On his record, Lonnie Donegan sang Rock Island Line backed by Chris Barber on double bass and Beryl Bryden on washboard. As you say, PPL royalties should have gone to Chris Barber's Jazz Band, but I don't know how they would have been shared.

From Wikipedia; While playing in Ken Colyer's Jazzmen with Chris Barber, Donegan sang and played both guitar and banjo as part of their Dixieland jazz set. He also began playing with two other band members during the intervals, to provide what was called on their posters a "skiffle" break, a name suggested by Ken Colyer's brother, Bill, after recalling the Dan Burley Skiffle Group of the 1930s. In 1954 Colyer left, and the band became Chris Barber's Jazz Band.

With a washboard, a tea-chest bass and a cheap Spanish guitar, Donegan entertained audiences with folk and blues songs by artists such as Lead Belly and Woody Guthrie. This proved so popular that in July 1954 he recorded a fast-tempo version of Leadbelly's "Rock Island Line", with "John Henry" on the B-side. This recording featured Donegan, Chris Barber on double bass and washboard player (Beryl Bryden), but as it was part of a Chris Barber's Jazz Band session for Decca Records, Donegan received no royalties from Decca for record sales, beyond his original session fee.

Lonnie Donegan's recording, released as a single in late 1955, signalled the start of the UK "skiffle" craze. It was an enormous hit in 1956 (which also later inspired the creation of a full album, An Englishman Sings American Folk Songs, released in America on the Mercury label in the early 1960s). It was the first debut record to go gold in the UK, and reached the Top Ten in the United States.