The first two Slokas were spoken by the Chandala. Now in response to the Chandala, the actual text begins with the reply of Bhagavan Sankara.
The First Verse indicates the mahavakya "prajnanam Brahma".
In the four verses of this text the last line is the same - चन्दलोअस्तु स तु द्विजोअस्तु गुरुरित्येषा मनीषा मम. First let us see the meaning of this. Bhagavan Sankara says that whether one be a Chandala or a Brahmin, as long as his conviction is firm, he is my Guru.
The conviction that Bhagavan Sankara is talking about is the knowledge of the oneness of jiva and Brahman. One who knows this, the purport of all Upanishads- is my Guru, says Bhagavan Sankara. Chandala means a dog-eater, meaning an outcaste. Dvija means twice born, referring to a Brahmin. Man is born as a Sudra but by polished culture and refinement in character he becomes a Brahmana. So what Bhagavan Sankara is indicating is whether a person is of the lowest stature or the highest, as long as his knowledge and conviction is firm, he is my Guru.
This conviction is defined in four different ways in these four Slokas. As already mentioned, in this Verse 1 the conviction is the Upanishadic statement "Prajnanam Brahma". What is this, is explained in the first three verses.
What is the firm conviction - That I am that seer experienced in all the three states. I am that seer, without getting contradicted or negated- as one state negates another). Moreover I am not just substratum of the three states, but this Self is present in all the objects and beings - from Brahma to a clump of grass. So this prajna is not limited to me but is all pervading, i.e prajnam Brahma. Whatever names and forms I am seeing is of that prajna only.
The path of drig-disya viveka, the "seer-seen" relationship is used for inquiry here. Whatever is seen, including the mind and thoughts is not Consciousness. But I that Consciousness is the seer of everything including the mind.
This Self is clearly manifested in all the three states, that Self I am, and not that which is seen. Indirectly Sankara is hinting that the Self is the ultimate seer.
Viveka is needed when two things are mixed up. Differentiation of gross things is relatively easy, but to differentiate the subtle from the gross is difficult and needs a subtle mind.
Definition of Jagrat- the sense organs are perceiving all objects. Consciousness is clearly perceived in the waking state.
Svapna - when all sense organs are withdrawn and the samsakaras collected in the waking state are projected and becomes the objects of the dream. Awareness is there so I am aware of dream
Deep sleep - In which all my sense organs are merged, and the buddhi is also merged in the causal body. Pratyabhigna is there, so I am also in deep sleep
Implication of saying that I am there in all three states is that I am eternal. These states are contradicted but not me. as all these states and the objects perceived in those states are only "drisya"- be they gross or subtle.
Drisya is that which is known and is an object of perception.
The Acharya says I am drig and not drisya. When we inquire, starting from the gross objects outside to the sense organs and then to the mind and finally even to the illuminator of the mind we arrive at Consciousness which never becomes an object of perception. This is drig-disya-viveka employed here.
This Consciousness pervades all - from Brahma to a clump of gross and is saakshi(witness) not only of me, but of this entire world. and that saakshi is ME, one who knows this is my Guru..This is prajna brahma as Brahma is sarva vyapak (all pervasive).
Hence to summarize
(1) Verse 1 talks about the Upanishadic Statement "prajnanam Brahma"
(2) Verse 1 uses a combination of the techniques drig-disya- viveka and anvaya vyatireka.
The all-pervasiveness of the Absolute is anvaya. (By saying that this Consciousness pervades all from Brahma to a clump of grass)
The distinctness of the Absolute is the vyatireka. (By saying that the Self is separate and a witness to all the three states of Consciousness and their objects)
Note:When the pot exists, so too does the clay. But when the pot is broken, the clay still exists. Therefore, we conclude that the clay is real while the pot is only mithyA. Similarly, when the world and thoughts are present, we exist and when these are absent, as in deep sleep, we still exist. Consequently, we must conclude that who we really are - the Atman - is real, while the world, including body and mind etc. is mithyA. This logical process is called anvaya vyatireka (anvaya means "connection, association"-; vyatireka means "distinction, separateness, exclusion").
One who knows the Self as such, and as his own Self, he be it a Chandala or a dvija is my Guru, this is my conviction says Bhagavan Sankara.