Doctrine of Territorial Nexus: Explained with Key Case Laws under Indian Constitution

In India, the power to legislate is vested in the Parliament and the State Legislatures. This authority to create laws is conferred upon the Parliament and State Legislatures by the Constitution, based on the distribution of powers. India has adopted a federal constitution, one of its key features being the division of powers between the Center and the States.

Provisions regarding the distribution of legislative powers between the Center and the States are outlined in Chapter I of Part XI of the Constitution. But what happens when the law crosses territorial boundaries? This is where the principle of territorial relation comes in. This is what we will understand in this article.

Distribution of Legislative Powers:

In the Constitution, the distribution of legislative powers between the Centre and the State has been done on the following basis –

1. Subject matter
2. Regional / Provincial

Jurisdiction related to the subject matter:

Article 246 Outlined the subjects on which the Parliament and the State Legislature make laws. According to this-

 Union List (List 1): Parliament has the exclusive power to legislate on 97 subjects mentioned here, including defence, foreign affairs and atomic energy.

State List (List 2): State legislatures have the power to legislate on matters relating to 66 subjects such as police, public health and agriculture.

Concurrent List (List 3): Both Parliament and state legislatures have the power to legislate on 47 subjects, including criminal law, marriage and bankruptcy.

Regional/Territorial Jurisdiction:

Article 245 provides for the territorial jurisdiction of Parliament and State Legislature to make laws.

Clause 1 :  Under this, Parliament is Empowered to legislate for the entire territory of India or any part of it, whereas the State Legislature can make laws for its entire state or any part of it. This power of Parliament and State Legislature is called regional/territorial jurisdiction. In other words, Parliament and State Legislature can legislate and enforce laws only within their designated territory.

Clause 2 :  However this clause states that no law made by Parliament will be considered invalid based on extraterritorial enforcement. That is, the law of Parliament can be enforced extraterritorially beyond its jurisdiction. In other words, Parliament has the power to legislate laws with extraterritorial application, extending beyond the borders of India.

 Territorial Jurisdiction of Parliament

As explained earlier, the Parliament and the State Legislatures have the power to make and enforce laws in their respective territories. However, clause 2 of Article 245 empowers the Parliament to make laws that apply beyond its territorial jurisdiction, i.e. extraterritorial jurisdiction.

Example: Rakesh and Rajani, who both live in Paris, come under the purview of the Hindu Marriage Act, 1955 in matters such as divorce despite living outside India. This shows how laws made by the Parliament can apply to persons or circumstances outside the Indian territory.

A.H. Wadia Case and the Doctrine of Territorial Nexus

In the landmark case of A.H. Wadia vs. Commissioner of Income Tax Bombay (AIR 1949 FC 181), it was held that a law enacted by a sovereign legislative authority cannot be challenged in a domestic court on the grounds that it applies beyond the territory of India. Even if such laws do not adhere to the principles of international law or face practical difficulties in implementation, these issues are considered matters of policy and not subject to judicial review. In simple terms, if a law enacted by the supreme legislative authority has extraterritorial enforcement, its validity cannot be questioned based on such enforcement.

Understanding the Doctrine of Territorial Nexus

The Parliament holds the power to legislate within its territorial boundaries as well as beyond, through extraterritorial enforcement. On the other hand, the State Legislature is confined to making and implementing laws within its territorial jurisdiction. However, an exception to this rule is embodied in the Doctrine of Territorial Nexus.

Definition:

This doctrine states that “if there is a real connection between the subject matter of a law enacted by the State Legislature and the state itself, such a law can be enforced outside the territorial boundaries of the state.” This principle is called the Doctrine of Territorial Nexus.

Essential Conditions of the Doctrine of Territorial Nexus

Extraterritorial enforcement of a law under this doctrine is valid only if the following conditions are met:

1. Real Connection: There must be a genuine connection between the subject matter of the law and the state enacting it.
2. Relevant Responsibility: The obligation or responsibility imposed by the law must be related to the state’s territory.

Only when these conditions are satisfied can extraterritorial enforcement of the law be considered valid under this doctrine.

Key Judgments on the Doctrine of Territorial Nexus

A.H. Wadia v. Commissioner of Income Tax, Bombay (AIR 1949 FC 181)

This case dealt with income tax, where it was held that a law imposing tax cannot be challenged for being extraterritorial if there exists a genuine connection between the individual liable to pay tax and the country imposing the tax. However, this connection must be real, and the liability imposed should be incidental to it.

Important Judgments Supporting the Doctrine of Territorial Nexus:

1. Wallace v. Commissioner of Income Tax, Bombay (AIR 1948 PC 118)

In this case, a British company was a partner in an Indian firm, and the Indian income tax authorities levied a tax on the company’s entire income. The Privy Council upheld this taxation, asserting that the doctrine of territorial connection applied since the majority of the company’s income originated in India. Thus, the connection with India was sufficient to validate the tax.

2. State of Bombay v. R.M.D.C. (AIR 1957 SC 699)

Here, the State of Bombay enacted a tax on lotteries and prize advertisements, which was also levied on a newspaper published in Bangalore but circulated in Bombay. The Court upheld the tax, stating that there was a proper territorial connection. For such taxation to be valid:

•  There must be a real connection between the subject matter and the taxing state.
•   The liability imposed should be incidental to the connection.

3. Tata Iron & Steel Co. Ltd. v. State of Bihar (AIR 1958 SC 4522)

This case revolved around the imposition of sales tax by the State of Bihar on goods sold outside the state. The Court ruled that a state cannot tax transactions that occur outside its boundaries, emphasizing that taxes can only be imposed on sales happening within the state’s territory.

4. Shrikant Bhalchandra Karulkar & Others v. State of Gujarat & Others (1994 SCC 52)

The appellants challenged a provision of the Gujarat Agricultural Land Ceiling Act, 1960, arguing that its extraterritorial effect was beyond the state’s legislative power under Article 245. The Supreme Court upheld the law, citing the doctrine of territorial connection, as the lands outside the state were inseparably connected to the lands within Gujarat.

5. State (NCT of Delhi) v. Brijesh Singh Alias ​​Arun Kumar & Ors. (2017 SC 2)

The Court emphasized that if a territorial nexus exists, such as between charge sheets filed in Uttar Pradesh and the State of Delhi under MCOCA, extraterritorial application of the law cannot be deemed invalid.

Conclusion

The doctrine of territorial nexus is crucial in determining the jurisdictional reach of laws. By establishing a genuine connection between the territory of a state and the subject matter, this doctrine helps define the boundaries of legislative competence and ensures legal enforcement in an orderly manner.

A state’s sovereignty allows it to regulate persons, things, and events within its borders. However, this doctrine extends that authority beyond territorial boundaries when a substantial and direct connection exists, upholding the principles of justice and fairness.

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