Summary: This article examines certain provisions in India’s key commercial laws, including the Companies Act 2013, Competition Act 2002, and SEBI regulations, analyzing how these laws extend beyond India’s territorial boundaries. While analysing the constitutional permissibility of such provisions, the article highlights potential challenges including jurisdictional overreach and compliance conflicts for multinational corporations.
Ordinarily, a nation’s jurisdiction extends only to its own territory, and the laws it enacts apply within those territorial boundaries. However, the complexities of the modern globalised world and international trade often prompt countries to depart from this principle in limited circumstances. India, too, has several laws with extra-territorial reach, and multiple Supreme Court decisions have examined the limits of such powers. This article highlights the provisions having extra-territorial operation in key commercial laws and considers their implications for ease of doing business and India’s attractiveness as an investment destination.
Constitutional Framework
Article 245(1) of the Constitution sets out the territorial limits of the law-making power of Parliament, and Article 245(2) provides that no law made by Parliament shall be deemed invalid merely because it has extra-territorial operation. As there is no reference to Article 245(1) in Article 245(2), there was much confusion about whether the immunity from invalidity of a law in Article 245(2) is independent of the territorial limit set out in Article 245(1) of the Constitution. A three-judge bench of the Supreme Court in ECIL v. Union of India held that there is a distinction between power to make laws and the operation of the laws.[1] The former has to be restricted to India while the latter may operate extra-territorial subject to having territorial nexus with India. The Court further referred the issue to a constitution bench as it had significant implications of the Parliament’s law making powers. In GVK Industries v. Income Tax Officer,[2] a constitution bench of the Supreme Court clarified that Article 245(2) must be read harmoniously with Article 245(1) and in turn, Parliament cannot enact laws with no nexus to India whatsoever. Building upon the ratio in ECIL, the Court upheld Parliament’s power to legislate on extra-territorial aspects or causes, but only where such aspects have an impact, effect, or consequence within India—either on its territory or on the interests, welfare, or security of its inhabitants.
This principle has been reaffirmed across various statutes including the Income Tax Act, 1961, and the Code of Criminal Procedure, 1973. Multiple corporate statutes also have provisions having extra-territorial operation, with some applying extra-territorially as a whole. For instance, Section 1 of Foreign Exchange Management Act, 1999 (“FEMA”) states that FEMA applies to the whole of India, to all branches outside India owned and controlled by an Indian resident, and to any contravention committed outside India by a person to whom the FEMA is applicable.
Against this constitutional backdrop, this blog examines the implications of the provisions in the Companies Act, 2013, the Competition Act, 2002, and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) having extra-territorial operation.
Companies Act, 2013
Although Section 1(4)(a) of the Companies Act, 2013 (“Act”) restricts the application of the Act to companies incorporated under the Act or previous company laws, several provisions in the Act have extra-territorial application. Most of these are logical extensions of the provisions applicable to domestic activities of the companies, but Section 217 is an exception. It empowers inspectors under the scheme of Chapter XIV (inspection, inquiry, and investigation) to require any body corporate—including a foreign company as defined under Section 2(11) of the Act—to furnish information, books, and records necessary for the investigation into corporate affairs of such body corporate.Further, section 217(4) of the Act empowers inspectors to examine any person who qualifies as an employee, agent, or officer of the company. Since Section 217 effectively grants investigators unfettered authority to procure documents and examine officers of foreign companies, the inspectors may summon documents, seek information, and collect evidence without explicit statutory safeguards for foreign entities or Indian entities operating abroad.
Critically, the Act does not require proof of territorial nexus before initiating such inquiries against foreign companies, thereby empowering inspectors to demand documents or examine officers even when the investigation has no demonstrable connection with India or its inhabitants. While Sections 217(10) and 217(11) of the Act provide procedural safeguards by requiring foreign courts to act as points of contact for the examination of officers and production of evidence, there is no substantive protection offered to foreign companies requiring the inspector to establish a territorial nexus between the cause of the investigation and territory of India.
Most judicial scrutiny of Section 217 has pertained to domestic investigations. Any future challenge involving foreign entities will likely require courts to read down the provision to ensure it is in line with Article 245(2) and limit investigative powers to only those instances with a clear territorial nexus.
Competition Act, 2002
Section 32 of the Competition Act, 2002, expressly grants the Competition Commission of India (“CCI”) extra-territorial jurisdiction and enables the CCI to investigate agreements, mergers, acquisitions, entities, and conduct occurring outside India, provided such conduct has an appreciable adverse effect on competition in a relevant market in India. This provision tracks the “effects doctrine”, originating from United States v. Aluminium Co. of America, wherein a state may exercise jurisdiction over foreign entities whose conduct has substantial effects on its domestic markets.[3]
A prominent example is the CCI’s action against Google for mandating pre-installation of its apps on Android devices—a practice rooted in global conduct but penalised for its effects in India. Although the NCLAT reduced the quantum of the penalty on review, it upheld the jurisdiction of the CCI and the ability to penalise Google for foreign conduct impacting Indian markets.[4] The CCI also exercised its extra-territorial jurisdiction when it penalised shipping lines operating abroad for cartelisation and violation of Section 3 of the Competition Act, 2002.[5]
Such instances of exercising extra-territorial powers notwithstanding, the CCI remains comparatively less aggressive than authorities such as the European Commission, which had famously blocked the USD 45-billion merger of General Electric and Honeywell even though neither company was incorporated in the European Union.[6] Such global practices lend legitimacy to the CCI’s approach in scrutinising foreign conduct with antitrust implications in India.
LODR Regulations
A concerning aspect of SEBI’s exercise of extra-territorial jurisdiction through a delegated legislation, LODR, is that the relevant part of the parent legislation – Section 30 of the SEBI Act, 1992 – does not envisage extra-territorial operation. It has also been argued by academics that delegated legislations, in general, cannot have extra-territorial operation as Article 245(2) of the Constitution uses the term “Parliament” and limits the scope to parent legislations. The extra-territorial jurisdiction of LODR and its limitations, with specific emphasis on Regulation 24, have been extensively covered by the author in another blog.[7]
Several LODR provisions impose obligations beyond India’s borders, sometimes creating situations where Indian requirements may conflict with the laws of foreign jurisdictions. A prominent example of such a provision is Regulation 23 which governs related party transactions undertaken both by a listed entity and its subsidiaries. In a 2024 informal guidance, SEBI clarified that unlisted subsidiaries of listed entities must identify “related parties” and “related party transactions” in accordance with the LODR.[8] As foreign subsidiaries have no specific exemption, it implies that even such entities will be required to apply Indian law on related party classification, rather than the law of their jurisdiction of incorporation.
Such a requirement may result in conflicting definitions of “related party” across jurisdictions and impose a double compliance burden. While related party transactions by a foreign subsidiary could impact Indian investors and, in turn, satisfy the territorial nexus test set out in GVK Industries, this objective could still be met by permitting foreign subsidiaries to report under the definitions applicable in their home jurisdiction, while ensuring adequate disclosures at the consolidated level.
SEBI, therefore, needs to address the practical challenges arising from conflict between the regulatory framework in India and the laws applicable to the foreign subsidiaries.
Concluding Thoughts
In an increasingly globalised environment, it is difficult to conceive of corporate laws that are entirely localised. However, India must be cautious about staying on the right side of the thin line between territorial overreach and legitimate exercise of legislative power. Corporate groups operate transnationally, and laws governing them will inevitably have extra-territorial elements. However, Parliament should ensure that such laws do not become overly aggressive, thereby discouraging Indian companies from expanding abroad or dissuading global companies from establishing a presence in India.
[1] Electronics Corporation of India Ltd. v. Union of India, 1989 Supp (2) SCC 642.
[2] GVK Industries Ltd. v. Income Tax Officer, (2011) 4 SCC 36.
[3] United States v. Aluminium Co. of America, 148 F.2d 416 (2d Cir. 1945).
[4] Alphabet Inc. v. Competition Commission of India, 2025 SCC OnLine NCLAT 604.
[5] In Re: Cartelisation by Shipping Lines, suo motu case no. 10 of 2014.
[6] The Commission prohibits GE’s acquisition of Honeywell, press release, European Commission, July 03, 2001.
[7] Extra-territorial application of India’s securities law – Has SEBI cast its net too wide? | India Corporate Law.
[8] Paragraph 3.6, Informal Guidance to Bajaj Finserv Limited, October 11, 2024.
