Why Regulating Act 1773?
By 1773, the East India Company was in dire financial crisis. The Company was important to Britain because it was a monopoly trading company in India and in the east and many influential people were shareholders. The Company paid £400,000 annually to the government to maintain the monopoly but had been unable to meet its commitments because of the loss of tea sales to America since 1768 as Dutch were able to enter the American Markets. The East India Company owed money to both the Bank of England and the government; it had 15 million lbs of tea rotting in British warehouses. The mismanaged Finances made the company almost insolvent and the company was forced to apply to the British Government for a loan.The East India Company was basically a trading farm that made business over a vast area of India but also maintained an army to protect its interests. PM Lord North decided to start Governmental control, as East India Company had no experience in ruling it conquered few areas.The British Parliament appointed two committees: (1) Secret Committee (2) Select committee. Based on the recommendations of the two committees there two Act were passed
(1) Granted to the company a loan of £ 14,00000 at 4% interest
(2) Regulating Act, 1773
Lord North decided to overhaul the management of the East India Company and to provide some form of legal government for the Indian possessions of the East India Company with the Regulating Act 1773. This was the first step along the road to government control of India. The Act set up a system whereby it supervised (regulated) the work of the East India Company but did not take power for itself. Since the Government in Britain regulated the company and did not take it over, it was termed “Regulating Act”.
East India Company had a very powerful lobby in Parliament in spite of the financial crises of the Company. The Shareholders along with this lobby of Parliament opposed the act.
Summary: The Regulating Act of 1773 was passed because:
- Being a trading company, EIC had difficulties in Governance.
- Address the problem of management of company in India.
- Address the problem of corruption
- Terrible famine in Bengal
- Address the problem of dual system of governance instituted by Lord Clive
- To control the company, this was so far a business entity but now a semi-sovereign political entity in India
- Lack of proper judicial administration
- Company’s defeat in 1769 at the hands of Hyder Ali
Provisions of Act
- The Regulating act of 1773 permitted the Company to retain its former possessions and power in India but the management was brought under control by the British Government.
- Election for Directors: The directors of the company were elected for four years. One- fourth of them retire for every year and the retiring Directors were not entitled to be elected again.
- In order to assert parliament’s control over the company, the directors were required to place regularly all their correspondence, regarding civil military affairs with the Indian authorities, before the secretary of the state in England. All correspondence regarding to revenues in India was required to be placed before the Treasury in England.
- The Act limited Company dividends to 6% until it repaid a GB £1.5 Million loan and restricted the Court of Directors to four-year terms.
- It prohibited the servants of company from engaging in any private trade or accepting presents or bribes from the natives to curb corruption.
- First Governor General of India: The Act elevated Governor of Bengal, Warren Hastings to Governor-General of Bengal and subsumed the presidencies of Madras and Bombay under Bengal’s control. Now, no other presidency could give orders for commencing hostilities with the Indian Princes, declare a war or negotiate a treaty. Now, the Governor General of India and his council of 4 members got a legal status. Their term of office was five years and the king was empowered to dethrone them even earlier on recommendation of the court of directors.
[Commonly we call Warren Hastings as First Governor General of India. But the official title of Warren Hastings was the Governor of the Presidency of Fort William. This office became Governor General of India in 1833 from the times of Lord William Bentinck and in 1858, when India was taken over by England; it remained Viceroy and Governor-General of India till 1947]
- Council of Four: The Act named four additional men (as explained in earlier paragraph) to serve with the Governor-General on the Supreme Council of Bengal: Lt-Gen John Clavering, George Monson, Richard Barwell, and Philip Francis. Barwell was the only one with previous experience in India. These councillors were commonly known as the “Council of Four“.
- The governor general in council was given all the power to govern the company’s territorial acquisition in India, to administer the revenue of Bangal, Bihar, Orissa and to supervise and control the general civil and military government of the Presidency. The presidencies of Bombay and Madras were placed under the control and superintendence of the Governor General in Council while exercising their power to make war and peace. The Governor General and the Council were to keep the court of directors fully informed of all their activities affecting the interests of the company and they were also to work in entire obedience to the orders and instructions of the court of directors.
- India’s First Supreme Court: A supreme court was established at Fort William at Calcutta. British judges were to be sent to India to administer the British legal system that was used there. This Supreme Court consisted a Chief Justice and three other regular judges or Puisne Judges, being barristers of not less than five years standing and to be appointed by His Majesty. Sir Elijah Imphey was the first Chief Justice. The Supreme Court was the supreme judiciary over all British subjects including the provinces of Bengal, Bihar and Orissa.