Judicial Precedents

What is a ‘Precedent’ in the eyes of law? Which ‘Precedent’ should be followed or what it means to follow a precedent? As to whether each and every judgment delivered by the Courts binding or not as a ‘Precedent’ as one gets easily lost in the maze of case law, while Article 141 of the Constitution of India binds all Courts and Tribunals within the territory of India to follow the law laid down by the Supreme Court of India. Interwoven issue of judicial discipline and precedents required to be strictly followed/applied has always waffled my mind as Hon’ble Supreme Court of India in the case of Union of India and Other V/s. Kamalakshi Finance Corporation, wherein the Hon’ble Apex Court made a very significant observation on the issue of judicial discipline, as under:

 “ The principles of judicial discipline require that the orders of the highest appellate authority should be followed unreservedly by the subordinate authorities”.

2. Recent judgment dated 11.03.2021 of Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs  Deputy Commissioner of Income Tax, Central Circle 1, Belgaum, raised my quest once again. Let us find out what is a ‘Precedent’ and before that, let us note down a few important words and phrases relevant to the context:

[i] Ratio decidendi – means the principle or reasons underlying a decision apart from the special peculiarities of the case or means the reasons for deciding the legal point.

[ii]   Ratio legis est anima legis – The reason of law is the soul of law.

[iii] Obiter dicta – decision on points not necessary to decide, an incidental remark or observation.

[iv] Stare decisis – a common law doctrine derived from ‘stare decisis et non quieta movere’ and operates as to the rule of law involved and binds everyone..

3. Their Lordships of Hon’ble Bombay High Court have lit the lights on ‘What is a Precedent’, while taking note of works of prominent authors, as part of the judgment in the case of Mohd. Farhan A. Shaikh (supra), as under:

A) Salmond defines a precedent as a judicial decision, “which contains in itself a principle. The underlying principle, which thus forms its authoritative element, is often termed the  “ratio decidendi”.” According to him, it is “the “abstract ratio decidendi”which alone has the force of law as regards the world at large.”

B) Professor John Chipman Gray, in his “The Nature and Sources of the Law [(2d ed. 1921) 261]” stresses that “it must be an opinion the formation of which is necessary for the decision of a particular case; in other words, it must not be “obiter dictum”.”

C) Putting both the above views in perspective, Allen in his Law in the Making [(2d ed. 1930) 155], observes that “any judgment of any Court is authoritative only as to that part of it, called the ratio decidendi, which is considered to have been necessary to the decision of the actual issue between the litigants.

D) Professor Morgan of the Harvard Law School has given these propositions: (a) The Court must have applied a rule of law;(b) Its application is a must for determining the issues presented; (c) Only that rule of law as applied to the facts of the case is treated as the ratio.

4. As a student of law, when we go through any decision or every decision, we find that it contains three basic ingredients:

For the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision and that ingredient constitutes the “Ratio decidendi”.

5. Having understood as to what can be successfully quoted as ‘Precedent’, it is further of importance to understand ‘Why Precedents’ and What is the justification for precedent? Why should a court be required to follow earlier judicial decisions as no two cases are completely alike, so if precedents are to constrain, they must not do so where there are factual dissimilarities. My Lords of Bombay High Court take note of Alexander, as quoted in Llyod’s Introduction to Jurisprudence, and the three models justifying precedential constraint which can be found in the literature:

a) The “natural model” argues that past decisions naturally generate reasons for deciding cases in the same way as previous ones. Equality and reliance are commonly cited reasons.

b) The second model is the “rule model”. Under this model, the precedent court has authority “not only to decide the case before it but also to promulgate a general rule binding on courts of subordinate and equal rank”.

c) The third model is the “result model”. According to this model, the result reached in the precedent case, rather than any rule explicitly or simply endorsed by the precedent court, is what binds.

6. The next issue that comes across mind is What Binds as a precedent? A number of times, the courts may decide cases while avoiding the stating of any general principle of law and on the other hand qualifying their judgments with the phrases like “in the special circumstances of the case”, “on the facts,” and so on. Sometimes, the principle of a case may have been correctly stated, but the proposition may remain too wide, covering, in isolation, a wider swath than warranted. Some other times, the principle of a case, again, may have been correctly decided, but the proposition may remain too narrow, covering, in isolation, a narrow strip of facts. So what matters is what has been stated, not what could have been stated, not what has been in the record but missed out on. Then, a precedent gets its binding force based on only the facts stated. An issue raised not addressed or an issue that has altogether gone sub silentio cannot support a precedent. Hence a fact, however material, if is not considered by the court, then the case is not a precedent in future cases where a similar fact appears. Where a case presents two sets of facts, the Hon’ble judge may determine the first set of facts and then conclude on them but may not desire to determine the second set of facts. Any views he may express on the undetermined second set are accordingly obiter dicta. If, however, the judge does determine both sets, as he is free to do so, and concludes on both, then the case creates two principles, and neither is an obiter dictum.

7. How to find principles of a case to successfully quote as binding precedent. Professor Goodhart summarises the rules for finding the principle of a case:

The rules for finding what facts are material and what facts are immaterial as seen by the judge are these:

From the above what can be derived, in my humble conclusion, is that before any case law is relied upon as a ‘Precedent’ for reinforcing your case, is the crucial ‘Ratio Decidendi’ contained therein and that the case law is not having qualification like “in the special circumstances of the case”, “on the facts” and such like phrases. However, we may continue to face the fact that the Tax Officials, although Quasi-Judicial Authorities, will be denying justice by making a simple statement that the precedent being cited/relied upon by the assessee is distinguishable on facts without defining/pointing out such distinguishing facts and even in the face of elaborate law demanding judicial discipline.  Before parting with the topic, I take the liberty to quote the views of Hon’ble Supreme Court in Para 15 of the judgment cited as (2006) 282 ITR 273(SC)-Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors- it is of importance that Res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or precedential value of the earlier pronouncement. Where the facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incurium. However, these are fetters only on a co-ordinate Bench, which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior jurisdiction.