Ratio decidendi determines the binding principle of a judgment, while obiter remains persuasive but non-binding. The binding legal rule is the ratio decidendi - the principle found by reading a judgment in light of the questions actually before the court; observations unnecessary to the decision are obiter dictum, non-binding though persuasive. Courts should not treat isolated phrases, factual findings, or concessions as binding law, and subordinate courts must follow principles declared by the apex court on points properly decided.