A law declared by the Supreme Court is binding on all courts. What is binding is the ratio of the decision, that is, the principles enunciated and the conclusion reached by the court. Observations in a decision on issues which were not required to be decided are obiter dicta which are not binding on the Supreme Court. However high courts and lower courts are bound by the considered obiter dicta of the Supreme Court. For example, in a suit filed for damages for breach of contract there is a two-fold defence, namely, that the suit is barred by limitation and in any event the contract stand frustrated by reason of subsequent legislation. The Supreme Court upholds the plea of limitation and the suit stands dismissed. That is the end of the matter. However the Supreme Court may consciously make observations on the recurring and important question of frustration which arose in the case before it. These considered obiter dicta are binding on the high courts.

But any and every observation of the Supreme Court is not binding. For example, in taking a bird’s eye view of the Sea Customs Act, Senior Justice N.H. Bhagwati observed that the maximum penalty leviable under the Act was Rs 1000, when the question did not at all arise. This observation was rightly described by Chief Justice M.C. Chagla as a casual observation which was not binding. The Supreme Court in subsequent judgments endorsed Chagla’s view.

There is another category of Supreme Court observations. In the controversial Supreme Court order dated December 6, 2007, of Justices A.K. Mathur and Markandey Katju, the actual question which arose was whether in a civil suit, not a PIL, a court can order the executive to create the post of a tractor driver to absorb the malis. The court rightly concluded that a civil court has no jurisdiction to pass such an order and set it aside. That should have been the end of the matter.

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