According to Article 245(1) of the Indian Constitution, a State Legislature has the competence to make laws only for the state concerned and not for any other state. A State legislature has no competence to make laws having extra-territorial operation; meaning laws operating outside the state. A State can legislate effectively only for its own territory. A State law can only affect persons, properties or things within the state and not outside the State. It is possible to challenge a law made by a State legislature in a Court on the grounds of extra-territorial operation of law.
A State law, therefore, loses its validity in case it purports to affect men and property outside the concerned State. A State law may apply to all persons within its territory, to property- both movable and immovable- situated within the State, or to acts and events which occur within its territorial borders. In order to decide whether or not a State law has an extra-territorial operation, it is necessary to invoke the doctrine of territorial nexus.
Application of the doctrine of territorial nexus is done in specific cases for the purpose of finding out whether a particular State law has extraterritorial operation. The main point of observation in this is that the object on which the law is applicable does not need to be necessarily physically located within the territorial boundaries of the State, but what is necessary is that it should have a sufficient territorial connection with the State. If there is a territorial nexus between the subject-matter of the Act and the State making the law, then the statute in question is not regarded as having extra-territorial operation.
The Doctrine of Territorial Nexus evolved after the Federal court decision in Governor-General in Council v. Raleigh Investment co. ltd.[1], where the Federal Court came up with the nexus theory. They established that
- There ought to be a sufficient nexus between state making a law and object of law and such nexus should be real and not illusory.
- It is of primary importance that the liability which it seeks to impose is pertinent to that connection.
This doctrine was further elucidated by the Privy Council in Wallace v. Income-tax Commissioner[2] where the test laid down in the 1944 case was held valid.
Though the nexus theory was created in these two case laws, the Constitution makers have not incorporated it in the Constitution of India.
In the decision of State of Bombay v. R.M.D. Chamarbaugwala[3], the Bombay State had levied a tax or lotteries and prize competitions. This particular tax had been extended on a newspaper that had been printed and published in Bangalore but had extensive readership in Bombay. The respondent conducted the prize competition through paper. The court decided that there was the presence sufficient territorial nexus in order to enable Bombay State to levy tax on the newspaper.
[1] Governor-General in Council v. Raleigh Investment co. ltd., AIR 1944 FC 51.
[2]Privy Council in Wallace v. Income-tax Commissioner, AIR 1948 PC 118.
[3] State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699.
This article is authored by Swagat Sanyal, student of B.A. LL.B (Hons.) at Gujarat National Law University
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