Shrikant Bhalchandra Karulkar and ors Vs. The State of Gujarat, (1994) 5 SCC 459

The following case is a great illustration for the doctrine of territorial nexus and not to mention, is the easiest illustration as well. This is one of the cases where the doctrine applies to other than tax disputes. (land ceiling)

Facts of the case:

Shrikant (the appellant) was holding some agricultural lands in the State of Gujarat and in the other States of India. Gujarat Agricultural Land Ceiling Act, 1960 (hereinafter referred to as the Act) does not allow an individual to hold more agricultural land area than the area prescribed in the Act. The provision stating the rule is reproduced as follows:

Section 6(3A) of the Act is reproduced hereunder:

(3A). Where any person holds any land in any other part of the India, outside the state, then of the area of land so held by him in such other part, not exceeding the maximum area of land which such person is entitled to hold in such other part of India under any law, if any, relating to ceiling on land, used or capable of being used for agricultural purposes, shall be excluded from the ceiling area in excess of which a person is not entitled to hold land under this section and the extent of land determined after so excluding such area shall in relation to such person, be deemed to be the ceiling area, to be held by him in this State.

Provided that where any such person disposes of, at any time before the determination of ceiling area under this Act, any land or part thereof so held by him any other part of India outside the state in accordance with the provisions of law in force in such part, the area equal to the land or part thereof so disposed of shall not be excluded while determining the ceiling area, to be held by him in this State.

 

The same provision along with provisions such as S.4, S.10 and S.11 of the Act was challenged in the Gujarat High Court by contending that the act operates extra-territorially: thereby violating Article 245(2) of the Constitution. But it turns out that the High Court upheld the validity of the Act and dismissed the writ petition. The petitioner's next move was obviously the Supreme Court and hence the appeal. The appeal was dismissed as well and ultimately the validity of the Act was sustained.

Issue:

Whether the provisions of Gujarat Agricultural Land Ceiling Act, 1960 have extra-territorial operation? 

Holding:

The Supreme Court held that the Act was not violating any Articles of the Constitution and upheld the validity by observing that the Act does not have any extra-territorial operation with the help of doctrine of territorial nexus.

Rationale:

The Court made it clear that the doctrine of territorial nexus was am undisputed principle which can justify the so-called contention of extra-territorial operation. Territorial nexus can be established when there exists a sufficient connection between subject-matter and the territory. Sufficiency denotes two aspects: (1) the connection must be real and not illusory (2) the penalty/liability imposed must be pertinent to the connection and not any way around.

Having said this, in the present case, the court observed that Section 6(3A) of  the Act was simply stating that no person can have any agricultural land in the State of Gujarat if such person has already owned such lands in other sates and such lands area exceeds the ceiling area prescribed in the Act; if not exceeds the prescribed ceiling area, then the area owned in other states must be deducted from the prescribed ceiling area to determine the actual ceiling area (above which a person cannot hold any agricultural land in the state of Gujarat) of such a person in the State of Gujarat. The Court was satisfied with the Act having sufficient connection with the subject matter and of the view that it has territorial nexus since the Act was interfering only on the agricultural lands exist in the State of Gujarat and individuals having land in the State of Gujarat and nowhere else. The exact words of the court were:

The provisions of the Act provide for fixation of ceiling in respect of the agricultural lands which are within the territory of the State of Gujarat. The declaration of the surplus land under the Act is also in respect of the lands held by various persons in the State of Gujarat. The territorial nexus is obvious. It is the land and the persons holding such land within the territory of Gujarat to which the provisions of the Act are applicable. If a person has no land within the State of Gujarat the provisions of the Act are not applicable to him or to the land which he owns outside the territory of the State of Gujarat.