What is binding Precedent for lower Court ?

A decision of a Court is a precedent if it lays down some principle of law Supported by reasons.

Mere casual observations or directions without laying down any principle of law and without giving reasons does not amount to a precedent.

 In State of Punjab vs. Baldev Singh (1999) 6 SCC 172, a Constitution Bench of this Court observed (vide para 43) that a decision is an authority for what it decides (i.e. the principle of law it lays down, and not that everything said therein constitutes a precedent.

 In Divisional Controller, KSRTC vs. Mahadeva Shetty and Another (2003) 7 SCC 197 (vide para 23, this Court observed that the only thing binding as an authority upon a subsequent Judge is the principle upon which the case was decided.

 As observed by this Court in State of Orissa vs. Sudhansu Sekhar Misra, AIR 1968 SC 647 vide para 13):-

“A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it. On this topic this is what Earl of Halsbury, LC said in Quinn vs. Leathem, 1901 AC 495 :

“Now before discussing the case of Allen vs. Flood (1898) AC 1, and what was decided therein, there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical Code, whereas every lawyer must acknowledge that the law is not always logical at all.”

(Emphasis Supplied)

 In Ambica Quarry Works vs. State of Gujarat and others (1987) 1 SCC 213 (vide para 18) this Court observed:-

“The ratio of any decision must be understood in the background of the facts of that case. It has been said long time ago that a case is only an authority for what it actually decides, and not what logically follows from it.”

 In Bhavnagar University vs. Palitana Sugar Mills Pvt. Ltd (2003) 2 SC 111 (vide para 59, this Court observed :-

“It is well settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision.”

(Emphasis Supplied)

 As held in Bharat Petroleum Corporation Ltd. and another vs. N.R. Vairamani and another, AIR 2004 SC 4778, a decision cannot be relied on without disclosing the factual situation. In the same Judgment this Court also observed :

“Court should not place reliance on decisions without discussing as to how the factual situation fits in with the fact-situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid’s theorems nor as provisions of the statute and that too taken out of the context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.

In London Graving Dock Co. Ltd. vs. Horton (1951 AC 737 at p. 761, Lord Mac Dermot observed:

“The matter cannot, of course, be settled merely by treating the ipsissima vertra[words actually spoken] of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge.”

In Home Office vs. Dorset Yacht Co. (1970 (2) All ER 294) Lord Reid said, “Lord Atkin’s speech …. is not to be treated as if it was a statute definition it will require qualification in new circumstances.” Megarry, J. in (1971) 1 WLR 1062, observed: “One must not, of course, construe even a reserved judgment of Russell L. J. as if it were an Act of Parliament.” And, in Herrington vs. British Railways Board (1972 (2) WLR 537) Lord Morris said :

“There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case.”

Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.

The following words of Lord Denning in the matter of applying precedents have become locus classicus :

“Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo, J.) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.”

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“Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path of justice clear of obstructions which could impede it.”