HC Deb 27 March 1868 vol 191 cc426-38

, in rising to ask the Secretary of State for India, What is the present position of the Bank of Bombay; and, whether he will institute any inquiry into the circumstances of the failure of the Old Bank of Bombay? said: I am glad to find that the right hon. Baronet has recently sent instructions to the Governor General of India to appoint a Commission of Inquiry into the circumstances of the failure of the old Bank of Bombay, and I beg to thank him for an act of justice to the unfortunate shareholders, which was denied to them by the authorities in India. I may mention that the Bombay Government were shareholders in this Bank; that they had the power of nomination of three of the directors; and that they exercised that privilege in the appointment to the Board of the highest officials in the financial Department of the Government. And without its being supposed that I cast imputations on anyone, I hope that I may be allowed to urge on the right hon. Baronet the Secretary of State that this inquiry should be of a most searching character; and I press this the more earnestly, seeing that the shareholders are chiefly members of the civil and military services of Western India, who, on the faith that this Bank was a Government institution, invested their money in it under the same feeling of security that they did in a Government Loan or in Government Stock. At a meeting held at Bombay on the 13th of January for the winding up of the Bank, an appeal was made by the shareholders then present for information as to where their money had gone, and who were the persons for whom their property had been sacrificed. The official liquidator replied to this effect, as reported in The Bombay Times of the 29th of January— If the shareholders wanted to make an investigation as to where their money had gone and who was to blame, it was for themselves to make it and not him. If it was to be one of his duties as liquidator, he should decline to take another step in the liquidation, and should at once place his resignation in the bands of the shareholders. He would not be the leader or mover in such an inquiry as the one suggested. The Accountant General of Government, then present, confirmed this statement. The opinion of the Governor General in Council on the subject of the Bank is given in a despatch under date of the 18th of April last, addressed to the Secretary of State. It is as follow:— We have the honour to forward the documents in the annexed list, and to state that it illustrates the scandalous manner in which the Bank of Bombay was conducted at the period to which the correspondence alludes. I shall only add that I trust the Report of the proposed Commission will be laid before this House with as little delay as possible, so that it may have an opportunity of discussing the connection of the Bombay Government with one of the grossest cases of joint-stock mismanagement on record. I now ask the right hon. Baronet, what is the present position of the new Bank? I much regret that the Bombay Government has been authorized to become shareholders in it. I had hoped that, after the disastrous experience of the past, any new bank with which they became connected, would have been put on an entirely different footing; that the Government would have retained complete control over its capital and deposits; and I fear that the proposed appointment of an inspector over a board of directors selected from a community who have shown of late years so little moderation and prudence, will not inspire confidence. But it is, Sir, most desirable that this House should have a full statement of the position of this new Bank, and the nature of the security it holds out to the public. In conclusion, I hope that the House will permit me to say that I have no interest, direct or indirect, in these Banks, but have ventured to bring the subject before it solely on public grounds.


endorsed the opinion of the hon. Member who had last spoken as to the importance of the questions arising out of the failure of the Bombay Bank. The essential features of the case were these: — A capital of £2,000,000 had been dissipated, and in consequence hundreds, perhaps thousands, of most deserving persons had been reduced to beggary, And more than this, the sufferers were for the most part retired officers and civil servants of India, who had been induced to invest the savings of years in the Bank of Bombay, on the credit of its being a quasi Government establishment; or at least in the belief that it was an establishment under the supervision of Government, because three of the directors had been Government officials. The inference put upon the connections of Government with the Bank might have been right or wrong, but it had naturally given birth to a very strong demand for redress. That redress had hitherto been denied, and explanations even had been resolutely refused; so that the unfortunate shareholders were not even accorded the poor satisfaction of knowing by what means their wrongs had come upon them. The painfulness of their position had even been aggravated by seeing a second Government Bank reared on the débris of the old one, buttressed by the vicious system of Government connection, and advertised with the same delusive disguise of Government support. He would not discuss these points on their merits; he would give no opinion on the policy of a Government indemnifying shareholders; nor would he venture to assert that exceptional circumstances might not justify a Government in taking shares in a private concern, notwithstanding the late disastrous experience, and the fact that such a course was directly opposed to all recognized principles of political economy. But what he did insist on was a searching inquiry into all the circumstances of this lamentable failure, that the House might have the means of reviewing it, and giving a just opinion on the merits of the case. He insisted on this, not only in the interests of the shareholders themselves, but in the interest of the public at large, who had the right to demand full information. This brought him to another matter, respecting which he wished to appeal to the right hon. Baronet. The House would recollect that when the Government of India Act was passed in 1858, it was especially provided that although the Council was powerless as against the Secretary, except in matters of finance, its members might still have the power to record their opinions whenever they differed from the Secretary of State. These were the words of the Act— And in case of difference of opinion on any question decided at any meeting the Secretary of State may require that his opinion and the reasons for the same be entered in the Minutes of the proceedings, and any member of the Council who may have been present at the meting may require that his opinion and any reasons for the same that he may have stated at the meeting be entered in like manner. The evident object of this clause was to provide a constitutional check against the possible exercise of power in an arbitrary or unwise manner by the Secretary of State, since, by placing the recorded opinion of the members of the Council at the disposal of Parliament it brought those disputed points under the supervision of the House. This had accordingly been the practice ever since. In no single instance, he believed, had the recorded Minutes of Council hitherto been refused; and the House would remember that in the Mysore case, recently before the House, the Minutes of the members of Council both for and against annexation were appended to the Correspondence, and formed an integral part of the Report. He had therefore fully expected the House would be put in possession of the opinions of the members of Council, in the case of the Bombay Bank, involving as it did two most serious questions; one affecting private interests to the extent of £2,000,000, the other dealing with the adoption by the Government of a very questionable policy. The House would, therefore understand his surprise when the right hon. Baronet declined to produce those Minutes of Council. As reported by The Times of Wednesday last— Sir Stafford Northcote said there was only one such Minute recorded under the provisions of the 23rd section of the Government of India Act, and, inasmuch as it referred to questions having relation to the personal character of individuals about to form the subject of judicial inquiry, he did not think it would be right to consent to its production. He (Sir Henry Rawlinson) was not aware that any judicial inquiry was pending. He was aware that a Commission was about to be ordered in India to collect evidence, and of course the examiners would in due course send in their Report; but he did not see that the production of a Minute recorded by an individual member of Council would affect that Report in any way whatever. If, however, the Commissioners were so plastic or so subservient as to be affected by the opinion of a man in authority, then it must also be held to be most injudicious to have included in the Correspondence furnished to Parliament, the Minutes of Council of India, and the despatch of the Governor General. The same objection to publications applied equally to the Minutes of the Council at Calcutta and at London. Both sets of documents should either be produced or withheld; and, in his view, both should have been produced, simply because in cases of this sort no good would result from concealment. If the right hon. Baronet had acted wisely he would have gone in advance of public feeling rather than have tarried behind until it became necessary to demand of him what was nothing short of a public right. If the right hon. Baronet rose and stated upon his responsibility as a Minister that the production of the Minute would be contrary to the interests of the public, of course there was no more to be said. But the right hon. Baronet would, no doubt, name a time for its production, which would probably be at the same time as the Report of the Commision. But, sooner or later, the Minute must be forthcoming; otherwise, the precaution deliberately sanctioned by Parliament for enabling members of the Council to record their opinions would turn out to be no precaution at all, but a mere snare and delusion.


thought the Governor General of India had shown himself oversensitive; but that the feeling upon his part was justified by expressions which had fallen in debate from the noble Viscount (Viscount Cranborne), who had himself formerly administered the affairs of India. If we had left the country a little more under the rule, of Native Princes, perhaps a greater success and contentment among the masses of the people would have been the result, and this, probably, was in the Governor General's mind. But looking to the security in the tenure of property, and the other benefits which had resulted from our rule, it might be said with truth that that rule has been on the whole beneficent in its effects, and history would show this.


said, that from time to time the House was startled by occurrences in India. But a few years back everybody was aroused by the statement that torture had been resorted to in the collection of revenue. Everybody denied the truth of the statement. The matter, however, was inquired into, and the fact was established. A year or two ago they learnt that hundreds of thousands of persons had died through the neglect of officials in India. His hon. Friend that night had brought under the notice of the House some circumstances connected with the administration of Indian affairs, which, though not so terrible in their immediate consequences, were yet exceedingly grave in their nature. The hon Member who had spoken last appeared hardly to understand the gravity of the question, which it was impossible to state without exciting a feeling of amazement that such things could occur, even in India. It was not simply that £2,000,000 had been lost to innocent depositors. A Bank had been established, after great consideration, by the Court of Directors of that day, with all the commercial knowledge and accurate business information at their command, and under conditions admirably calculated to promote the security and success of the undertaking. The manner, in fact, in which it was established was calculated to convey to persons in India the idea that the Bank had as much claim to their respect as the Bank of England had to that of persons in this country. And what, he asked, would persons here think if, one fine day, the Bank of England ceased to exist, and they were told that no one could be held responsible for the disappearance of one single farthing of the capital of that great institution? Such an event would startle the whole country, yet it was precisely such an event which had happened in Bombay. The Government had declared, "We will become partners in the concern; we will appoint three of our principal civil servants to represent us there; and we will have the rules of its administration put into a law, so that there may be no mistake about the nature of the duty which the shareholders have to perform." His own personal experience of banking at Bombay had probably been as great as that of any hon. Member in the House, and he had no hesitation in stating that the rules laid down by the court of directors were admirably calculated to secure the objects which they had in view. He remembered warning Viscount Halifax, when he proposed the creation of local legislative councils, of the danger of substituting for the responsible servants of the Crown persons with no real position or responsibility. Now it was alleged by the victims of this failure that the Council varied and altered the fundamental laws of the Bank for their own sinister purposes, granting unlimited powers to the administrators of the Bank, and jeopardizing the interests of the shareholders without giving them any intimation of the change. It was clearly the duty of the Secretary of State to require a thorough investigation into every circumstance attending those proceedings; and that Government ought not to be allowed to screen themselves by the fiction of the responsibility of the Legislative Council. Again, it was asserted that high officers in the civil service had conducted the bank in a manner lacking not merely in discretion but in morality. This imputation, too, ought to be inquired into, so as to show how every shilling was withdrawn from the coffers of the bank. The besetting danger of public servants in India at the present time appeared to be their relation to joint-stock companies; for they were tempted to waver between the discharge of their duty and the profits they could obtain by manipulating those companies. This catastrophe was an illustration of the way in which our Indian administrations were constantly breaking down, and the truth was, that while a certain system of Government existed on paper, a wholly different one existed in fact; and this was the explanation of much of the discontent which attended our rule. He hoped the Secretary of State would show that whatever demoralization there might be in the conduct of the Bombay Government, there was in this country a high sense of morality, which would insist on a proper performance of their public duties by local administrators.


Sir, the hon. and learned Member for the Tower Hamlets (Mr. Ayrton) has slated strongly, but, speaking with some qualification, I am bound to say, not too strongly, the case of the failure of the Bombay Bank. I say with some qualification, because I feel it necessary to reserve my opinion on the history of a transaction which is at present the subject of inquiry. I quite agree with him that the charges which have been made against the Legislature, and several high officials of Bombay, are charges which it would be discreditable and disgraceful for us to pass over without a full inquiry. An inquiry has been ordered; and I have received a communication from the Government of India, stating that, in accordance with my directions that they should issue a Commission, they propose one armed with powers of obtaining evidence compulsorily, and composed of two members nominated by the Governor General and one by the Government of Bombay. [Mr. AYRTON here intimated disapproval.] The hon. Gentleman cannot think it right that the inquiry should be one-sided. The inquiry should surely be conducted by those who have a perfect knowledge of the case, and the Commissioners will inquire thoroughly into all the allegations which have been made. I wish, however, to remark that when Members speak of the liability of the Government in a matter of this kind, they must mean the liability of the taxpayers of India; and it will be a question for serious consideration whether any case can be made out justifying the imposition of a burden upon them for the purpose of replacing the funds lost through the failure of the Bank. I have heard a good deal said on both sides with regard to that failure, and I am inclined to think that the inquiry will show that it is by no means so one-sided a matter as might be supposed from the statement of the hon. and learned Gentleman. I wish, therefore, to abstain from entering into the subject at present. In answer to the hon. and gallant Member for Frome (Sir Henry Rawlinson), I may say that I have, on the same principle, abstained from laying on the table the dissent for which he has asked. That dissent was recorded in the Council of India, during last autumn, and expressed the strong opinion of a member of the Council in favour of a full inquiry. Now, at that time, an inquiry was not contemplated; but, in consequence of information which subsequently reached me, the policy embodied in the despatch against which the dissent was entered was reversed, and a full inquiry was ordered. It was therefore unnecessary to produce it, and its production would be inconvenient; since the dissent is couched in very free terms, and reflects on the conduct of certain persons whose acts will undergo investigation. I may remark in passing that I believe the phrase I used on a former occasion was not a "judicial" but an "official" inquiry. Were these parties to be prejudiced by the production of a document entering into questions of a personal character, it would be only fair to give them the opportunity of representing their own case in reply. I think it would be inconvenient, and in some respects unfair, to produce the document now; but I shall have no hesitation when the time has come for bringing the whole matter before Parliament to produce the dissent and everything else bearing on the subject. The hon. Member for Kincardineshire (Mr. Dyce Nicol) asks me what position the Bank of Bombay is in, and what part we intend to take in respect of it. With regard to that, perhaps I need not enter at full length into the present position of the Bank, because I think it is described in the Papers laid on the table. I may, however, say that a new Bank has been formed under Articles of Association, and under the Limited Liability Act, which. I believe, is in operation at Bombay. The Government have taken shares in the Bank under those articles as a provisional arrangement, till a decision can be come to as to the terms on which we shall have any connection with it. It will be necessary to give a charter to the new Bank, and instructions have been given to the Governor of Bombay to impose such ample conditions in respect of the partnership of the Government as may be thought necessary. One of the inquiries now being made is as to the proper terms on which the Government may enter into partnership with the Bank. I may further observe that at the time when I assumed the office which I have now the honour to hold, I found this question in agitation in India. The question as to what was to be done in the re-constitution of the Bank of Bombay was not officially before the Government, but various proposals had been put forward in India. One was for the reconstruction of the old Bank, another for an amalgamation with the Bank of Bengal, and there was a suggestion of a wider character for the establishment of a great State Bank for all India. I found it to be the case that the Government were shareholders in the Banks of Bengal and Madras; and that the Bank of Bengal had power under its charter to establish branches anywhere in India, and might therefore establish one in Bombay. I was anxious to withdraw the Government from what appeared to me to be the false position of a shareholder in a bank; and I have no hesitation in stating that if by a stroke of the pen I could have cancelled the connection of the Government with the Banks of India I would have done so; but that was not possible, under the circumstances, as regarded the Bengal and Madras Banks. In a private communication to the Governor of Bombay, I stated my own strong feeling that, on the one hand, it was undesirable the Bank of Bengal should extend its operations to Bombay, and thereby enlarge the circle of its operations, and render it more difficult for the Government directors to exercise a control over its proceedings; and, on the other hand, it was desirable that we should withdraw from any connection — at all events, as shareholders — with the new Bank that was to be formed. I found that the Governor of Bombay was strongly of the same opinion. But, at the same time, I said that if it was found impossible to reestablish the Bank on any other terms than those of the Government taking shares in it, this might be done. For some time after I was under the impression that the Bank would be re-constructed without such a connection. The Governor of Bombay, however, found that to be an essential condition for the re-establishment of the concern; and, looking at all the consequences —at the distress which might be occasioned if a bank were not opened; the proposal for extending to Bombay the operations of the Bank of Bengal; and the great difficulties in the way of carrying out so great a scheme as a bank for all India—I thought, on the whole, that the least evil would be for the Government to take shares, at least temporarily, in the new Bank of Bombay. My instructions to the Governor of Bombay were to state to those engaged in the reconstruction of the Bank that our partnership was for a temporary purpose, and that, as soon as possible, arrangements would be made to enable us to withdraw from it. I objected to the appointment of Government directors, and asked that some other system of inspection might be adopted. I put on record my opinions on this subject, and I would be willing to produce them; but perhaps the statement I have now made will sufficiently explain the reasons which induced me to act as I have done. I regret it should be necessary for us to so far depart from what I believe to be the true principles of economy as to consent to the Government becoming shareholders in a bank; but there was no choice before the Government, and I shall take care to avoid any liability as far as possible. Having said so much, I think it better to leave the question aside. All I can promise now is that a full and searching inquiry will be made; but when so much of the blame of what has happened is thrown upon the Government directors, it must be borne in mind that they were in a minority, and that they had no more voice in the direction of the Bank than any other director?. Again, one of the elements entering into their appointment was that those gentlemen held other offices, the duties of which they had to perform, and that they were not allowed to be shareholders in the Bank, and received no remuneration for their services as directors. It was altogether a vicious system. It was assumed that those gentlemen had control; while, in fact, they had no real control, and were not particularly responsible.

I am sorry to be only now able to say a few words on the subject which occupied our attention an hour or two ago; but it is one of the misfortunes of the manner in which business is conducted on this evening of the week that a Minister, when replying, has frequently to mix up several topics, I am sorry that the subject to which I have been last adverting has intervened in the middle of a discussion of the very interesting question which the noble Lord the Member for Taunton (Lord William Hay) has brought forward. I concur entirely with what my noble Friend (Viscount Cranborne) has said. I feel that the speech of the noble Lord the Member for Taunton has been one of very great value and very great interest. I am entirely persuaded that it will be of very great advantage to India that subjects of this kind — that everything which interests that Empire—should be, from time to time, brought before this House, and that it should be shown to the people of India that what interests them is interesting to us. The papers which have been laid on the table contain, I think, their own justification. I believe that it is not necessary to go into the question whether Sir John Lawrence had or had not sufficient provocation, or I would rather say sufficient excuse, to address to the officials the questions which he did address to them; but I do think it important that such a body of opinions should be collected. I cannot agree with the hon. Member for Dumbartonshire (Mr. Smollett) that those were opinions obtained to order. I think they show this — that those who are intrusted with the administration of our system of rule in India do look at the people they have to deal with, and at the task committed to them, in a large and statesmanlike and candid spirit. It cannot be expected that they should all agree on every point; and it should be borne in mind that those gentlemen are writing from different parts of India — one from one part and another from another part, and that they speak of the people as they find them in the districts with which they themselves are connected. It will be found that one of the characteristics of India is the difference between the different populations. What is true of one part may not be true of another; and, therefore, it is not surprising to find that a gentleman writing from the North should take a different view from that taken by a gentleman writing from the Central provinces. In these papers you will see a description by Sir R. Temple, of the diversity of opinion which he observed between the people in Behar and the people in Central India. With regard to this whole question, I would venture to make one general remark. I have often heard it asked, by what right we hold India; but I do not think it necessary, expedient, or useful for the House of Commons to enter into an abstract question of that sort. It is a very interesting question, and one which in the proper place may very well be discussed; but an extremely useful question for the House of Commons to ask is, by what tenure do we hold India?—By what power? There are two answers to that question. Some say that we hold it by the sword. Others say, to quote the eloquent expression of Sir Bartle Frere, that we hold India "By the divine right of good government." But, with reference to one and the other expression, we should be careful as to what interpretation we put upon them. If by the expression "We hold India by the sword" is meant that by a very small force we hold 150,000,000 of people in rule against their will, that implies two things—great absurdity and great immorality; because it would be absurd to suppose that by such a force we could keep such a number of people under British rule against their own will, and it would be immoral to so keep them for our purposes alone. But there is another sense in which I think that expression may be justifiable. It is no doubt an immense advantage to have the ruling power strong enough to preserve peace and order, and to keep the nation over which it presides free from foreign invasion and domestic trouble. No doubt, it is an enormous advantage to the people of India that they are under the administration of a nation which is able to prevent the disturbances of civil war and the robbery and plunder which weak Native Governments very probably might, and, in former times did, actually indict, and we ought never to lose sight of the immense benefit we confer by rendering possible good government, quiet, and prosperity by the force which we bring to bear upon public affairs. Of all Governments, I believe a weak Government — especially in the case of a people not sufficiently advanced to govern themselves — to be the greatest curse possible. With regard to the other explanation of our tenure, that "We hold India by the divine right of good government," in one sense it is perfectly true. We do govern India in a manner very superior to that which prevailed in a great many of the native States and among our predecessors in that dominion. But if it is intended to say by that expression that because we do govern them better than they could govern themselves we have any right to go and take possession of the countries bordering upon ours; or, in other words, to carry out a policy of annexation with a view to that end, I say we should be entering upon a most wicked and dangerous course. And, although we do give good government to those people, I do not think it would be justifiable to use that as an argument for the purpose of annexing Native States or refuse to them existence as far as possible. Now, I venture to point out that one very great advantage is derived by Native States from our presence among them. We keep peace upon their borders; we set a good example; we bring work and prosperity into their neighbourhood; and, moreover, we have a certain duty imposed upon us, as the paramount Power, of interfering in cases in which gross misconduct has taken place in a Native State. That power has been often exercised with very great advantage, and has been felt as a benefit by the people. I would mention a case which occurred very recently, in which a very barbarous crime was committed by the Nawab of Tonk on the ruler of a dependent State and several of his nobles whom he got into his power. The offence was so great against the laws of morality that the Governor General interfered, took possession of the State, but not for the advantage of the British, deposed the offender, and put the next heir in his place. Where you have the great British power exercising its influence in that way, it must produce very great good. With regard to the other question of Native agency, I quite agree with the hon. Member for Brighton (Mr. Fawcett), that this is one of the points to which we must address our serious attention. This is a great opening we have got for training the Natives to the administration of their own affairs. In a very large proportion of cases that must be done gradually—with care and wisdom. I believe very great good is to be effected in that way. What lies at the root of that question is this — you should never forget that India is not one country; it is an agglomeration of many countries, and what may be done in one part with safety cannot be done in another. The great object we have before us is to discover how far we can decentralize, and how we can introduce into the different States that principle of Native agency of which the hon. Member spoke. But we shall have that question before us on a future occasion, and therefore I shall not detain the House further now than to thank the noble Lord for the speech which he has delivered.