The Arbuthnot & Co. well-known bankers of Madras crashed in October 1906, bringing ruin and desolation to thousands of homes in the Presidency. THE HINDU: “Of all the tragic accounts which we have heard relating to this catastrophe the most revolting are those cases in which it is reported that sums of money have been received on current and fixed deposits by Arbuthnot & Co. on Friday and Saturday last, the last day on which they kept their doors open for investors, whose feelings may be better imagined than described when they heard of the crash the next day.”
OCTOBER 23, 1906
The failure of Arbuthnot & Co.
WE POINTED OUT YESTERDAY THAT THE PARTNERS OF THE firm Arbuthnot & Co. should make a speedy full and fair disclosure of the antecedent circumstances relating to their bankruptcy. The telegram received today that Mr. Macfadyen leading partner of the firm in England has committed suicide enormously increases the gravity of the situation. As one who held the master key of the firm he was in the best position to give the public the correct account of the transactions of the firm, the extent of the losses which it had sustained and how they had been brought about. It is said that “No statement of his affairs is possible”. Naturally so, when the only man who could have unravelled the state of things has put an end to his life in the most barbarous and ignominious manner possible. The public will be shocked to hear that a man who was at the head of a firm of merchants, who enjoyed for such a long period and in such abundant measure, their wholehearted confidence and respect should not only have caused the wreck of so many homes and unspeakable anguish in many households but closed his inglorious career by an act of supreme selfishness and cowardice. The London Times rightly says that the event will produce an unfortunate moral effect in India. It will be true to say that it is sufficient to blast for a long time to come the reputation of Englishmen for probity and righteousness. Since yesterday we have been receiving harrowing accounts of innumerable instances of the little all that people, young and old, had possessed, having become engulfed in this catastrophe. Under the present circumstances, the plain duty of the partners of the firm is by all means in their power to allay the public excitement, indignation and alarm by an honest and open statement of all the circumstances which have led to the disaster and to endeavour to realise the assets and make the best reparation possible to the creditors. The act of selfdestruction which the chief partner has committed makes the position exceedingly gloomy and renders his previous conduct liable to the worst suspicions. It also renders somewhat improbable the prospect of the creditors receiving anything like a substantial dividend. The liabilities are evidently very large and the means by which they have accrued are prima facie such as will not bear close scrutiny, if we are to judge of their nature from the fact that Mr. Macfadyen who was chiefly instrumental in incurring them has shrunk from facing a public enquiry and deemed it safer to get “behind the veil”. It cannot be denied that under the present circumstances the burden of liability and responsibility on Sir George Arbuthnot who is the partner of the firm in Madras has become very heavy indeed. We may say at once that we hope there is no truth in the rumour that he contemplates leaving the country immediately. Personally and as one of the principal partners of Arbuthnot & Co. Sir George Arbuthnot has long enjoyed the confidence and respect of Europeans and Indians alike in the city. There is no doubt that a great reverse has befallen him which is none the less keen or less ill deserved, because it has carried ruin and desolation to many others likewise. An Anglo-Indian contemporary pleads for sympathy by the public on behalf of the partners of the ill fated firm. It need scarcely be pointed out that they will be entitled to sympathy or consideration only in so far as they succeed in showing that the financial ruin with respect to which they have been the instruments of so many hundreds of persons has been caused by circumstances beyond their control and to which they have not contributed by any acts of theirs. As we have said before Mr. Macfadyen the chief partner has by committing suicide sealed his own lips in regard to the bankruptcy of the firm and of the extent of his own responsibility in regard to it. He did not also have the feeling of humanity which ought to have impelled him to retrieve by his future exertions in life the shattered fortunes and conditions of his innumerable customers. To the credit of the English merchants’ fidelity to truth and honest dealing, we may cite an instance which is exactly the reverse of the case of Mr. Macfadyen. An English coffee merchant in the mofussil in this presidency, some years ago was doing the business of a banker. His banking business was like that of Arbuthnot & Co. Owing to the state of the coffee market his business declined and he was involved in bankruptcy. He was able to pay only a small fraction of their debts to his numerous creditors but he faced his misfortune and the execrations of his creditors like a man and set up fresh business. The latter soon flourished and led him on to fortune and in spite of his non-liability under the law this honest Englishman paid up in full the balance of the debts due to his former creditors. He is still doing the prosperous business and lives contented to the approbation of a satisfied conscience and with the esteem and respect of his Indian fellow countrymen. We think Sir George Arbuthnot should emulate his countryman’s example and live up to the traditions of his ancestry and the honourable place which he has hitherto occupied in the minds of the public of this part of India.
As usual in matters of large moment affecting the interests and feelings of a large number of people there are rumours floating about regarding the transactions of the firm during a week or ten days immediately preceding the suspension of payments to creditors. While some of them may be groundless there are others which have an air of plausibility and probability as they are attended by circumstances which may seem to have a corroborative value. It is said that these withdrawals were by a favoured class of creditors. It is admitted by the firm that there were “sudden and unexpected demands for withdrawal of deposits”. It is material for the public to know who were all the persons that were allowed the withdrawals and how and by what sources they were inspired with a knowledge that like rats leaving a sinking ship they should secure their own monies from the impending ruin. It is also relevant to know how much of deposit amounts have been received by the firm during the last one week or ten days.
Sir George Arbuthnot is also bound to enlighten the public as to how long he has been in possession of the knowledge that his firm was sinking and was not capable of keeping above water.
Of all the tragic accounts which we have heard relating to this catastrophe the most revolting are those cases in which it is reported that sums of money have been received on current and fixed deposits by Arbuthnot & Co. on Friday and even on Saturday last, the last day on which they kept their doors open for investors, whose feelings may be better imagined than described when they heard of the crash next day. We are told that a deposit of Rs. 10,000 was received from a native gentleman on Saturday and the National Fund collections amounting to Rs. 2,000 were also received on the same day. These facts and other rumours which have an ugly look about them are matters to be explained in a satisfactory manner. No authentic statement of the particulars relating to the bankruptcy has yet been published by the firm. It seems to us that notwithstanding the fact that proceedings have been initiated in the court for declaring insolvency, Sir George Arbuthnot should without delay, in order to allay public excitement, make a detailed statement of the circumstances which have caused the lamentable collapse of his firm. With regard to the order which was made in the insolvency court yesterday, vesting the properties of the firm in the Official Assignee the wish has been widely expressed that in view of the large properties involved and their being situated in various places another Commissioner should be appointed to work with the Official Assignee and he may be an Indian gentleman of experience and position. If it is allowed by the law nothing will give greater satisfaction to the numerous body of Indian creditors under the circumstances.
Reference:
The First 100
A Selection of Editorials, 1878-1978, THE HINDU, VOLUME I