The first Backbay Reclamation Company was formed during the boom years of the early 1860's, with the stated purpose of reclaiming the whole of Backbay. With the end of the American Civil War, in 1865, a depression set in and land prices fell. The company went into bankruptcy and was liquidated. The government took over the narrow strip of land that had been created and gave to the BB&CI Railways for the purpose of laying a line from Churchgate to their new terminus in Colaba.
About fifty years later, a proposal for the reclamation of 1500 acres of land between Colaba and Backbay was made in 1917 by a syndicate of prominent citizens and a private company. This project was taken over by the Development Directorate, which planned to reclaim 1145 acres.
Work was delayed by the necessity of relocating the terminus of the BB&CI Railways at Colaba. They were directed to shift the terminus to its present location at Bombay Central, but were unable to do so within the given time frame. In the meanwhile the Consulting Town Planner, W. R. Davidge, had proposed a development scheme incorporating wide open spaces with recreational areas and a mixed residential and commercial land-use pattern.
The work was plagued with delays and losses. The depression of the '20s led to a fall in property values. In 1926 it was estimated that the work, at the rate with which it was proceeding, would be completed in 1945 at a cost of Rs 11 crores, 4 times the estimated cost.
The Backbay Enquiry Committee was set up. Spearheaded by K. F. Nariman and Manu Subedar, it uncovered financial irregularities and the fact that the sanction of the Government of India had been obtained through an incomplete presentation. The committee found that the dredging craft was inefficient, and had been bought before the sanctioning of the project. The construction of the sea-wall was inadequate and 900,000 cubic yards of mud had escaped through it. They held the Advisory Engineer, Sir George Buchanan, responsible, and recommended that only 3 blocks be completed. The project came to be known as Lloyd's Folly, after Sir George Lloyd, then Governor of Bombay.
Eventually 4 blocks were completed in 1929, a total of 439.6 acres. Of this 234.8 acres was sold to the military at a cost of Rs. 2.06 crores, and 16.6 acres was incorporated into the Marine Drive and its sea-wall.
The final chapter in the Backbay farce started in 1958.