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Theory of 'Personal Contract'
255. A striking illustration of this opportunistic approach to the whole question of the status of the Indian States was provided by the theory of 'personal contract' or 'personal obligation' as between the Crown and the Rulers which found expression in the Act of 1935. The increasing emphasis on the Crown in the field of relationship of the States with the Paramount Power, and the interposition of the Crown Representative between the Government of India and the States, were constitutional innovations calculated to deprive the successor Government at the Centre of its legitimate status vis-a-vis the States and to impede the evolution of an organic political and fiscal relationship between the Centre and the States.
The theory of personal contract disregarded not only historical facts but also usage and sufferance which had come to be recognised as the principal factors governing the relationship between the States and the Paramount Power.
256. It is a recognised historical fact that the East India Company had a juridic personality of its own not merely as a trading corporation but as a political power quite distinct from the British Crown. In entering into treaty relationship with the States, the Company acted not as agent of the King in Parliament at Westminster, but in theory as the agent of the Delhi Emperor from whom power and authority were supposed to be derived although he himself was an empty pageant. The attributes of a territorial sovereign, which, coupled with its pre-eminent position in India, enabled the Company to enter into treaties with the States, were acquired by the Company not from the British Crown but the Moghul Emperor. While the Parliament periodically considered Indian affairs when the Charter of the East India Company came up for discussion, the fact that the Company was functioning in India under the authority conferred on it by the Dewani grant of the Moghul Emperor excluded any direct involvement of the British Crown or Parliament in the affairs of the Company. Even as late as 1831, Metcalfe admitted having been a "dutiful subject" of the King at Delhi; "until 1835", writes Edward Thompson, "the Company had coins in the name of Shah Alam, the blind old man whom Lake had found sitting under a tattered canopy when he entered Delhi". Evidently, the British Crown and Parliament could not be fitted into this context. In no treaty does the Crown find a mention; the treaties usually run in the name of the East India Company, the British Government or the Government of India and the officer subscribing them
