The Supreme Court of India in Career Institute Educational Society vs. Om Shree Thakurji Educational Society, Special Leave to Appeal (C) Nos. 7455-7456/2023 stated:-
"The distinction between obiter dicta and ratio decidendi in a judgment, as a proposition of law, has been examined by several judgments of this Court, but we would like to refer to two, namely, State of Gujarat & Ors. vs. Utility Users’ Welfare Association & Ors. and Jayant Verma & Ors. vs. Union of India & Ors..
The first judgment in State of Gujarat (supra) applies, what is called, “the inversion test” to identify what is ratio decidendi in a judgment. 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 Jayant Verma (supra), this Court has referred to an earlier decision of this Court in Dalbir Singh & Ors. vs. State of Punjab to state that it is not the findings of material facts, direct and inferential, but the statements of the principles of law applicable to the legal problems disclosed by the facts, which is the vital element in the decision and operates as a precedent. Even the conclusion does not operate as a precedent, albeit operates as res judicata. Thus, 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."
A Constitution Bench of the Supreme Court in Islamic Academy of
Education vs State of Karnataka reported in 2003 INSC 391 observed as under:
“2. …The ratio decidendi of a judgment has to be found out
only on reading the entire judgment. In fact, the ratio of the judgment is what is set out in the judgment itself. The answer to the question would necessarily have to be read in the context of what is set out in the judgment and not in isolation. In case of any doubt as regards any observations, reasons and principles, the other part of the judgment has to be looked into. By reading a line here and there from the judgment, one cannot find out the entire ratio decidendi of the judgment. …”
In Secunderabad Club vs CIT reported in 2023 INSC 736 the Supreme Court had the occasion to delineate how to cull out the ratio decidendi of a judgment and identify the principles which have precedential value. The Supreme Court observed:
“14….According to the well-settled theory of precedents,
every decision contains three basic ingredients:
(i) findings of material facts, direct and inferential. An
inferential finding of fact is the inference which the judge
draws from the direct or perceptible facts ;
(ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and
(iii) judgment based on the combined effect of (i) and (ii)
above.
For the purposes of the parties themselves and their privies,
ingredient (iii) is the material element in the decision, for, it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedent, ingredient (ii) is the vital element in the decision. This is the ratio decidendi. It is not everything said by a judge when giving a judgment that
constitutes a precedent. The only thing in a judge's decision
binding a party 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 ratio decidendi.”