Law Cannot Change With Change Of Bench; Coordinate Bench's Decision Binding : Supreme Court

While granting customs duty exemption to Adani Power for electricity from a Gujarat SEZ, the Supreme Court faulted the Gujarat High Court for violating the principle of stare decisis, holding that it wrongly ignored a binding coordinate bench ruling and reiterating that the law cannot change with a change in Bench.

“The discipline of precedent is not a matter of personal predilection; it is an institutional necessity. Stare decisis et non quieta movere which means to stand by what is decided and not to disturb what is settled, is a working rule which secures stability, predictability and respect for judicial outcomes. The law cannot change with the change of the Bench.”, observed a bench of Justices Aravind Kumar and NV Anjaria, while allowing the Adani Power Ltd.'s appeal against the Gujarat High Court's 2019 order which failed to follow binding precedent laid down by a High Court's coordinate bench in 2015 on the legality of customs duty levied on electricity supplied from a Special Economic Zone (SEZ) to the Domestic Tariff Area (DTA).

Briefly put, in 2015, a division bench of the Gujarat High Court had struck down the levy of customs duty on electricity supplied from an SEZ to the DTA, holding the levy to be ultra vires and unconstitutional. That judgment was subsequently upheld by the Supreme Court, thereby attaining finality.

However, in 2019, another coordinate bench of the same High Court declined to extend the benefit of the 2015 ruling to later periods and notifications. The later bench attempted to confine the earlier decision to a specific notification and timeframe, effectively reopening a question that had already been settled.

Aggrieved by the High Court's decision, Adani Power appealed to the Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Aravind Kumar observed:

“In the present case, if the Division Bench in 2019 was of the opinion that the 2015 decision could not, or ought not, apply to the later notifications or to the later period, the proper course was to request that the question be placed before a larger Bench of the High Court. The Bench in 2019 did not do so. Instead, it narrowed the effect of the 2015 judgment and declined relief for the subsequent years. That course was impermissible. The 2019 Bench was bound by the declaration of law in 2015, unless duly referred to a larger Bench.”

Citing State of Uttar Pradesh v. Ajay Kumar Sharma (2016) 15 SCC 289, the Court said that once a coordinate Bench of a High Court has settled a question of law, a subsequent Bench of equal strength is bound to follow that view when confronted with the same issue.

“If the later Bench believes that the earlier view is so manifestly erroneous or inapplicable that it ought not to be followed, the later Bench must refer the matter to a larger Bench for reconsideration. What it cannot do is to sidestep or whittle down the earlier pronouncement by confining it artificially or by treating it as a fact-specific indulgence.”, the court added.

Appeal was allowed.

Cause Title: ADANI POWER LTD. & ANR. VERSUS UNION OF INDIA & ORS.

Citation : 2026 LiveLaw (SC) 3

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Appearance:

For Petitioner(s) Mr. P. Chidambaram, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Anshuman Srivastava, Adv. Mr. Rohan Talwar, Adv. Mr. Naman Agarwal, Adv. Mr. E. C. Agrawala, AOR

For Respondent(s) Mr. Raghvendra P. Shankar, A.S.G. Mr. Gurmeet Singh Makker, AOR Mr. Sharath Nambaiar, Adv. Mr. Diwakar Sharma, Adv. Ms. Satvika Thakur, Adv. Ms. B.sunita Rao, Adv. Mr. Ishaan Sharma, Adv.