MAHARASHTRA NATIONAL LAW UNIVERSITY, MUMBAI

SEMESTER – 2 (PROJECT).

COURSE-B.A. LL.B.(Hons.)

LEGAL AND CONSTITUTIONAL HISTORY

REGULATING ACT OF 1773

Submitted to- Prof. Raghav Pandey Submitted By-Shobhit Shukla

Date of Submission-25th May, 2020.

The Regulating Act was an act brought by the British Parliament designed to control and
limit the East India Company’s misadministration and corruption in Bengal by serving as an
authoritative watchdog. It was passed by Lord North’s Parliament of Great Britain to regulate
the Company’s territories, mostly focussed on Bengal because of which the act is sometimes
called the Bill of Lord North. He stressed on the need for a strong, transparent and definitive
government to administer and position the Company’s affairs. However, due to the bill’s
power of restricting and administering the powers of the most profitable company in world
history, it faces significant criticism but was ultimately passed in the parliament. The
significance of this act is that it was the interference by the British Government in the
territorial affairs of the Company and marked the start of a takeover process to be completed
in 1858. The Regulating Act was a very lengthy document which renovated and reframed the
constitution of the East India Company. The cause for such a document was East India
Company’s rampant corruption and mis governance in the Bengal lands which brought a
demand for a government loan and a threat towards bankruptcy.1 However, the Act failed to
curb corruption, and it was still rampantly committed by virtually all officials from the
Governor General at the top to the lowest district authorities. The following conditions
welcomed Parliamentary action on the affairs of the Organization. The English East India
Company became a colonial force when it gained widespread hegemony of India as well as
the privileges of the Diwani. When the Business was in financial difficulty their servants
were rich. The devastating famine that occurred in Bengal in 1770 affected the farmers. As a
result, the collection of revenues was weak. The following conditions welcomed
Parliamentary action on the affairs of the Organization. The English East India Company was
a colonial force when it gained widespread hegemony of India as well as the privileges of the
Diwani. The early government was not only infamous but corrupt. When the Business was in
financial difficulty their servants were rich (farmers, traders and weavers) The devastating
famine that occurred in Bengal in 1770 affected the farmers. As a result, the collection of
revenues was weak. The Organization was at the verge of bankruptcy. In 1773 the company
approached for an urgent loan to the British Government. It was under these circumstances
that the British Parliament voted to control the Company's affairs. The Prime Minister of

1
Regulating Act, Great Britain 1773. Viewed on 23rd May, 2020. <https://www.britannica.com/topic/Regulating-
Act>
England, Lord North, appointed a select committee to examine the Company's affairs. The
committee's report paved the way for Regulating Act to be passed.2

HYPOTHESIS

The Regulating Act of 1773 was passed in order to provide the corporation with
accountability and to curve the abuses of the servants of business. This Act provided for
improvisation of the existing justice structure and created the Calcutta Supreme Court of
Judicature.

METHODOLOGY

The researcher follows The Doctrinal Research Method which involves the collection of
relevant data from the stated documents and the compilation of databases to analyse the
material and to arrive at a more complete understanding and interpretation of the 1773
Regulating Act. This research paper has the means to collect both quantitative and
qualitative data. The data collection is achieved by referring to various websites, books
and online articles.

CHAPTERISATION

CHAPTER 1- REASONS BEHIND THE IMPLEMENTATION OF THE

 Following the Battle of Plassey (1757) and the Battle of Buxar (1764), the Dual
Government structure had put the region of Bengal and Bihar under its control as
well. As a result, the British got the right to manipulate the people of these areas
without keeping anyone responsible. They made life miserable and full of trouble for
their fellow Indians. Thus, both – Business Official and Nawabs–oppressed and
abused the citizens of these provinces. The British Government therefore had to
intervene.
 The people were literally reduced to beggars because of those exploitative practices.
They had no means of livelihood or money to rely on. This was a major explanation
for the 1770 Great Bengal Famine. Ten million perished as a result of this drought,

2
Robert Grant, A Sketch of the History of the East-India Company: From Its First Formation to The Regulating
Act of 1773, (1813), Viewed on 23rd May, 2020.
<https://books.google.co.in/books/about/A_Sketch_of_the_History_of_the_East_Indi.html?
id=PZ9PAAAAcAAJ&redir_esc=y>
 and there were also millions of others who were ripped apart. The famine spread
during the 1769-773 era. One important thing to note is that, in that century before, no
famine had happened. The drought had reduced East India Company's revenue which
had worsened its financial situation.
 The East India Company 's servants were deeply dishonest from the bottom to top.
They had no sense of duty, integrity or "right and wrong" or even its meaning: Even
Clive was known for his unethical behaviour. Clive and other English officials have
greatly benefited from Bengal's Nawabs. This corruption had led the company to near
bankruptcy, which had been worsened by the decreased income from famine.
Servants of the Company had gained so much money that some retired to lead lavish
lives that mimic those of Indian Nawabs. The term "ENGLISH NAWABS" was also
introduced to these dishonest notorious English policemen. They had become a stain
on the authorities in government. The acts of the company's servants were put before
the Supreme Court, but this was a tussle between the Governor General and the
court again. 3
 Thus, the British Government was willing to examine, supervise and control East
India Company affairs in India. They didn't have enough control over East India
Company's affairs at this time which led them to find a way to have some means of
restraint. Bengal, Madras and Bombay 's three presidencies were independent from
each other and there was no centralized authority to control them in India. All three
presidencies were independently accountable to the English Court of Directors. The
Court of Directors were 24 in number East India Company 's affairs were under the
control of those Court of Directors.

Thus, the major causes for the implementation of the regulating act were: -

a. The company's financial position and its high debts were worsening;
b. Rampant Corruption among the company's servants;
c. Complicated Dual Government administrative issues;
d. Lack of adequate Central Judicial Administration to manage and direct the
Company's affairs;
e. Defeat of the company at the hands of Haider Ali of Mysore in 1769;
f. Devastating famine that took a severe toll on its people in Bengal;

3
Regulating Act 1773, Background, Provisions and Drawbacks. Viewed on 23rd May, 2020.
<https://byjus.com/free-ias-prep/ncert-notes-regulating-act-1773/>
 g. The loan of 1 million that the company applied for in 1772.

These reasons were thus enough for the English Parliament to catch hold the opportunity,
cross examine and investigate and evaluate the doings of the company and its officials and
then enact a legislation or a set of guidelines to regulate the unfortunate circumstances.

CHAPTER 2- IMPORTANT PROVISIONS OF THE REGULATING ACT OF 1773.

The act reformed the Government of the Company at its Home and in India. The Act
established a structure by which it supervised the East India Company's work but did not take
power to itself.4 The Regulatory Act was thus defined in its entirety as an “Act to create
certain regulations for better management of East India Company's affairs both in India and
Europe.”

The provisions of the Act are as follows-

 Election of Executives
The company's directors were serving for five years, instead of one year being chosen.
Every year, one-fourth retired and the retired directors were not eligible to be re-
elected. This was done in order to ensure consistency in the course of the company's
affairs and to improve the position of the directors at the discretion of the shareholders
who could have their say also. To avoid power from being easily bought by the
company's employees, the shareholders’ voting power was limited to those holding
shares in the company worth 1000 Pounds or more. Small shareholders were thus
stripped of their voting rights in the expectation that the standard of shareholders and
therefore of directors would improve.
 Correspondence-control
To claim the control of the company by the parliament, the directors were required to
regularly position all their correspondence on civil military affairs within the Indian
authorities before the State Secretary. All correspondence about India 's revenues was
required to be put in England before the Treasury. Therefore, the officials had to
uphold a sense of duty, accountability and transparency.5
 Governor-General and Council appointments

4
Lucy S. Sutherland, “The East India Company in 18th Century Politics” Page No-147, Viewed on 23rd May,
2020. < https://academic.oup.com/ahr/article-abstract/58/4/897/132807?redirectedFrom=fulltext >
5
Aditi Srivastava, Regulating Act 1773, Viewed on 24th May,2020.
< https://blog.ipleaders.in/regulating-act-1773/>
 The Act reorganized the Government of Calcutta's framework. It appointed a
Governor General and a four-member Council and entrusted the Calcutta Presidency
with "the entire civil and military government" to them. Warren Hastings was elected
the 1st Governor-General. The decisions were to be made by a majority of votes in the
Council meeting. In case of a tie in the Assembly, the Governor-General had only one
vote and a casting vote. He did not have the power to override the majority in the
Council which, as a result, could reject all of his policies which meant that he had no
veto. Under changes made by Cornwallis, this system of one vote and no overarching
authority was changed.
 Bombay and Madras, under the governor general 's control
The Bombay and Madras presidencies were put under the oversight, superintendence
and control of the Governor General in Council when exercising his power to make
war and peace The Governor General and the Council had to keep the Court of
Directors completely aware of all their actions concerning the company's interests and
they also had to work with complete compliance, allegiance and allegiance to the
court of directors' orders and instructions.
 Reforms to rein in corruption
The Act prevented the company's servants from engaging in any private trade or from
receiving the native gifts or bribes to curb corruption. This Act also prevented the
servants of the Company including the Governor-General, members of his council and
the judges of the Supreme Court from receiving directly or indirectly any gifts in kind
or cash.

Accordingly, the provisions of the Act clearly indicate that it was directed primarily at the
company officials' malpractice and corruption.6

CHAPTER 3- THE IMPACT OF THE REGULATING ACT OF 1773.

The significance of the Regulating Act is that it put the affairs of the Company under
Parliament 's oversight, supervision and control. In addition, it showed that England's
parliament was worried about Indians' welfare and their livelihoods and sustenance.

 The greatest benefit of this Act is that it put an end to the Company's arbitrary
rule and provide a basis for all future Indian governance enactments. Any

6
Akib Khan, Regulating Act 1773, Viewed on 24th May,2020.
< https://www.slideshare.net/akibmeenu/regulating-act-1773 >
 governor general's autocratic rule subsequently could not survive. 7 In lieu of
arbitrary company rule, the act created a formal constitution for British
possession in India. To prevent the Governor-General from being autocratic a
system was implemented.
 Without a doubt this act created the dominance of Bengal 's Presidency over the
others. The Regulating Act of 1773 made presidencies of Bombay and Madras
subordinate to the Governor General in foreign policy matters. Therefore, no
other presidency may issue orders to initiate warfare, declare a war or sign a
treaty with the Indian Princes. This act unambiguously established the
supremacy of the Bengal Presidency over the others. In foreign policy matters,
the Regulating Act of 1773 made Bombay and Madras presidencies subordinate
to the Governor General.
 This legislation is considered a landmark legislation because it brought
with many complex and important changes in the country's judiciary system.
This act created the Supreme Court in Calcutta for the first time, thus creating a
proper judicial system and the judiciary was regulated to an extent and was
made part of the Supreme Court in India for the first time learned judges from
England. It created a supreme court that began the modern constitutional history
of Fort William, Calcutta and India.
 This act also laid the foundations for the country's Central Administration. The
1773 Act recognised the company's political activities, as it claimed the
parliament's first right to decide the form of government. It was the British
government's first effort to centralise India's administrative machinery. Through
the said act, the value of anti-corruption legislation to restrict government
officials and those with power to participate in such activities was realized. 8

CHAPTER 4- CONSTITUTIONAL RELEVENCE OF THE REGULATING ACT OF

This enactment is considered a Landmark Enactment as it has brought major changes and
has dynamized the judiciary system in the country.

7
Regulating Act 1773, GKtoday, Viewed on 24th May,2020.< https://www.gktoday.in/gk/regulating-act-
1773_25/#Importance_of_the_Regulating_Act>
8
Saharshrarchi Uma Pandey, The Regulating Act of 1773. Viewed on 19th April, 2020.
<https://www.lawqedu.com/regulating-act-1773-saharshrarchi-pandey/ >
 The act made some important changes to the Court of Directors' (COD)
constitution. For the first time there was acknowledgement of the company's
political and financial roles. They were held accountable for their acts and were
held responsible. This act also laid the groundwork for the country's Central
Administration. It stated the importance of having a Supreme Authority which will
act as a legal and ethical watchdog over delegated regulators and officials.
 This act established the Supreme Court in Calcutta for the first time, thereby
establishing a proper judicial structure and controlling the judiciary to an extent.
Judges trained from England were made a member of India 's Supreme Court for
the first time. The Supreme Court sought to accommodate the different ideas and
components of the British period and developed itself into what it now is. Through
the said act, the importance of anti-corruption measures to restrict government
officials and those with power to indulge in such activities was realized.
 The inefficiency, ineffectiveness and inept face of the dual government structure
implemented by the then Governor Robert Clive was evident and a basis was
formed for the future leaders to escape such governance.

The Regulating Act played a major constitutional role. This was a significant milestone
in India 's constitutional history, for the following reasons:

 It was recognized for the first time that the East India Company was not a mere
commercial organisation. The Act made it crystal clear that it was a political
organization, the purposes of which were indeed political.
 It was the first of a series of legislative enactments that gave the Parliament
oversight of Indian affairs. The Act is considered important because it was the first
measure of its kind that allowed a European government to take responsibility for
managing territories outside of Europe. So far, no other European nation had made
such an attempt.
 The Act ended the scandalous misrule and corruption prevalent among the
Company's servants. Henceforth, no person in the Indian service was allowed to fill
his pockets with attractive native presents or to amass huge fortunes. Even the
Governor-General, his Council or the Supreme Court's judges were stopped from
succumbing to all these temptations.
It was the Act of 1773 that the British people, as a republic, claimed for the first time the
actual responsibility of the territory government gained by the trading corporation's
servants. There was a gradual growth in the feeling that the Britain would be responsible
for the British rule in India through their Parliament. 9

Conclusion

The provisions of the Act clearly indicate that it was directed mainly to the malpractice and
corruption of the company officials. The Act, however, failed to stop corruption and it was
practised rampantly by all from the Governor General at the top to the lowest district
officials. Major charges brought against Hastings in his impeachment trial were those on
corruption. Corruption divided the Council into two mutually hostile factions- the Hastings
group and Francis group. The issues of their fighting were corruption charges against each
other. Consequently, Pitt's India act, 1784 had to be enacted to fight corruption and to do that
an incorruptible person, lord Cornwallis, was appointed with specific references to bring
order in the corruption ridden polity established by the company.

In the beginning one of the problems with the Regulating act was that majority terms were
not defined properly by the regulating act and it led to the conflict between the Supreme
Court Judges and Governor General and Council. Governor General did not get the power to
overrule the majority vote. Because of this, other three council members always opposed the
policies of Governor General.

The significance of the Regulating Act is that it brought the affairs of the Company under the
control of the Parliament. Besides, it proved that the Parliament of England was concerned
about the welfare of Indians. The greatest merit of this Act is that it put an end to the arbitrary
rule of the Company and provided a framework for all future enactments relating to the
governing of India. The main defect of the Act was that the Governor-General was made
powerless because the council which was given supreme power often created deadlocks by
over-ruling his decision.

This act was the first parliamentary approval, Codification and Authorization which
established the powers and duties of the East India Company’s various institutions,
including its territories including Bengal. The Regulating Act was not without its own
flaws. The flaws and shortcomings of the Act of 1773 appeared once the Act was put into

9
The Early Administrative Structure, selfstudyhistory, Viewed on 24th May, 2020.
<https://selfstudyhistory.com/2015/01/31/the-early-administrative-structure-from-diarchy-to-direct-control/>
effect. Accordingly, in order to curb corruption, Pitt's India Act, 1784 had to be passed,
and to do so, an incorruptible individual, Lord Cornwallis, was named with clear
references to bring order into the corruption riddled polity of the company. The
Declaratory Act 1781, The Pitt's India Act 1784 and the Amendment Act of 1786 came
into effect to fight the deficiencies of the Act. The researcher would like to conclude with
Prof. Keith 's words: “The act modified the company's framework at home, amended the
company's structure in India, subjected the entire territory to some degree of supreme
control in India, and provided for the ministry 's oversight of the company in a very
effective manner.”10

CONSTITUTIONAL DEVELOPMENTS (1757-1858), Egyankosh, Viewed on 23rd May, 2020.

<http://egyankosh.ac.in/bitstream/123456789/20342/1/Unit-23.pdf>