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Source: wikipedia.org

Introduction

“Federalism isn’t about states right. It’s about dividing power to better protect individual liberty” - Elizabeth Price Foley

Federalism is an intrinsic unit of the constitutional setup of our country. The makers of our Constitution viewed the idea of federalism as an indispensable part of the nation. Federalism in layman’s language is the division of power and responsibilities between the centre and state so that there is no overlap of powers and everyone can execute their errands with unambiguity, utmost diligence, and sincerity. Although there are few instances where the centre impinges upon the jurisdiction of the state in some matters, India still, by its structure and the virtue of constitutional provisions, is a federal country to a great extent. The law-making, administrative and pecuniary authority is distributed between the centre and the state. Indian constitution is divided into 25 parts and part XI deals with this constitutional division of powers.

“The basic principle of federations is that the legislative and executive authority is partitioned between the centre and the states not by any law to be made by the centre, but by the constitution itself… The states are in no way dependent upon the centre for their legislature or executive authority. The states and the centre are coequal in this matter” said Dr B.R. Ambedkar.

The Concept of Territorial Jurisdiction

This concept derives its authority from Article 245 of the Indian Constitution. It deals with the extent of legislation made by the parliament and the state legislature. Article 245(1) states that parliament may create legislations for a whole or a portion of the territory of the country. It also offers the state legislature to frame laws for the entire state or a portion of it. The state law-making authority is not permitted to broaden its territorial jurisdiction provided that the boundaries of the state are not amended through any legislation of the parliament. On the flip side, parliament is conferred with the power to legislate the whole of India including states and union territories under Article 246(1). Article 245(2) of part XI of the constitution states that no legislations made by the law-making authority of India shall be declared as invalid on the ground that it has extra-territorial operations. It signifies that Parliament can make laws on extra-territorial operations. This also indicates the fact that not only the persons and property residing in the country but also that in the world over will be subject to parliamentary legislation. Clause 2 of this Article 242 does not mention the state legislature but only the parliament. The parliament while making laws that have extra-territorial operation must ensure that only those laws, which have a proportionate relation to India and have that potential to affect the interest of India and its citizens can be legally effective and acceptable. In the Raleigh Investment case, two essentials were laid down for the law with foreign applicability which is that the link must be real and not illusive and that the liability that needs to be levied must be pertinent to that link. The Landmark case of G.V.K Industries vs Income-tax officer is very pertinent to note here where the apex court declared that any law with an extra-territorial operation that has no legitimate nexus or impact on India would be considered a law made for a foreign country and thus ultra vires.

The doctrine of Territorial Nexus

Article 245 of the Constitution and the doctrine of territorial nexus are closely knitted. According to this article, only the laws made by parliament and not the state can have extra-territorial operations. But this doctrine empowers the states too with an exception to this general rule. The state legislature can also make extra-territorial operational laws in certain specific cases. There are 2 conditions to create laws that have authority outside the territory of the state and these are

  • There should be a nexus between the state and the scope of the law(subject matter to be precise)
  • The nexus therewith should be legitimate.

There is a probability that the object to which the law made by the state applies may not be tangibly present inside the state per se but that is not a bar on its validity till the time there is a legitimate and reasonable nexus between the two. It is more commonly applied to tax laws although there are some exceptions too.

Case laws dealing with territorial nexus

History is a blend of both pre-constitutional and post-constitutional laws created on territorial nexus. Raleigh case(1944) and Wadia case(1949) was dealt with by Federal courts and the Wallace case of 1948 by the Privy council. In the case of Wallace Bros and Co. Ltd vs The commissioner of Income, A company registered in some country carried out business in India also through some mediator. The company made a staggering profit that year and the income tax authorities of India levied a tax upon the company. This act by the authority was challenged, but it was decided that there is a reasonable nexus as major profit came from the British Indian territory only. In the RMD Chamarbhaugwalla case of 1957, The respondent was a resident of Bangalore but he used to organize competitions through his newspaper in the Bombay and his newspaper was widely circulated in that state, so he can be legitimately taxed under the law of the state of Bombay as there is an apparent and unambiguous territorial nexus between the state and the law imposed. In the case of Shrikant Bhalchandra Karulkar vs State of Gujarat and Anr. , Gujarat legislature came up with an Agricultural Land ceiling Act which included the land an individual acquires both in and outside the state. This law was challenged for being extra-territorial but the Supreme Court held that the legislature is empowered to make such law ceiling the amount of land a person can hold in total.

Some other Judicial Doctrines

  1. Doctrine of Harmonious Construction – Justice Venkatrama Aivar while explaining this doctrine observed that: “in case of two irreconcilable provisions, they should be so interpreted that effect can be given to both and none of the two is rendered nugatory”. While dealing with the conflicts between the Fundamental Rights and Directive Principles of State Policy (DPSP), The supreme court applied this doctrine of harmonious construction to not neglect either of them and give importance to both to an extent possible. The case of Tika Ramji vs The State of UP is apposite to mention here where this judicial doctrine was applied.

  2. Doctrine of colourable legislation – This doctrine is based on the principle “what cannot be done directly, cannot also be done indirectly”. Article 246 deals with the three federal lists mentioned under Schedule VII of the Indian Constitution which distributes the responsibilities among the centre and the state. There are some instances where the legislature tries to frame a law that seems to be under its jurisdiction but is not in reality. Thus, this doctrine was formulated to clear this notion that the law if given different colour would still remain invalid in the eyes of law. In the case of the State of Bihar vs Kameshwar Singh, Bihar land reforms were declared invalid.

  3. Doctrine of Pith and Substance – List 1 and 2 of the constitution deals with union and State subject matters respectively. This doctrine is applied when the state formulates legislation that impinges into the boundary of central subject matters or vicely versa. It provides a sense of suppleness to the otherwise straight-jacket formula of distribution of powers. The purpose for the adoption was that if all the laws are disregarded only on the basis that they encroached on the powers, the authority of the legislature would be curtailed and constrained. F.N. Balasar case is essential to note here.

Can the Validity of an Extra-territorial law made by Parliament be challenged?

The Supreme Court through a constitutional bench of five judges held that parliament has ample authority to create a law in respect to territorial aspects in the interest of the well-being or security of residents of the country. The bench held that “any laws enacted by Parliament with respect to extra-territorial aspects or causes that have no impact on or nexus with India would be ultra vires.” Article 13 of the Indian Constitution ponders over the concept of Judicial Review and states that any law in contravention to the essential rights of the people shall be made unconstitutional and hence will be declared void. In the case of Minerva Mills v. Union of India, Judicial review was included in the list of elements already there in the basic structure. As the power of the parliament to make extra-territorial laws is limited, the validity of those legislations CAN NOT be challenged in the court of law. In respect to these laws, the court is bound to enforce these laws and thus the legislation so formulated cannot be invalidated.

Conclusion

Through this article, it can be fairly deduced that law-making powers are distributed between the centre and the state through the federal lists mentioned under Schedule VII of the Indian Constitution. Article 245 that deals with the territorial jurisdiction of the parliament and state legislature mention that while Parliament can formulate legislation having extra-territorial operations, the state legislature falls short of this power. But the doctrine of territorial nexus grants an exception for the state legislature to create laws having an extra-territorial operation if there is a legitimate nexus between the object of the legislation and the state itself. There are various case laws advancing this idea. The validity of the extra-territorial laws made by the legislature cannot be challenged in the court of law and thus the legislations certainly can’t be invalidated.

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