Ratio Decidendi of a case can be defined as the material facts of the case plus the decision thereon. Suppose that in a certain case facts A, B and C exist; and suppose that the court finds that facts B and C are material and fact A immaterial, and then reaches conclusion X (e.g. Judgment for the plaintiff, or judgment for the defendant). Then the doctrine of precedent enables us to say that in any future case in which facts B and C exist, or in which facts A and B and C exist, the conclusion must be X. If in a future case, facts A, B, C and D exist, and fact D is held to be material, the first case will not be a direct authority, though it may be of value as an analogy.
Ratio decidendi means the reason or the principle upon which the case has been decided by the higher Courts and only this much is binding on the subordinate courts while applying the earlier decision. The ratio decidendi can be ascertained by an analysis of facts. There is a difference between the ratio decidendi or the basis of reasons or the principles underlying a decision and the ultimate relief granted or manner of disposal adopted in a given case.
In another case Krishna Kumar vs.Union of India and others, it has been observed that: “In other words, the enunciation of the reason or principle upon which a question before a court has been decided is alone binding as a precedent. The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a pre-existing rule of law, either statutory or judge-made, and a minor premise consisting of the material facts of the case under immediate consideration. If it is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it.”
In case of Rajiv Singh Dalal (Dr.) Vs. Chaudhari Devilal University, Sirsa and another, Honourable Supreme Court, after referring to its earlier decisions, has observed that: The decision of a court is a precedent, if it lays down some principle of law supported by reasons. Mere casual observations or directions without laying down any principle of law and without giving reasons do not amount to a precedent.