Doctrine of Territorial Nexus – Indian Polity Notes

Federalism denotes the demarcation of powers between the Centre and the State. The division of power makes sure that there is independence over the executive and legislature. A federal character provided by the Indian Constitution established dual polity between the Union and the State. Both have certain sovereign powers, which are used in a manner as directed in the Constitution of India.

Under the Article 245 of the Indian Constitution, the Parliament can make laws for all extraterritorial operations or legislations for all or any part of India.

Similarly, the State Legislature has jurisdiction to make laws for all or any part of the state.

Thus, it can be concluded that both the Centre and State have clear demarcation of power to legislate in their own territorial jurisdiction.

Article 246 states that

• For all the matters enumerated in the Union List of the VII schedule, Parliament has the explicit power to make laws.
• For all the matters enumerated in the State List of the VII schedule, the State has the power to make laws.
• For all the matters enumerated in the Concurrent List of the VII schedule, both the Centre and State have the power to make laws.

However, under the Article 245 (2) of the Constitution, for any law made with respect to the extra-territorial operations by the Parliament, the validity of the law cannot be questioned.

The court, in such a case, is bound to enforce the law made with regards to the extra-territorial operations.

Legislative relation between Union and State

The Constitution provides for the division of the legislative powers in two ways:

• Distribution of the legislation powers with respect to the territory
• Distribution of the legislation powers with respect to the subject matters listed under the VIIth Schedule

Distribution of the legislation powers with respect to the territory

• Under the Article 245 (1) of the Indian Constitution, Parliament can make laws for all or any part of the Indian territory.
• Parliament can also make laws on extra-territorial operations, and the courts cannot invalidate them on the grounds that they are not applicable outside India.

A.H Wadia vs Income Tax Commissioner

In the A.H Wadia vs Income Tax Commissioner case, it was held that the validity of a law cannot be questioned against a supreme legislative authority like the Centre on the question of enactment being valid for extraterritorial operations.

Doctrine of territorial nexus

For a law to have extraterritorial effects, a nexus between the object and state is necessary. While the state legislature has the authority to make laws within its territorial jurisdiction, a territorial nexus is an exception which allows the state legislature to make laws for extraterritorial operations.

The Indian Constitution allows the state legislature to make laws within its territorial jurisdiction. But, how do we know if a particular law falls within the ambit of the state’s power to legislate?

While the State can legislate on any purpose, it is the Doctrine of Territorial nexus which helps in its enactment. To do so, the following conditions must be fulfilled:

• The nexus must be legitimate.
• The liability shall be related to the territorial connection.

These conditions are sufficient enough to show that the nexus is legitimate. Once the legitimacy of the nexus is proved, the validity of the extraterritorial law cannot be questioned by the court of law. 

Doctrine of Territorial Nexus in Indian Legislation with Important Cases

Article 245 of the Indian Constitution states the extent to which the Parliament and the State Legislature can make laws.

Apart from the territorial jurisdiction of the state, some laws can also be enacted by the Parliament for extra territorial operations. This can happen if the nexus between law and the state is legitimate. If this is held, the validity of law cannot be questioned.

The power of the Parliament to make laws is not absolute. While the Parliament can enact the extra-territorial laws, the state government cannot do so. However, the restriction of the state legislature is subjected to one exception, and that is territorial nexus. 

If sufficient nexus can be built between the law enacted by the state legislature and the object, the law will have an effect on the territorial limitations of the state.

The circumstances which confirm the invoking of territorial nexus jurisdiction are:

• If there exists extra-territorial operations in the state
• If there is a legitimate nexus between the object & the state.

Important Cases

State of Bombay vs R.M.D. Chamarbaugwala

In the State of Bombay vs. RMD Chamarbaugwala, the respondent – not a resident of Bombay, conducted a puzzle game with a prize through a newspaper published in Bangalore.

The paper was eventually also published in Bombay. It attracted a lot of buyers for the tickets for the competition from Bombay.

The State of Bombay, eventually, levied a tax on the respondent, claiming an amount for the prize competition being benefited from the ticket buyers from Bombay. 

The respondent challenged the tax levied in the Supreme Court, questioning whether tax could be levied on any person living outside the territorial limits of the state. The Supreme Court held that since there was sufficient territorial nexus, the legislature did have the authority to tax the respondent for the revenue earned by selling tickets to residents of Bombay.

Tata Iron & Steel Company vs Bihar State Tax Act

In the Tata Iron & Steel Company vs Bihar State Tax Act, the state of Bihar passed sales tax. The Sales tax was a tax levied on the company for doing sales, be it within, or outside the territorial limits of the state.

The logic given by the State of Bihar was, since the goods were manufactured in the state, any sales made within or outside the territorial jurisdiction of the state, was liable to a sales tax. The court identified that since that was an established nexus between the object being taxed and the law, the Doctrine of Territorial Nexus could be applied, and the tax was valid.

Shrikant Bhalchandra Karulkar v. State of Gujarat

In the Shrikant Bhalchandra Karulkar v. State of Gujarat, the apex court held that the State of Gujarat was within its ambit to enact a legislation for extra-territorial operations, as complying to the Articles 245 and 246.

To Conclude…

Summarizing the Doctrine of Territorial Nexus, while both the Centre and State are allowed to make laws for within their territorial jurisdiction, and the state legislature cannot make laws for extra territorial operations, there exists only one such exception.

If sufficient nexus between the object and the state legislature can be made, then even if the object is located outside the territorial jurisdiction of the state, the law can be enacted and cannot be invalidated by the court of law.

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