Centre State Relationship and Doctrine of Territorial Nexus
India is a federal country. The constitution of India states, that India is a union of states; one of the most important features of the federal structure is dual polity between centre and states that divides the powers between the centre and the states. Part IX of the Indian constitution specifies the relations between the centre and states.
The relations between centre and states are divided as follows:
- Legislative Relations that are enumerated in Articles 245-255.
- Administrative Relations that are enumerated in Articles 256-263.
- Financial Relations that are enumerated in Articles 268-293.
LEGISLATIVE RELATION BETWEEN THE CENTRE AND STATE
The legislative powers between the centre and state can be demarcated in 2 ways:
- Territorial distribution of powers (Article 245)
- Distribution of powers through the seventh schedule (Article 246).
TERRITORIAL DISTRIBUTION OF LEGISLATIVE POWERS
As mandated by article 245 of the Indian constitution which shows the territorial distribution of legislative powers,
- The Parliament has the power to make laws for the whole or any part of India, and the State Legislature has the power to make laws for the whole or any part of that particular state.
- Also the laws so made by the Parliament cannot be held invalid on the grounds of extraterritorial operations.
EXTRA TERRITORIAL OPERATIONS
Extra territorial operations are those operations wherein there is a connection (nexus) with the Indian Territory, in simple words parliament may make laws in cases where the laws so framed have a legitimate nexus with India and if they have nexus, then the laws cannot be questioned or held invalid. But if the laws show no nexus or any real connection with India then they will be treated as ultra vires.
To have a better understanding a reference can be made to the famous case of ‘Wallace Bros. & Co. Ltd. Vs The Commissioner of Income’ wherein a company situated outside India doing business in India was asked to pay taxes to the Indian Govt. as it had territorial nexus with India.
DOCTRINE OF TERRITORIAL NEXUS
- The doctrine of territorial nexus is enshrined under Article 245 of the Indian constitution wherein the centre and the state have been allocated their jurisdictions for framing laws and are expected to follow the same.
- As seen above the Parliament has the power to make laws in cases of extra territorial operations which show that they have a legitimate nexus with the geographical limits of India and hence cannot be called in question but the state legislatures do not have the power to frame laws relating to extra territorial operations.
- However, there is one exception where the state legislatures can make laws; in cases where it can be shown that there is a direct nexus i.e. connection between the object and the law so framed by the state legislature, this is known as Doctrine of Territorial Nexus.
- The doctrine comes into action when sufficient nexus is shown between the object and laws made by state legislature and only then the laws will have effect outside the territory of the state.
HOW CAN THE DOCTRINE BE INVOKED?
The doctrine of territorial nexus can be invoked under following Circumstances:
- Extraterritorial operations should exist in a state.
- There should be a legitimate nexus between the object and state i.e. the object should be outside the territorial limits of the state but should have a connection with the state.
Listed below are some of the famous cases in connection with the doctrine:
- ‘State of Bombay Vs R.M.D. Chamarbaugwala’
The fact of the case- The respondent was not a resident of Bombay, but he conducted a prize competition of crossword puzzle through newspaper which was widely published in Bangalore and Bombay as well. The competition attracted many buyers for the tickets of the competition.
The State of Bombay then levied tax on the respondent’s company which was challenged by the respondent and Supreme Court ordered that the legislature had the right to levy tax as there was a sufficient nexus between the respondent and the revenue earned by the company.
- ‘Tata Iron and Steel Company Vs State of Bihar’
The state of Bihar passed a sales act to levy tax on sales of goods manufactured in the state, whether sale took place within the territorial limits of the state or outside it. The court held that there was a sufficient nexus between the object to be taxed and the law.
- ‘State of Bihar Vs Charusila Dasi’
The state of Bihar passed a legislation safeguarding all the properties relating to Hindu religious trusts within the territorial limits of Bihar. The respondent made a trust deed where in all her properties in Bihar and Calcutta were included. The Court held that the act passed could have the effect over the property situated outside territorial limits of Bihar keeping in mind that the trust must be situated with the limits of the state and there exist the sufficient nexus.
The Indian constitution has a federal nature and thus it has laid down the theory of distribution of powers between the centre and the state, the basic idea of the division is that though the states are acting independently in terms of functioning but there is a parliament which deals with the overall functioning of the whole of India.
The theory of Territorial Nexus has a very wide scope and also can be applied outside India. The main highlight being that the parliament has freedom to make laws in extra territorial operations which the state legislatures don’t subject to the only condition that there should be a legitimate nexus between the object and the state.