Not everything said by a judge while pronouncing judgment constitutes precedent: Supreme Court

The Supreme Court recently observed that not everything said by a Judge when pronouncing a judgment constitutes a precedent [Career Institute Educational Society v. Om Shree Thakurji Educational Society]..A Bench of Justice Sanjiv Khanna and Justice MM Sundresh observed that, "It is not everything said by a judge when giving judgment that constitutes a precedent. The only thing in a judge's decision binding as a legal precedent is the principle upon which the case is decided, and for this reason, it is important to analyse a decision and isolate from it the obiter dicta.".The Bench noted that although there are many judgments on the distinction between ratio decidendi and obiter dicta, two verdicts hold the field, namely, State of Gujarat v Utility Users’ Welfare Association and Jayant Verma v Union of India.The first judgment in Utility Users applies what is called, “the inversion test” to identify what is the ratio decidendi in a judgment, the Court said."To test whether a particular proposition of law is to be treated as the ratio decidendi of the case, the proposition is to be inversed, i.e. to remove from the text of the judgment as if it did not exist. If the conclusion of the case would still have been the same even without examining the proposition, then it cannot be regarded as the ratio decidendi of the case."In the Jayant Verma judgment, the Court held that it is not the findings on material facts, but the statements of the principles of law applicable to the legal problems disclosed by the facts, which are the vital elements of the decision and operates as precedent..The Court made these observations while dismissing a special leave petition in an arbitration matter, noting that there was no merit in the case.The judgment in Vidya Drolia v. Durga Trading Corporation did not examine and decide the issue of the effect of unstamped or under-stamped underlying contract on the arbitration agreement, the Court observed. Thus, the judgment in Vidya Drolia is not a precedent on this question of law, the Court added."As this issue and question has not been decided in Vidya Drolia, the decision is not a precedent on this question...It is apparent from the aforementioned paragraphs in Vidya Drolia (supra) that reference to the decision in Garware Wall Ropes Limited (supra) was made to interpret the word ‘existence’, and whether an ‘invalid’ arbitration agreement, can be said to exist? This examination was to decide "who decides existence of an arbitration agreement” in the context of Sections 8 and 11 of the Arbitration and Conciliation Act, 1996.".The petitioner was represented by Senior Advocate Rajive Bhalla along with Advocates Amit Aggarwal, Sumeir Ahuja, Deepak Samota, Yajur Bhalla, Jaisurya Jain, Ashish Vajpayee, Akansha Gulati, Ragini Sharma and Shubham Bhalla.The respondent was represented by Advocate Pinki Aggarwal..[Read Order]