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

Assam Railways and Trading Company

Acts covered: Assam Railways and Trading Company s Act 1897 (60 & 61 Vict. c.xvii), Assam Railways and Trading Company s Act 1910 (10 Edw.7 & 1 Geo.5 c.xiv)

Background

1. The Assam Railways and Trading Company originated from an agreement (made in May 1880) between the Secretary of State for India and Shaw, Finlayson and Company to build a railway line between Dibrugarh and Sadiya. By a contract dated 25 July 1881, the company's name was changed to the 'Assam Railways and Trading Company Limited'.[20] The company was incorporated in 1881 under the Companies Act 1862.

2. During the construction work, the company struck oil. This led to the creation of the Assam Oil Company in 1889. The Railways and Trading Company continued to be involved in oil and railways in the Assam region for many years. The Indian government bought the company's line in 1945, and merged it with the Bengal Assam Railway, which had been a government-owned and managed railway from 1942.[21]

3. The Assam Railways and Trading Company is now one of a group of companies owned by the Assam Company Ltd, which is 'the flagship company of the Duncan Macneill Group'.[22] The Assam Railways and Trading Company is a company registered in the United Kingdom.[23] It has no current involvement in the management of railways in India.

4. Two Acts relating to the Assam Railways and Trading Company were promoted over the lifetime of the company:

Assam Railways and Trading Company's Act 1897

Assam Railways and Trading Company's Act 1910.

Both of these Acts are proposed for repeal in this note.

Assam Railways and Trading Company's Act 1897

5. The Assam Railways and Trading Company was incorporated under companies legislation in 1881 as a company limited by shares. The company owned and ran a railway from Debrugarh (now Dibrugarh) to the River Dehring (the main line), and a branch line from Makum Junction to Talup in the province of Assam in India. It also owned and operated other businesses 'of considerable value', including colliery workings.[24]

6. The company had originally, in accordance with its memorandum and articles, issued a maximum allocation of A and B shares which would be redeemed (with a 20% bonus) on sale of the railways but meanwhile would generate a cumulative dividend. Between 1884 and 1893 the company then created additional share issues (new A shares, pre-preference A shares, and new 6% and 8% preference shares) to raise further capital. These various issues were not fully paid but, in error, the share certificates declared that they were. Subsequently, the shares were 'the subject of frequent dealings', but the purchasers in the main were unaware of the true position. The terms of issue of the additional shares were 'inconsistent with' the provisions of the company's memorandum of association, and only 'lengthened litigation' would determine the shareholders rights following sale of the railway enterprise.[25]

7. In May 1880, the company's promoters had entered into an agreement with the Secretary of State for India ('the 1880 agreement') whereby the Secretary of State was given a right of first refusal, exercisable every five years, to purchase the railway system. By 1897, the railway enterprise's 'present earnings' were such that the directors of the company apprehended that the Secretary of State might want to exercise his right of purchase. At the same time, they realised the company's power to redeem its shares was 'invalid' and, without first being able to determine the various shareholders rights, creating a capital-reduction or reconstruction or reorganisation scheme would be impossible.[26]

8. Against this backcloth, the company sought new powers, via a bill,[27] for the following purposes:

(a) to deem certain classes of share to be fully paid up from their date of issue;[28]

(b) to arrange for an orderly distribution of proceeds (using a set formula) in the event that the railway enterprise was sold to the Government of India pursuant to the 1880 agreement;[29]

(c) to give notice to the various shareholders of intention to repay in accordance with the formula in the event that the Secretary of State were to give notice of his intention to purchase (and to effect the repayments);[30] and

(d) to cancel shares (when paid off) and reduce the company's capital accordingly.[31]

Status of the 1897 Act

9. The sole purpose of the 1897 Act was to restructure the capital funding of the Assam Railways and Trading Company in the light of a possible buyout of a significant portion of its assets by the then Government of India.

10. The promotion of a later Act in 1910 (see below) indicates, first, that this financial restructuring either took place or was rendered redundant by subsequent events and, secondly, that the risk of buyout was deferred until 1921 at the earliest.

11. Although the 1897 Act was linked to current company legislation, the specific scheme within the Act stood alone and was designed to bridge a gap in that legislation.

12. In these circumstances, the 1897 Act is now spent, and may be repealed in whole.

Extent

13. The 1897 Act related only to the affairs of the Assam Railways and Trading Company Ltd. (which was incorporated under United Kingdom company legislation).

14. The Act applied to the United Kingdom and to India (in the states of Assam and Arunachal Pradesh). Assam Railways and Trading Company's Act 1910 (10 Edw.7 & 1 Geo.5 c.xiv) Purpose

15. By 1910, the Assam Railways and Trading Company Ltd. had need to redistribute its capital holding amongst different share categories (so as not to disadvantage the holders of both A and B shares). This conversion of shares into different forms of share and stock required legislative authority, which could only be secured by an additional Act. [32] The 1910 Act was directly linked to, and an extension of, the provisions in the 1897 Act.[33]

16. In December 1901, the Secretary of State for India had undertaken not to exercise his right of purchase before 1921, and to extend the intervals for subsequent exercise of his right from 5 to 10 years.[34]

17. The broad purpose of the 1910 Act was:

(a) to permit increase of the company's nominal share capital by 285,000 to 1,078,750, spread across four categories of share and stock;[35]

(b) to permit conversion of specified A and B share categories into A and B stock, followed by cancellation (on 'the prescribed date') of the former shares and dividend arrears;[36]

(c) to permit the formal issue of A and B stock (deemed fully paid up) to the previous shareholders;[37] and

(d) to make provision for the rights of members (as to voting, asset distribution on winding up or on sale under the 1880 agreement,[38] and provision of a copy of the 1910 Act).[39]

Status of the 1910 Act

18. The function of the 1910 Act was to supplement the earlier scheme in the 1897 Act (above). Its principal purpose was to legitimate a proposed financial rearrangement within the company.[40]

19. The scheme within the 1910 Act appeared to stand alone, and to put in place contingency arrangements ahead of a possible purchase - by the then government of India - of a significant tranche of the company's operating assets.

20. The bulk of the Indian railway network had already been transferred into state ownership under an acquisition programme in 1907 (under which the Indian government then leased the lines back to private operators). The rail-based assets of the Assam Railways and Trading Company were acquired by the government in 1945.[41] The Assam Railways and Trading Company appears still to exist (registered company no. 15743),[42] although it is owned by the Assam Company Limited, which itself is part of the Duncan Macneill Group. The company no longer has railway-operating interests in the Indian sub-continent.

21. The 1910 Act is now spent, and may be repealed in whole.

Extent

22. The 1910 Act related only to the affairs of the Assam Railways and Trading Company Ltd. (which was incorporated under United Kingdom company legislation).

23. The Act applied to the United Kingdom and to the states of Arunachal Pradesh and Assam in India.

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 India, the Assam Railways and Trading Company, Duncan Macneill & Co. Ltd., 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

Notes

  1. [20] Ghosh, S. Railways in India - A Legend (2002) Jogemaya Prokashani, Kolkata, page 143.

  2. [21] See Ghosh, S. Railways in India - A Legend (2002) Jogemaya Prokashani, Kolkata, pages 140-3.

  3. [22] The Assam Company website at www.assamco.com/corporate/company.html [11 October 2006].

  4. [23] Registered company number 15743.

  5. [24] Preamble to the Assam Railways and Trading Company's Act 1897 ('the 1897 Act'), the long title of which was 'An Act to provide for the Distribution of Surplus Capital of the Assam Railways and Trading Company Limited and for other purposes'. The Act's short title was assigned by section 1.

  6. [25] The 1897 Act, preamble.

  7. [26] The 1897 Act, preamble.

  8. [27] Authority to promote the bill had been sought, and obtained, from each class of shareholder.

  9. [28] The 1897 Act, s 2 and Sch. Section 2 made clear that the deeming was 'without prejudice to the rights in winding up' of certain existing creditors.

  10. [29] The 1897 Act, s 3. The section included a proviso for the possibility that the sale proceeds might be insufficient to pay off the various classes of shareholder in full (being a pro rata payment of principal and bonus).

  11. [30] The 1897 Act, s 4.

  12. [31] The 1897 Act, s 5. By sections 6 to 8 of the 1897 Act, nothing in the Act was to prevent the company in the future from altering its memorandum or articles in accordance with companies legislation; a printed copy of the Act was to be filed with the companies registrar; and the cost of obtaining the Act was to be borne by the company.

  13. [32] Preamble to the Assam Railways and Trading Company's Act 1910 ('the 1910 Act'), the long title of which was 'An Act to vary and define the rights of the holders of certain shares in the capital of the Assam Railways and Trading Company Limited and for other purposes'. The short title of the Act was assigned by section 1.

  14. [33] The Acts were permitted to be cited together as the Assam Railways and Trading Company's Acts 1897 and 1910: the 1910 Act, s 1.

  15. [34] The 1910 Act, preamble.

  16. [35] The 1910 Act, s 3. A statement of the permitted increase (stamped with duty) had to be lodged with the companies registrar.

  17. [36] The 1910 Act, ss 4-6, 12. The 'prescribed date' was defined in section 2 of the Act. The newly created stock holdings were to 'confer upon the holders thereof the like rights and be subject to the like incidents in all respects (mutatis mutandis) as the existing [A and B] shares of the company': ibid., ss 4, 5.

  18. [37] The 1910 Act, s 7. All the previous share certificates were to be called in, and cancelled, prior to issue of the new stock certificates: ibid., s 7(4), (6). Sections 8-11, 13, 16-17 and 21 made mechanical provision for: shares held in trust; unregistered share transfers; new stock transfers; the order of priority for dividend distribution for new shares or stock; adjusting the register of members and books of account; and filing a copy of the 1910 Act with the companies' registrar.

  19. [38] See the 1897 Act, preamble and s 3 (above).

  20. [39] The 1910 Act, ss 14, 15 and 22. The Act also included various savings provisions (in sections 18 to 20) and placed responsibility for meeting the costs of obtaining the legislation on the company (section 23).

  21. [40] The preamble to the 1910 Act noted that 'doubts exist' as to the rights of various share and stockholders to receive capital repayments, either on dissolution of the company, or on the occurrence of 'certain events'. To that end, it was 'expedient that such doubts should be removed' by supplemental legislation: ibid.

  22. [41] See previously.

  23. [42] The company is described as a non-trading company. Full accounts have been filed at Companies House, made up to 30 September 2006.

The material in the Indian Railways Repeals Proposal - Consultation Paper is under UK Crown Copyright and is reproduced here in accordance with applicable terms of use.