Regulating Act of 1773 Explained

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Last updated on October 8, 2022

The Regulating Act of 1773 was passed by Lord North’s government (British Parliament) in June 1773. It recognised the political functions of the East India company in India and asserted the right of the British parliament to dictate the system of governance in India.

Reasons for the passing of Regulating Act of 1773. 

  1. Desire of British empire to have a share in the spoils and revenue collected in India: In 1765-66, the British government granted the East India company the power to retain and collect Diwani from the territories of Lahore, Bengal and Orissa. A sum of 4 lakh pounds was to be given by the Company to the British Government. The British Parliament soon realised that the Company was collecting a huge sum of money and so they also wanted a larger share of the same. The officials of East India Company were exploiting the Indians, and collecting money from corruption and private trade. After amassing a lot of wealth, these officials went back to England, and then they would purchase seats in British Parliament and would occupy positions of importance in Parliament. The existing British government wanted to stop this increasing power of officials of East India Company, as the Company officials had started replacing them and now most policies introduced in the Parliament were more favourable to East India Company and not the British Parliament.
  2. East India Company was suffering from financial difficulties: The company was suffering from financial crunch as the officials were privately carrying out private trade and corruption, and the revenue of East India Company steeply declined. The Company had come under debt of about 6 million pounds, hence the british parliament had to intervene.
  3. Dual system of government had failed. British government carried out a series of enquiries in India and found misgovernance by the East India Company. The Company was under debt, and had to pay pensions to the erstwhile Mughal emperor, the Nawab of Bengal and maintain military and had no money to do so.

As a result, British Parliament decided to bring in changes of governance and introduced this act.

Changes –

1. Changes in Constitution of East Indian Company

Qualification for voting at general court was raised- Beforehand any person or member who held stocks of company of 500 pounds for 6 months was given a right to vote, however with this act, the criteria was increased to 1000 pounds for a period of at least 1 year.

The term of director was extended to 4 years from 1 year. 1/4th of members were to retire every year, and new members were to be elected in their place. The members could be removed by the king only on representation of court of directors. Also directors of East India Company were to present before treasury, all paper dealing with Indian revenue and all papers dealing with civil and military administration were to be presented before secretary of state. All officials of EIC were to obey directors of EIC and inform them on all matters of the company

2. Changes in Company’s government in India

The Governor of Bengal, Warren Hastings, was made the Governor General. A counsel of 4 members was constituted to assist him in administrative functions. Governors of Madras and Bombay were made subordinate to the Governor General Warren Hastings. The Presidencies got united, and separate relations with directors of East India Company came to end. Salary of the Governor General was fixed at 25,000 pounds a year. Councils of 4 members were appointed for a period of 5 years and could be removed by king on recommendation of court of directors.

Governor General and counsellors were bound to follow the majority in times of difference of opinions. In case of absence or death of a councillor, or if councillors and governor general got equally divided. The casting vote of the eldest councillor who was the presiding person, prevailed. Governor-general was authorized to control presidencies of Bombay and Madras in matters of war, peace and treaties. He could also issue ordinances, rules and regulations for welfare of East India Company and also the civil management. These rules could become a law only when they were registered and published in the Supreme Court.

3. Establishment of Supreme Court at Calcutta 

1 Chief Justice and 3 puisne judges were appointed at the Supreme Court at Calcutta. They were to be Barristers in England or Ireland with at least 5 years of standing. The Supreme Court was to deal with civil, criminal and ecclesiastical (religious) jurisdiction. It was a court of record. It was a court of Oyer and terminer – a British judge could hear and determine the criminal cases. Such cases could also be punishable with either life imprisonment or death. Jurisdiction of supreme court extended over British subjects of Bengal, Bihar and Orissa and all employed by East India Company. The court had original and appellate jurisdiction. The Chief justice had a salary of 8000 pounds and other judges of 6000 pounds and worked at the pleasure of crown. All appeals against judgement of the Supreme Court were to be heard by King’s court and King in counsel in England.

4. Reforms in removing the evils of the East India Company 

The Act prohibited all officials of East India Company from directly or indirectly accepting presents, bribes and carrying out private trade. The defaulters had to pay a fine of double the amount that they took. They were to involve in trade only for company. If any official of East India Company was found of public distrust or bribery or corruption, he could be fined, imprisoned or sent back to England, where he could be punished by King’s bench.

Advantages of the Regulating Act of 1773

Until 1773, the company was functioning in a haphazard manner, the act gave clarity upon many of the company’s functions. For the first time, an attempt was made to setup a written constitution for company and this provided a framework for all the future constitutional enactments. The chaotic state of affairs of court of directors was removed. Qualificatin of voters increased and real power came in hands of a few experienced men. Earlier there was little control of the British parliament over East India Company, however with this act, the company was required to submit both financial reports and matters relatring to military and civil administration to the British parliament which made the company subordinate to parliament. Powers of Company were curtailed. Crown developed direct control over affairs of company by appointing governor generals, council and the Supreme court that tried to check corruption of the official of EIC. Upto now, officials could collect wealth, but this act prohibited them from entering into private trade, and they could not lend money at more than 12% interest p.a.. The act introduced a centralized administrative machinery. Vast territories of EIC could be consolidated, governor general and council could control and direct the presidencies and an attempt was made to setup a supreme authority for all dominions of the country. It introduced sovereignty of the british parliament and gave new governor of Bengal, that could place system of check and balance,

Problems in the Regulating Act of 1773

The regulating act, 1773 had several loopholes and flaws in it which are as follows:

  1. The Governor General was left at mercy of council and struggled with it. He did not have the veto or casting vote, so he was often defeated by his council.
  2. Most of councillors of the governor general’s council did not have much knowledge about Indian affairs.
  3. The 3 presidencies were independent before the introduction of this Act i.e. the governor would take all the decisions. After this act, the presidencies of Bombay and Madras became subordinate to Bengal, however they would often disregard the authority of Governor General in various situations like in the case of Anglo- Maratha struggle
  4. Jurisdiction of the Supreme Court and the Governor general were overlapping having no clear division of jurisdictions, even which law was to administered wasn’t clear, definition of a ‘british subject’ was not clear, no clarification of ‘government servant’. Thus the powers of Governor General and his council and Supreme Court were not clear.

The Regulating Act of 1773 was followed by the Amending Act of 1781.

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