Court case(1989) 2 SCC 754

The doctrine of binding precedent promotes certainty and consistency in judicial decisions and is a necessity of a hierarchical court system. A pronouncement of law by a Division Bench of the Supreme Court binds a Division Bench of the same or a smaller number of judges, and the Court will depart from its own earlier decisions only in exceptional circumstances.

Section 92A, inserted in the Motor Vehicles Act 1939 in 1982, created a liability to pay a fixed sum of compensation in motor accident cases without proof of fault. Claimants whose accidents had occurred before 1982 sought that benefit, and conflicting decisions of the Supreme Court existed on whether the provision was retrospective. The matter was referred to a Constitution Bench, which had to decide both the statutory question and how the Court should treat its own inconsistent precedents.

Pathak CJ held that s. 92A was prospective only. On precedent, the Court gave a full statement of the doctrine: certainty and continuity in the law, and the orderly development of a legal system, require that the law declared by the superior court be followed; judges do make law, but as part of a tradition that values consistency. The Supreme Court may reconsider its decisions, but only in exceptional cases where the earlier decision is manifestly wrong or its continuance would cause injustice, and a bench of lesser or equal strength is bound by the earlier decision of a larger bench; a Division Bench of two judges must follow one of three or more. The Court traced the practice to the Government of India Act 1935 and the Privy Council and reviewed Bengal Immunity and Keshav Mills.