Indian Railway History - British Law

Extracts from the "Statute Law Revision - Indian Railways Repeal Proposals", August 2007, published by the Law Commission of the United Kingdom.

The Law Commission published a consultation paper in August 2007, proposing repeal of 38 Acts in the UK statutes relating to the operation of railway companies in British India. The material here is extracted from the Consultation Paper. Web site of the Law Commission

Related pages:
History of railways in India - FAQ Extracts from historical archives

Ceylon Railway Company

Acts covered: Ceylon Railway Company's Act 1856 (19 & 20 Vict. c.ci)
Ceylon Railway Company’s Dissolution Act 1862 (25 & 26 Vict. c.ci)

Background

1. The Ceylon Railway Company was incorporated in Britain in 1847. It was to be responsible for building a railway line across Sri Lanka (formerly Ceylon) for use by planters. After surveying the land, the company estimated that the line would cost approximately £800,000.

2. Construction commenced in 1856, but there was very little progress. By 1858, it was clear that the project was going to be considerably more expensive than originally planned. Questions were raised in the House of Lords in 1860,[115] about the impact on the economy of the 5% guaranteed return on the investment if the railway were to cost £2 million rather than the predicted figure of £800,000.

3. Shortly after these questions, the government cancelled the company's contract, and took over all its assets and liabilities. The Act of 1862 made provision for dissolution of the company.[116] Recognising that there was still a need for a railway system in Sri Lanka, the government, having taken over responsibility for the construction of the railway network, invited tenders from interested parties to act as building contractors.[117]

[115] The Earl of Carnarvon, Parliamentary Debates, 3rd series, vol 158, cols 1605-1608, 22 May 1860.

[116] The National Archives holds one record from the Board of Trade archives which relates to the company, but this does not confirm that the company was formally dissolved. The reference number is BT41/135/785. There are no items in the London Gazette to verify the company's dissolution. The company does not feature on the companies register at Companies House.

[117] For further information see, Aryadasa Ratnasinghe, "Sri Lanka Railway 144 years: The First Train to Ambepussa" Daily News 3 August 2002, at http://origin.dailynews.lk/2002/08/03/fea07.html [accessed 30 January 2007] and Hyatt, D. Railways of Sri Lanka (2000) Comrac, London and Colombo.

4. Two Acts relating to the Ceylon Railway Company were promoted over its lifetime:

  • Ceylon Railway Company's Act 1856
  • Ceylon Railway Company's Dissolution Act 1862.

Both of these Acts are proposed for repeal in the following note.

The Ceylon Railway Company's Act 1856 (19 & 20 Vict. c.ci) - Purpose

5. In the 1850s Ceylon (now the state of Sri Lanka) was a British colony. From 1796 to 1802, Ceylon had been administered by the East India Company from mainland India as part of British India. Ceylon remained a British colony until it achieved its independence in 1948.[118]

6. The Ceylon Railway Company was formed under a deed of settlement (as a joint stock company) in 1847 for the purpose of establishing, and then running, "railway communication" across Ceylon (with a mainline from Colombo to Kandy).[119] The company was registered as an incorporated body in accordance with the prevailing company legislation.

7. Notwithstanding formation and registration, the company's board felt the need to seek enhanced statutory incorporation, and the grant of ancillary powers, so as to carry out its responsibilities more "effectually".[120] To this end, the Act of 1856 was promoted with (in broad terms) the following aims:

(a) to incorporate the company as a legal entity (with a company seal) "as well in the Island of Ceylon as elsewhere", for the purposes of litigation and of holding land both in Ceylon "so far as may be authorised by the laws of the said Island or by the legislature thereof, and also in Great Britain";[121]

[118] Ceylon changed its name to Sri Lanka in 1972 on attaining republican status.

[119] Preamble to The Ceylon Railway Company's Act 1856 ("the 1856 Act"), being "An Act for incorporating the Ceylon Railway Company, and for other Purposes connected therewith". The Act's short title was assigned by section 1.

[120] The 1856 Act, preamble. The need for enhanced powers was foreseen in the deed of settlement; the directors were authorised to seek them from both the "Local Government of Ceylon and from the Imperial Legislature of Great Britain". It is not known whether primary legislation was sought from the former body.

[121] The 1856 Act, s 2. The company was to continue to be regulated by its original 1847 deed of settlement (where the provisions were not in conflict with the new rubric), and the 1856 Act and the deed were to be read as one instrument. All property and contractual rights vested in the old company were automatically to be transferred to the new entity, but preserving the liabilities of the former shareholders in respect of any antecedent judgment debt or tortious act: ibid., ss 3, 4.

(b) to make various arrangements in respect of the new company's share capital (including re-valuing each shareholding, establishing a Ceylon office and staff for local share dealing and registration, maintaining registers of holdings and transfers, and transferring holdings between the London and Ceylon registries), subject to the proviso that the legislature of Ceylon could, within its island jurisdiction, override the registration provisions;[122]

(c) to authorise the new company to enter into, or vary, legal arrangements with the "local government of the Island of Ceylon" in connection with the construction and operation of railways in the territory, the installation of telegraphs, and the securing to the local government of the island (or the Secretary of State acting on its behalf) rights to, amongst other things: the railway network and its income, the control of the company and its affairs within the Island (including appointing an ex officio director to the board with a right of veto), the receipt of payments of subscribed capital, and the acquisition of the railway system (or any part of it);[123] and

(d) to address a range of miscellaneous issues.[124]

Status of the 1856 Act

8. The sole purpose behind seeking the 1856 Act was to place The Ceylon Railway Company on a more stable footing, with enhanced contractual powers (which would enable it to enter into a variety of arrangements with the Ceylon government).

9. Although the Act referred to two national Acts relating to the regulation of companies,[125] in terms of its geographic ambit and its specific remit it stood alone. It referred to an earlier 1847 deed of settlement which, certainly in part, it superseded. The 1856 Act was itself superseded totally by the 1862 Act (see below), which governed the dissolution of The Ceylon Railway Company.

[122] The 1856 Act, ss 5, 8-13.

[123] The 1856 Act, s 7. Provision could be made in contracts for any disputes arising to be resolved by referral to arbitration.

[124] Such as: giving notice of company meetings (by newspaper advertisement in London or Middlesex), determining the law (Ceylonese or British) applicable to particular share dealings by reference to the country of registration, preparing a Ceylon seal for use in lieu of the common seal, and providing for the costs of obtaining the Act to be borne by the company: the 1856 Act, ss 6, 14-16.

10. The 1856 Act is now spent and may be repealed in whole.

Extent

11. The 1856 Act related only to the commercial affairs of The Ceylon Railway Company which operated in Great Britain (principally London) and in Ceylon.

12. The Act applied to Great Britain and Sri Lanka only.

The Ceylon Railway Company's Dissolution Act 1862 (25 & 26 Vict. c.ci) - Purpose

13. Following enactment of the 1856 Act (above), The Ceylon Railway Company entered into various agreements with the Ceylon Government in the same year whereby the company undertook "to construct and work a railway in Ceylon, and to raise capital for that purpose", in exchange for which it received "various rights and privileges, including a preferential claim on the revenues of Ceylon for interest guaranteed to be paid by the Ceylon Government to the company on their paid-up capital".[126]

14. In pursuance of its obligations, the company proceeded to raise and spend tranches of capital (on which the Ceylon government paid the interest) and to commence the construction works. Once construction had commenced, however, it gradually became clear that the cost of the work would greatly exceed the original estimates and that both parties had entered into the agreements "under misapprehension".127

[125] Joint Stock Companies Act 1844 (7 & 8 Vict c.110) (now wholly repealed) and the Companies Clauses Consolidation Act 1845 (8 & 9 Vict. c.16) (repealed in part).

[126] Preamble to The Ceylon Railway Company's Dissolution Act 1862 ("the 1862 Act"), being "An Act for dissolving the Ceylon Railway Company, and for other purposes connected therewith". The Act's short title was assigned by section 5. The preamble recited details of four formal agreements: the first, executed with the Principal Secretary of State for the Colonies, on behalf of the Government of Ceylon (and confirmed by Ordinance No. 1 of 1856 enacted by the Governor of Ceylon with the consent of the Legislative Council, and ratified by HM Queen Victoria); the second two, executed in the same manner pursuant to Ordinance No.1 of 1857; and the fourth, executed by the Governor of Ceylon in 1858.

[127] The 1862 Act, preamble.

15. The Ceylon government proposed (and the company accepted) that the project should be aborted, and that the underpinning contract "should be annulled".128 To that end, in 1860, the government sought (and obtained) an ordinance from the island's legislature empowering the Secretary of State for the Colonies to enter into an annulment contract whereby, in return for the government undertaking to pay up all the capital and interest and to assume all the company's liabilities, the company would transfer to it "all lands, and all things moveable and immoveable, corporeal and incorporeal" (together with all property and moneys in its ownership and all enabling powers).[129]

16. In August 1861, the Secretary of State (on behalf of the Ceylon government) executed the annulment contract with the railway company so that, in return for payment by the government of £297,500 (plus interest), the government would take over the assets and liabilities of the whole railway project. Thereafter, the company would repay its shareholders, who had already agreed to the annulment, and proceed to formal dissolution. Dissolution, however, required further legislation.[130]

17. The railway company, at the government's expense, promoted the 1862 Act in order to secure the necessary winding up powers. The purpose of the fairly short Act was to authorise:

(a) payment by the company of the unclaimed and undistributed residue of its capital into the Bank of England (to the order of the Court of Chancery);[131]

(b) the court, on summary application, ordering payment out of its funds of the annuities (and interest) to any named shareholder claimant, or his personal representative, on their proving entitlement;[132] and

[128] The 1862 Act, preamble. The shareholders of the company "unconditionally accepted" the government's proposal at an EGM held in February 1861.

[129] The 1862 Act, preamble. The Ordinance was No. 9 of 1860. It provided that the Ordinances of 1856 and 1857 would cease to have effect once the property transfer had been completed.

[130] The 1862 Act, preamble. Three main contracts were taken over by the Ceylon government; those with Robert Stephenson and Co. (who were locomotive engineers), Samuel Beale and Co., and Messrs. Weston and Grice.

[131] The 1862 Act, s 1, Sch. The unclaimed residue totalled £113 8s. 6d (for 15 shares held by three shareholders, each resident in Ceylon). Once paid into court, the moneys were to be invested in 3% consolidated bank annuities, on a compound interest basis (subject to court order).

[132] The 1862 Act, s 2.

(c) the immediate dissolution of the company on payment of the moneys into court, subject to the proviso that the dissolution should not adversely affect either the Ceylon government's title to the lands and property transferred to it, or the various rights acquired.[133]

Status of the 1862 Act

18. The sole purpose of the 1862 Act was to provide parliamentary authority for the dissolution of The Ceylon Railway Company which had previously been established by specific statute (the 1856 Act, above).

19. A series of local ordinances had paved the way, first for the annulment of certain contractual obligations and, secondly, for the dissolution of the railway company.

20. The Ceylon Government constructed the Sri Lanka Railway, originally known as the Ceylon Government Railway. Surveys and construction began in the 1860s. The railway network has been a state enterprise since its inception.[134]

21. The 1862 Act is now spent and may be repealed in whole.

Extent

22. The 1862 Act related only to the commercial affairs of the former Ceylon Railway Company and its dealings with the local Ceylon government. The company operated in Great Britain (London) and in Ceylon.

23. The Act applied to Great Britain and Sri Lanka only.

Consultation

24. HM Treasury, the Foreign and Commonwealth Office, the Department for International Development, the Department for Business, Enterprise and Regulatory Reform, Companies House, the Bank of England, the High Commission of Sri Lanka and the relevant authorities in Scotland, Wales and Northern Ireland have been consulted about the repeal proposals set out in this note.

32-195-50
LAW/005/017/06
9 July 2007

[133] The 1862 Act, ss 3, 4.

[134] Hyatt, D. Railways of Sri Lanka (2000) Comrac, London and Colombo, page 19.

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