The KSRTC will settled the dues partially utilising Rs 50 crore allotted by the Government and Rs 10 crore in hand.
The salary and coupons should be disbursed by September 6.
The cabinet also decided to hand over to Kochi Metro Rail Corporation Ltd the works of Light Metro projects in Thiruvananthapuram and Kozhikode, and three flyovers.
The court intervened while considering the plea submitted by the Corporation's employees asking the state government to prioritise salary disbursement.
The pay and allowances for legislators and Ministers were revised last in 2018. The Government has decided to effect a pay hike considering the increase in living expenses.
A total of Rs 79 crore is needed to distribute the salary to all the employees with the KSRTC.
Minister Antony Raju also said that the government was providing funds for payment of salaries of the employees.
The BMS and the INTUC-led unions have decided to continue with their strike, demanding salary disbursal on time every month.
The court, however, reserved its judgment on blocking the salary of the managing director of KSRTC.
The approval comes on the back of a letter that had been submitted by the KSRTC MD to the Finance department requesting Rs 65 crore to pay the salaries of employees.