The theory regarding the doctrine of territorial nexus was first propounded in the 1948 case of Wallace. It is a theory read with the theory of pith and substance. It can be better understood with the legal maxim, “extra territorium jus dicenti impune non paretur.”
Table of Contents
What does the Doctrine of Territorial Nexus Mean?
Every country has the power to enact laws applicable to its own jurisdiction. However, what is one country’s jurisdiction? For India, the constitution provides the limits to where the laws made by the respective legislatures would be applicable. The Parliament has the power to enact laws for any part or whole of India whereas the state legislature has power only to enact laws for its own state or part of its own state. Hence the limit for Parliament is the domestic territory of India whereas the limit for states is within the state territories. Often, times challenges arise if states can make laws that might impact other states for instance when a state makes laws regarding taxes. On the other hand, the issue arises that can Parliament law made can be applicable to citizens who reside outside India? The answer is yes because they are citizens of India.
Essentials of the doctrine
The apex court has said for its to be applicable two things must be satisfied i.e.
- The legitimate nexus; and
- The sufficient connection with the territory for liability determination.
Understanding extra-territorial operation?
It basically regulates the conduct of the nationals of India abroad for their acts as they are representing and are part of India. It is a theory which is applied to regulate transactions of Indian nationals abroad. This can also be understood by reading IPC which mentions that the code extends to the extraterritorial offences committed by any citizen of India who is placed outside India. Furthermore, this encourages global businesses and commercial transactions between parties from one country and our country in the hope that national laws will govern Indian nationals for transactions they conduct even outside of India.
Restricted Judicial Review
The doctrine restricts the power of the judiciary to actually invalidate laws having extra-territorial operations because the judiciary cannot do so merely because of such extraterritorial operations. But it can be done only if the nexus cannot be specified by the parliament within the legislation itself. Therefore, Parliamentarian sovereignty has been upheld, but at the cost of one of the basic features of our constitution – the power of judicial review.
Examples of theory
Income tax applied on citizens staying abroad.
Tax applied on those who stay in India but do business outside the boundaries of India.
Other cross-border operations such as antitrust, insolvency, terrorism etc.
In 1957 case, the state, wherein the respondents were generating their revenues, was taxing the respondents on their activities while they argued since they don’t belong to the state they cannot be charged. However, the finally the apex court held that they can be charged since they are staying in another state but their primary activity is in that state only where they generate revenue and they cannot escape their liability otherwise all would do the same. Hence, states can make laws which can be extraterritorial for them but only if they can then establish their power is legitimate and there is nexus.
Conclusion
The doctrine is through the states and union exercise power to enact laws within their geographical limits. It is also through which the Central Government can monitor the conduct of its citizens who are staying outside domestic territory & are regularly transacting with parties of other jurisdictions such as the doctrine is essential for taxing statues to tax its citizens. To make doctrine applicable there must be a nexus which must not be illusionary but real.
Users not registered with Strictlylegal can Email us their content and the same are posted through this account. In case of abuse, kindly let us know at [email protected]
