841.6463 Calcutta/12
The Acting Secretary of State to the Consul General at Calcutta (Frazer)
Sir: At the request of the American and Foreign Power Company, of New York, New York, on January 8, 1930, the Department of State instructed the Ambassador at London to inquire informally of the British Foreign Office as to certain statements which had been attributed to officials of the Calcutta Electric Supply Corporation regarding the investment of non-British foreign capital in India, These statements consisted of a categorical assertion in a notice of a special share-holders meeting that the Government of Bengal had suggested to the Calcutta Electric Supply Corporation the desirability of reorganizing the articles of association in such manner as to preclude foreign (i. e. other than British or Indian) control of the corporation; it was also reported to the Department that the Chairman of the Calcutta Electric Supply Corporation had stated verbally to a representative of the American and Foreign Power Company that the Government of India desired to exclude American capital from British India.
In its despatch No. 710, under date of March 5, 1930,33 the Embassy at London forwarded a copy of an informal communication from the [Page 165] Right Honorable Mr. Arthur Henderson, dated March 3, 1930, which confirmed the accuracy of the statement that the proposal to limit foreign share-holdings in the Calcutta Electric Supply Corporation had originated with the Government of Bengal but denied the substantial accuracy of the statements attributed to the Chairman of the Calcutta Electric Supply Corporation. The text of Mr. Henderson’s letter reads as follows:
[Here follows text of letter printed supra.]
. . . . . . . . . . . . . .
So far as the records of the Department of State would indicate, this appears to be the first recent occasion on which an official British governmental agency has taken the initiative in recommending the limitation of foreign capital in a private British company. The instance is the more remarkable in view of the recent acquisition by American capital of large public utility interests in the United Kingdom. The attitude of the British Government in the premises would appear to throw considerable doubt on the future status of foreign capital throughout the Empire and if extended to other types of enterprise might be regarded as detrimental to American financial interests throughout the British Empire.
You are directed discreetly to investigate and report on the several issues of law and of fact which are raised in Mr. Henderson’s letter to the Ambassador at London. In particular, the Department desires to be informed as to the danger to the Bengal Government which might inhere in the control by foreign capital of a public utility which is subject to the Bengal Government’s license, to the legal or actual power of the Government of Bengal to act as a sovereign without the possibility of intervention by the British Government, to the Bengal Government’s competence to take action in the premises and whether there is any precedent for such action, to the Bengal Government’s relation to the Government of India in these matters, and to the question of the apparent hostility of the Government of India to the investment of American capital in that country. It is particularly desired that you should indicate the most practical manner of approach when this Government desires to raise questions of this character in relation to India. Any additional comment which you may consider appropriate will also be appreciated by the Department of State.34
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