The settled law that obiter dicta are not binding can be found discussed in the Supreme Court's judgment in Property Owners Association vs. State of Maharashtra (2024), particularly in its analysis of prior rulings like Sanjeev Coke and Ranganatha Reddy. The Court clarified that observations in a judgment which are not part of the ratio decidendi — i.e., not necessary for the decision of the case — do not have binding precedential value.

The Issue of Obiter Dictum:

• The issue of obiter dictum arose prominently in the context of the respondents' reliance on Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536, a decision by a nine-judge bench. In Mafatlal, Justice Jeevan Reddy, speaking for the majority, observed that "the material resources of the community are not confined to public resources but include all resources, natural and man-made, public, and private owned."
  • This statement was cited to support the expansive interpretation of Article 39(b) adopted in State of Karnataka v. Ranganatha Reddy (1977) 4 SCC 471 and Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Ltd. (1983) 1 SCC 147, which included privately owned resources within the ambit of "material resources of the community."
  • The appellants challenged the authority of this observation, arguing that it was obiter dictum, as it was not central to the ratio decidendi of Mafatlal, a case primarily concerned with excise duties rather than property rights or Article 39(b).
  • The respondents countered that the observation, made by a nine-judge bench, carried significant weight and reinforced the settled interpretation of Article 39(b), aligning with the Court's consistent jurisprudence.
• Obiter dictum refers to remarks or observations made by a judge that are incidental to the main issue being decided and thus lack binding precedent.
  • Unlike the ratio decidendi—the core reasoning that resolves the case—obiter dicta are persuasive at best, depending on context, the bench's composition, and their alignment with established law.
  • The Supreme Court examined the Mafatlal observation carefully. The appellants argued that the remark on material resources was extraneous and should not be treated as binding precedent.
  • The respondents emphasized the stature of the nine-judge bench and consistent jurisprudence supporting the broader reading of Article 39(b).
• The Solicitor General urged that the Mafatlal observation be seen as authoritative.
  • He pointed to repeated endorsements in cases like State of Tamil Nadu v. L. Abu Kavur Bai (1984) 1 SCC 515 and National Textile Corp Ltd. v. Sitaram Mills Ltd. (1986) AIR SC 1234.
• The Court's Findings:
  • The Chief Justice classified the Mafatlal observation as obiter dictum, since Mafatlal dealt with excise duty disputes, not acquisition of private property.
  • However, the Court acknowledged its persuasive value, given its consistency with the broad interpretation of Article 39(b) seen in Sanjeev Coke and Ranganatha Reddy.
• The Court's broader analysis:
  • Critiqued the appellants' reliance on Ranganatha Reddy's majority opinion, which did not substantially engage with Article 39(b).
  • Clarified that Sanjeev Coke, adopting Justice Krishna Iyer's minority view, was a deliberate and binding choice by a five-judge bench.
  • Referred to Central Board of Dawoodi Bohra v. State of Maharashtra (2005) 2 SCC 673 to underscore that smaller benches are bound by larger benches' rulings.
• Commitment to constitutional coherence:
  • The Court highlighted the importance of directive principles like Article 39(b) in achieving social justice.
  • It rejected the argument that Mafatlal promoted a specific economic ideology, reaffirming that legislative flexibility exists subject to judicial review for the common good.
• Implications of classifying Mafatlal observation as obiter:
  • The Court preserved Sanjeev Coke's binding authority while recognizing Mafatlal's persuasive influence.
  • This maintained judicial flexibility and upheld the dynamic interpretation of constitutional principles like Article 39(b).

The Highlight of the Case:

• The specific holding:
  • "The single-line observation in Mafatlal is obiter dicta" and therefore not binding precedent.
  • The Court noted that Sanjeev Coke erred in relying on the minority view in Ranganatha Reddy, which did not constitute binding ratio.

Thus, the Settled Law:

• Obiter dicta, even if made by a coordinate or larger bench, do not bind subsequent benches unless they form part of the ratio decidendi.

Case Title: Property Owners Association Vs. State of Maharashtra 
Date of Order: November 5, 2024
Case No.: Civil Appeal No. 1012 of 2002 and connected matters
Neutral Citation: 2024 INSC 835
Name of Court: Supreme Court of India
Name of Judge: Dr. D.Y. Chandrachud, C.J.I., Hrishikesh Roy, J.B. Pardiwala, Manoj Misra, Rajesh Bindal, S.C. Sharma, Augustine George Masih, B.V. Nagarathna, and Sudhanshu Dhulia, JJ.

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Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: ajayamitabhsuman@gmail.com, Ph no: 9990389539