The settlement at Darjeeling really began in 1828 with British interest. By 1835, it was separated from Sikkim for establishing a Sanatorium for the invalid servants of the East India Company. It then consisted of a monastery on observatory hill clustered with about 20 huts and a population of about 100 people. Planning began in 1839, to lay out the Darjeeling town and construct a hill road connecting Siliguri, Pankhabari, Kurseong and Darjeeling. At the same time, evolution of hotels began, the first being The Darjeeling Family Hotel’s, followed by other hotels. By 1840, Darjeeling town had about 30 buildings and a few respectable houses.

In the year 1878, Franklin Prestage, Agent of the Eastern Bengal Railway, foresaw the utility of a rail link between the hills of Darjeeling and the plains. His scheme was mainly driven by hard economic considerations viz., the huge difference in the cost of essential commodities between Darjeeling, and Siliguri, the need to carry out tea for export and the inability of the existing road to handle the growing traffic. He submitted a scheme for the construction of a two feet gauge railway line from Siliguri to Darjeeling.

In a detailed scheme submitted to the Government of Bengal and approved by the Lt. Governor Sir Ashley Eden, he pointed out how a railway could substantially reduce the cost of transport between Darjeeling and the plains. Rice, which sold at 98 a ton at Siliguri, Cost 238 at Darjeeling! He was also convinced that the cost of construction of the 2 feet gauge rail-line would not be prohibitive, and locomotives, small but powerful enough to climb steep gradients, could be designed

Prestage received final sanction for his project on April 8, 1879 and formed the Darjeeling Steam Tramway Co. However, the idea of operating the line as a steam tramway was soon abandoned and, on September 15, 1881, the company adopted the designation of Darjeeling Himalayan Railway Co. (DHR), which remained effective until it was taken over by the Government of free India on October 20, 1948. Throughout that period Gillanders Artbuthnot & Co., one of the oldest managing houses in Calcutta, handled its financial, legal and purchasing interests.