispute involving employees of the Bihar State Financial Corporation. After the Bihar government introduced the 6th Pay Revision for its staff in 2010, BSFC’s board decided to extend similar benefits to its employees using internal funds. However, the move was stalled as the corporation sought state approval, which was later denied due to concerns over financial losses.
This led to a prolonged legal battle, with employees approaching the court multiple times. While a Single judge had earlier allowed the corporation to implement the revision independently, BSFC challenged this decision, citing financial stress and arguing that state consent was mandatory.
The Division Bench rejected this argument. It clarified that the law grants corporations full authority over employee remuneration and service rules. The court noted that BSFC had earlier acknowledged financial stability and available funds when it approved the pay revision.
It also found the corporation’s later withdrawal of benefits to be unjustified and possibly influenced by external pressure. The judges observed that the financial position cited by the corporation did not justify denying employees revised pay.
With this, the court dismissed the appeal, affirming that such corporations are empowered to make independent decisions on employee compensation without state interference.
