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Tracing the Roots of Dysfunctional Legal System

Tariq Omar Ali (toali@illinois.edu) is with the Department of History at the University of Illinois.

Law and the Economy in Colonial India by Tirthankar Roy and Anand V Swamy, Chicago: University of Chicago Press, 2016; pp 240, $45.

Tirthankar Roy and Anand V Swamy’s book traces the roots of contemporary India’s dysfunctional legal system in the history of colonial economic legislation. Their approach is narrowly informed by “new” institutional economic histories and the unquestioned contention that long-run economic growth depends on the laws providing secure property rights and reliable as well as efficient contract enforcement.

Overview of Colonial Laws

The scope of the book is vast: Roy and Swamy provide an overview of colonial laws relating to different facets of the economy across all regions of the British India from the 18th-century establishment of the colonial state to the end of the British raj in 1947. Each chapter focuses on a different sphere of law and economy: property and tenurial rights, credit and debt, inheritance and succession, labour, contracts, corporations, and procedural law. The authors focus on examining the origins and evolution of colonial legislation and the impact of these laws upon economic investment and growth.

Roy and Swamy demonstrate that colonial economic legislation was not informed by an overarching desire to transform India into a modern capitalist economy, but evolved in an ad hoc and piecemeal fashion, as the colonial state attempted, at different times and places, to codify the Hindu and Muslim religious laws, to efficiently collect taxes, to mollify rebellious peasants, and to respond to the interests of capital. The unsystematic and uneven nature of colonial economic legislation, the authors argue, created ambiguities, contradictions and procedural complications that led to delays in disposing law suits, an ever-growing backlog of undecided cases, and—ultimately—the dysfunctional legal system that plagues contemporary India.

Roy and Swamy retread the familiar ground on zamindari and ryotwari laws, tenancy reforms in Bengal, Madras, and the Deccan, and restrictions of land alienation in the Punjab. The agrarian property law, the authors argue, emerged out of the early colonial state’s attempts to collect taxes with a limited administration and evolved through piecemeal responses to peasant rebellions, as the colonial state strengthened tenancy rights and limited the powers of moneylenders to mollify the peasantry.

Roy and Swamy measure the effectiveness of these laws against the ideal of new institutional economic theory: the best laws create unambiguous property rights and allowed for unrestricted land transfers to provide access to credit. Judging agrarian laws against the ideals of neo-institutional economic theory, Roy and Swamy reach controversial conclusions. For example, they state that the Permanent Settlement Act in Bengal was more conducive to growth as it endowed with zamindar with clear and absolute rights to the land even though the tax rates were set high: “The state was rigorous, even harsh, in enforcing its rights, but there was little legal ambiguity” (p 32). On the other hand, amendments to the Permanent Settlement Act in favour of tenants in 1859 and 1885, were “bad” laws in that they created ambiguity in ownership that resulted in more frequent lawsuits that took ever longer to resolve: “The protection of tenants, while a just cause, may have slowed economic growth” (p 45).

Similarly, colonial laws of contracts also evolved in response to a popular peasant rebellion, in this case, the indigo riots or the Blue Mutiny in Bengal during 1859–60. Roy and Swamy trace initial and failed attempts to identify a Hindu law of contract in the late 18th century and the arbitrary judgments on court cases dealing with breaches of contract in the absence of a codified law of contracts. The indigo riots revealed the necessity of legislation governing the framing and enforcement of contracts. The authors argue that the violence of the indigo planters towards cultivators should not be attributed to the predatory European capital, but to the absence of contract legislation which necessitated that planters rely on violence to obtain indigo from cultivators. The framing of the indigo riots purely in terms of incomplete contracts is emblematic of the authors’ commitment to new institutional economic theories, and also informs their discussion of the perseverance of penal provisions in labour laws.

Roy and Swamy demonstrate that the greatest resistance in removing penal provisions for the breach of employment contract came from the tea capitalists in the Brahmaputra Valley in Assam. Located at some distance from the centres of labour recruitment, the tea garden owners in the Brahmaputra Valley relied on violence to ensure that their investment in recruiting and transporting indentured labourers was protected from workers who refused to honour their contracts upon arriving at the distant plantation. In explaining the relation of capital and labour through the theory of contracts, the authors consistently reject arguments of racialised capital and labour.

Instance of the Westernisation

The Indian Contract Act of 1872, according to Roy and Swamy, was an instance of the westernisation of colonial economic legislation, distinct from the attempts to codify religious laws or to contain rebellions through pro-peasant legislative reforms. Another example of the “westernisation” of economic legislation was provided by the corporate law, where the colonial state drew primarily upon British precedence. However, the British corporate law did not address the peculiar institution of colonial capital in British India—the managing agency house.

European business houses exerted effective control over Indian firms through managing agency contracts, which put them in charge of operations of insurance firms, textile mills, transportation companies, and so forth. The British-based corporate law was ill-equipped to protect shareholders and owners against abuses of managing agents. As with their discussion on indigo planters and tea gardens, Roy and Swamy eschew arguments of racialised capital in explaining the overwhelming power of the British managing agency houses in terms of “flawed” legislation to address principal–agent relationships.

Even as the colonial state expanded, the judicial system in the late 19th century, with an exponential rise in the numbers of judges and courts, the backlog of lawsuits grew sharply. The authors explain this paradox of rising judicial capacity and increasing judicial inefficiency with reference to the Code of Civil Procedure of 1859. The procedural law enabled litigants to appeal and counter-appeal decisions on procedural grounds. Roy and Swamy demonstrate that litigants turned to procedural law mostly in cases that involved implicit, unwritten, and incomplete contracts regarding land transfers of business agreements. The very existence of procedural law, the authors argue, transformed the “extreme commonness of incomplete and implicit agreements between parties who shared social ties” (p 172) into the large numbers of drawn out and lengthy court battles that plagued and continue to plague Indian courts.

Limitations

Law and the Economy in Colonial in India is convincing in locating the origins of contemporary India’s dysfunctional judicial system in the evolution of colonial laws. However, despite its impressive breadth and scope, the authors do not convince the reader of their central contention: that economic performance is determined by laws that protect private property and permit the efficient enforcement of contracts. Social historians and legal historians of South Asia will find it limiting to view the complexities of agrarian production, the intricacies of capital–labour relations, the social worlds of European and indigenous capital in Bombay and Calcutta, or the institutional life of a district court in a mofussil town purely through the lens of colonial legislation.

At several points in the book, the authors themselves recognise the limitations of their narrow perspective. For example, regarding Punjab, a location particularly blessed by “good” laws, the authors conclude: “If investment did not occur, the causes for this would have to be sought elsewhere, not in the structure of property rights or contract enforcement” (p 79). The reader may well feel like looking “elsewhere” in understanding economic performance throughout colonial India, and perhaps, even in contemporary India. As Timothy Guinnane notes in the jacket to Law and Economy in Colonial India, “That the Indian economy continues to develop even with this constraint raises a set of rich questions about the role of law in economic development.” The authors, however, do not raise any such questions.

 

 

Updated On : 11th Jan, 2018

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