The Doctrine of Territorial Nexus

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Table of Contents hide
1) Introduction
2) Distribution of legislative power
3) A concise description of Doctrine of Territorial Nexus
4) Doctrine of Territorial Nexus Features
5) Doctrine of Territorial Nexus Conditions
6) When the Doctrine of Territorial Nexus can be invoked?
7) Case laws on Doctrine of Territorial Nexus
8) Conclusion

Introduction

The collective meanings of the terms doctrine, territorial, and Nexus are the sine qua non to gain a better knowledge of this theory and its significance. In layman’s terms, the word doctrine implies a principle or body of principle on the branch of knowledge, or system of belief, or tenet of law. Territorial denotes locality, and Nexus means the connection or the series of connections linking two or more things. Therefore, the construed simple definition of the Doctrine of Territorial Nexus is that it is the principle, which dealt with the distribution of legislative power and the subject of law in connection with the territory.

But then, which component necessitates the distribution of powers? And why is that important? Since it is not a Res Integra question, even though the constitution has not described India as a federation, without dissenting, it provides that India has the combination of federal and unitary governmental features. Concerning federalism, the bedrock principle is the distribution of power qua its object comprises the division of power between the central and the state governments. It is noteworthy that the division of strength and establishment of the dual polity with the centre and the states at a periphery are the ultimate tendency of federalism. Furthermore, it bestows each with sovereign powers to wield in jurisdiction assigned by the constitution. The legislative, executive and financial authority was divided between the states and the centre, not by the mean of any statutes but nemine contradicente by the Indian constitution.

Back then, the operation of law with respect to territory in India was brought by the British parliament, which was addressed in the context of the Government of India Act, 1935. At present, the same is dealt with under Article 245 of the Indian constitution.

Distribution of legislative power

India constitution provides two-fold distribution of power between the states and the central government,

  • Distribution of legislative power apropos territory, and
  • In relation to the subject matter described in 7th the schedule.

A concise description of Doctrine of Territorial Nexus

Territorial jurisdiction:

The Doctrine of territorial Nexus has been elucidated in Article 245 of the Indian constitution. Clause (1) of the same provides that, “Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State”. Comprehensively, reiterating this Clause, both the state and the union have their own territorial jurisdiction to enact legislation.

The subsequent clause (2) states that “no law made by Parliament shall be deemed to be invalid on the ground that it would have an extra-territorial operation”. Thus, the enacted laws will not be declared invalid just because it is extra-territorial i.e. operating outside the Indian Territory.

This theory of territorial nexus provides that when it comes to the extra-territorial laws made by the state, it has prescribed to ascertain the existing connection between the state and the object in the first place.

Article 246: Parliament is empowered to make laws for the matters dealt in union list (List I of Schedule 7), whereas the state has jurisdiction to enact laws, which the state list concerns (List II of Schedule 7). Regarding the Concurrent List, both the state and the Union have the authority to make laws (List III of Schedule 7).

“The state is a sovereign in the area left to them by the constitution as the centre in the field entrusted to it” – B.R. Ambedkar.

However, the legislating powers of both the parliament and the state are subjected to the provisions of the Indian constitution namely,

Extra-territorial Nexus:

While reiterating the content of Article 245, the parliament is empowered to make laws within its territory and even outside its territorial jurisdiction, when the subject matter has a legitimate connection with the Indian Territory. Thus any law made by the parliament uphold by Article 245 of the constitution shall not be considered invalid law or ultra vires. Per contra, if any law enacted by the parliament falls outside the ambit of the said Article will not be relaxed from being avowed invalid. Thus, no law shall be made to engage in extraterritorial operations, where the concerned subject has no nexus with India.

Doctrine of Territorial Nexus Features

  • The parliament has the power to make laws within the jurisdiction of India and to the extra-territorial issues having nexus with the Indian Territory as well.
  • This doctrine may also apply to the states. This could be epitomized by the taxing statutes, where the sale/purchase is not entirely necessary to takes place within the territory of the state
  • Despite scrutinizing whether or not the concerned object is physical located within the jurisdiction of the state, this doctrine can be invoked only by examining its territorial connection with the state. Thus, It is one such exception that leads the state to levy tax on property, person, or object not only within its territorial limits but also on those having sufficient territorial connection with it.
  • This doctrine governs the taxation of non-residents in India.

Doctrine of Territorial Nexus Conditions

Lucidly, the constitution of India confers power on the state to enact laws within its territorial jurisdiction and extra-territorial connections. But then, how the theory in context may evoke practically and when it could be applied?

  • The nexus/ connection must be legitimate
  • The liabilities should be related to territorial connections
  • The aforementioned are the requisite conditions that should be satisfied enough to apply the Doctrine of territorial Nexus.

When the Doctrine of Territorial Nexus can be invoked?

However the state legislature has no power to enact extra-territorial legislation, it has one exception that is the extra-territorial nexus. Here the connection between the state and the object is necessary.

The doctrine of Territorial Nexus can be invoked in the following circumstances,

  • If there exist extra-territorial operations in a state
  • If there is legitimate nexus between the object and the state. Notably, even the object locates outside the territorial limits of the state; it must have some territorial connection with the state.

Case laws on Doctrine of Territorial Nexus

In the case of A.H. Waida v. Income-Tax Commissioner, Bombay[1], the Apex Court held that legislation enacted by the sovereign legislature, which offends the rules of international laws or has some operational difficulties in enforcement, may not be questioned in the municipal court. And challenging its validity on domestic tribunals on the grounds of extra-territoriality is null and void when the foreign courts are being incognizant of the matter in issue.

In Wallace v. Income-tax commissioner[2] case, following the appeal of Indian income tax- authorities, the Doctrine of territorial Nexus was applied by the Privy Council to levy tax on the Britain-based company, which has also carried out its business in India through its partner firm. Withal, the Privy Council affirmed its validity and substantiated since British India is qua the significant source of its income, it has sufficient ground to invoke the Doctrine of territorial Nexus.

In the case of Kochuni v. State of Madras[3] it was held that, since Article 245(1) seems to nullify the state laws with extra-territorial operations, the court holds that the state legislation takes effect outside the state are invalid or ultra vires. But later, catena of court decisions have set aside such kind of narrow interpretations and provided that the extra-territorial of state laws are valid when the object has sufficient nexus with the state.

The State of Bombay v. R.M.D.C.[4] In this case, the court held the validity of the State’s act of levying tax on lotteries and prize competition that extended to the newspaper printed and published in Bangalore but widely publicized in Bombay. It was rendered, as the lotteries and prize competition was conducted through the newspaper, which has territorial nexus with the state. Similarly, this doctrine was also applied to the sales tax in the case of Tata Iron and Steel Company v State of Bihar[5].

‘This Court — over a period of three decades — has evolved a principle called “doctrine of territorial nexus” to find out whether the provisions of a particular State law have an extraterritorial operation. The doctrine is well-established and there is no dispute as to its principles’ held in Shrikant Bhalchandra Karulkar and Ors v. the State Of Gujarat and others[6]case. The court further added that the state cannot be considered to have extra-territorial operations when the provisions of the enacted law and the subject matter have justifiable nexus. Meanwhile, it has provided two conditions to be satisfied viz. 1) the nexus should not be an illusion one but real. 2) Charges imposed by such statute must be pertinent to the connection. The same was upheld in the case of The State of Bihar & Others v. Sm. Charusila Dasi[7]. 

The apex court reaffirmed the existing one such exception by which the state legislature can engage in extra-territorial operation by satisfying the features of Doctrine of Territorial Nexus dealt under Article 245 in the case of Sondur Gopal v. Sondur Rajni[8]. The court elucidated the jurisdiction of the Hindu Marriage Act with respect to the Doctrine of territorial Nexus. The court observed and held that the Act applies to all Hindus domiciled in Indian irrespective of where they reside and which country’s citizenship they acquired.

Conclusion

The doctrine of territorial Nexus has meticulously been described in Article 145 of the Indian constitution and reinforced by vast judicial interpretation. Hence, the concept comprehends is, India has a divided legislative power between the union and the state, which seems to be complex but not vague. Besides, both have been empowered to make laws for subject matters that have nexus with its jurisdiction.

References:

  • https://lawbhoomi.com/understanding-the-concept-of-the-doctrine-of-territorial-nexus/
  • https://www.wallcliffslawfirm.com/uploads/newsletter-files/2020120914483767088-Legal_Angle_-_December_2020_-_Issue_02.pdf
  • https://www.legalbites.in/doctrine-of-territorial-nexus/

[1] AIR 1949 FC 18

[2] AIR 1948 PC 118

[3] AIR 1960 SC108

[4] AIR 1957 SC 699

[5] AIR 1958 SC 452

[6] 1994 SCC 5 459

[7] 1959 AIR 1002

[8] AIR 2013 SC 2678

Also Read – Extra-Territorial Operation of State Laws

Snegapriya V S

A third-year student of law at Vellore Institute of Technology (VIT School of Law), budding first-generation lawyer cum legal researcher with multiple publications in various web journals and portals on different subject matters of law in issue. Being a zealous-natured person with thoughts enrooted in epistemophilia has boosted my passion for research writings by interpreting diversified legal facets. As a perceptive observer and reader, I pay greater attention to the overlooked legal fields where divergent challenges might arise, that include cyber law, environmental law, consumer law, and several constitutional provisions. Besides, I prioritize construing legal problems with social psychology. My dream and vision are to catch myself as a skilled legal adroit.

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