Regulation Act, 1773

“The British government's first interference in the company's territorial issues, which
signaled the start of a takeover process that was completed in 1858.”

Regulation Act, 1773 legislation was the beginning of British parliamentary control over
Indian affairs of the Company. At the time of England Prime minister, Lord North, this Act
of 1773 was passed by British Parliament for the governance of the Indian lands of the British
East India Company, primarily Bengal1, which is considered as the first constructional
landmark development of India. The Governor-General of Bengal was created as a result of
the act. Lord Warren Hastings became the first Governor-General of Bengal. The Governors
of Bombay and Madras were subjected to the Governor-General of Bengal as a result of the
act. In 1774, the Supreme Court was created as the Apex Court in Fort William (Calcutta). 2
“Every provision in it is framed with a view to setting the affairs of the Company on a solid
and decided establishment,” Lord North remarked in a speech on the 18th of May, 1773 A.D.,
explaining the Act's purpose. Its historical significance stems from the fact that it was crucial
in developing and molding the company's government structure for the future. Then, in 1781,
the Act of Settlement was enacted to correct the defects in the previously passed Act of
17733.

It is necessary to understand, why the British adopted the regulation in the first place in order
to understand what the Britishers sought to govern and what they meant by regulation. For
starters, there was a dual government or dyarchy form of government prior to the act, which
not only caused confusion but also made the people miserable due to persecution by both
companies and nawabs. The British government was merely a bystander, and hence
regulation of the trading corporation was required to protect people's interests while also
increasing commerce. Second, the company's servants had turned dishonest, and many of
them had retired and taken vast sums of money to England, where they lived like Indian
Nawabs. A secret parliamentary committee concluded in 1772 that the company's servants,
including Robert Clive, had received significant sums of money and other benefits. Finally,

1
Britannica, The Editors of Encyclopaedia. "Regulating Act". Encyclopaedia Britannica, 29 Dec. 2010,
(https://www.britannica.com/topic/Regulating-Act). Accessed 17 August 2021.
2
Marshall, P.J... "Warren Hastings". Encyclopaedia Britannica, 2 Dec. 2020, Accessed 17 August 2021
(https://www.britannica.com/biography/Warren-Hastings.).
3
Malik, S. (2016). Historical Background of the Constitution. In Landmark in Indian Legal Constitutional
History (2019th ed., pp. 101-101). Eastern Book Company.
corruption was so widespread that the company's servants drove it into financial insolvency
in the early 1770s. In addition, the 1770 famine cut down revenue. In August 1772, the East
India Company asked to the British government for a loan of one million pounds to help them
survive. Ironically, the corporation that was meant to pay the government big returns is now
requesting funds.4

WHAT DOES THE WORD "REGULATING" MEAN IN THIS LAW?

The term "regulating" in the "Regulating Act, 1773" simply means "supervising" the
company's conduct. This oversight was not limited to simply compiling reports; it also
included intervening in company problems and carrying out operations that benefited the
British government. This resulted in the company's political influence being stripped away, as
well as particular actions to establish a new administrative framework. All powers were
transferred to the British government. The core aim of the Regulating Act was:5

 The East India Company's affairs must be controlled and regulated.

 To take the Trading Company's political influence away from them.
 Recognize the Company's political and administrative clout
 To implement new administrative changes that would result in the establishment of a
central administration system.
 To enhance the company's dictatorial state of affairs (position).
 To restore order following the implementation of the dual-government system
 To use the legislation to promote anti-corruption policies by preventing company
servants from engaging in any sort of private commerce and from collecting bribes,
gifts, and presents from the public.

The main benefit of this Act was that it ended the Company's arbitrary control and
established a basis for all subsequent enactments dealing to India's government 6. The
Regulating Act of 1773 recognized the company's political functions by emphasizing for the
first time the parliament's ability to define the structure of administration. It resulted in the
centralization of India's administrative machinery. In place of the company's arbitrary rule,

4
Atharva Naukarkar, THE REGULATING ACT, 1773, LEX FORTI, Legal Journal, Vol- 1, Issue-5,
(https://lexforti.com/legal-news/wp-content/uploads/2020/06/The-Regulating-Act-1773-by-Atharva-1.pdf)
Accessed on 17 August 2021
5
Aditi Srivastava, Regulating Act, 1773 and The Act of Settlement, 1781, iPleaders Blog, July 10, 2018,
(https://blog.ipleaders.in/regulating-act-1773/) Accessed on 18 August 2021
6
Regulating Act 1773, Civils Cracker, (https://civilscracker.com/regulating-act-of-1773%E2%80%8B/)
Accessed on 18 August 2021
the act established a written constitution for British control in India. A framework was put in
place to prevent the Governor General from becoming autocratic4, or acting in a dictatorial
manner.

THE REGULATORY ACT'S PROVISIONS

The Regulating Act was explicitly characterized as "Act for establishing certain laws for the
better management of the East India Company's activities both in India and in Europe."
Whereas, by experience, the various powers and authorities granted by charters to the united
company of merchants in England trading to the East Indies have been found to be
insufficient in force and efficacy to prevent various abuses which have prevailed in the
government and administration of the said united company's affairs, both at home and in
India, to the manifest detriment of the public.7 The characteristics are as follows:

 The Directors were elected

Instead of being elected for one year, the company's directors were elected for five years.
Every year, one-fourth of them retired, and the retiring Directors were not eligible to be re-
elected. This was done to ensure continuity in the management of the company's business
while also reinforcing the directors' position at the mercy of the shareholders, who might thus
have a say at any time.

To prevent the company's servants from buying power, voting power was limited to
shareholders who owned stock worth at least 1000 pounds. Small shareholders' voting rights
were thus taken away in the goal of enhancing the quality of shareholders and, as a result, the
directors.8

 Correspondence Management

To maintain parliament's authority over the corporation, the directors were compelled to file
all civil military correspondence with the Indian government with the Secretary of State on a
regular basis. All correspondence relating to India's revenues had to be filed with the
Treasury in England. As a result, administrators had to preserve a sense of accountability,
transparency, and responsibility.9

7
D. B. Horn and Mary Ransome, eds., English Historical Documents, 1714-1783 (London: Eyre and
Spottiswoode, 1957), pp. 811-812.
8
Regulating Act 1773 - Causes, Objectives and Results, GENERAL STUDIES INDIA, Friday, September 09,
2016, (https://www.padmad.org/2016/09/regulating-act-1773-causes-objectives.html) Accessed on 18 August
2021
  The Governor General and the Council are appointed

Calcutta's government was restructured as a result of the Act. It installed a Governor General
and a four-member Council and gave them control of the Calcutta Presidency's "full civil and
military government." The first Governor-General, Warren Hastings, was appointed. The
council meeting's decisions were to be decided by a majority of votes. In the event of a tie in
the Council, the Governor-General had only one vote and a casting vote. He lacked the
capacity to override the Council's majority, which could effectively kill any of his policies,
implying that he lacked a veto. Under the Cornwallis amendments, the system of one vote
and no overriding authority was changed.10

 Governor General's jurisdiction over Bombay and Madras

While exercising their ability to make war and peace, the Governor General in Council was
given management, supervision, and oversight of the presidencies of Bombay and Madras.
The Governor General and the Council were required to keep the Court of Directors fully
informed of all their operations impacting the company's interests, as well as to operate in
complete obedience, allegiance, and loyalty to the Court of Directors' commands and
instructions.11

 Reforms aimed towards reducing corruption

To combat corruption, the Act barred company servants from engaging in any private trade or
receiving gifts or bribes from natives.

In India, this act gave businesses legislative powers and executive authority. To establish and
issue rules, ordinances, and regulations for the good order of company settlement civil
government at Fort William and other subordinate factories and locations.

 Correspondence Management

To maintain parliament's authority over the corporation, the directors were compelled to file
all civil military correspondence with the Indian government with the Secretary of State on a
regular basis. All correspondence relating to India's revenues had to be filed with the

9
Pukhrj Agarwal, Regulating Act 1773, Indian Legal& Constitutional History, August 24, 2015
(https://ilchslcu.wordpress.com/2015/08/24/regulating-act-1773/) Accessed on 18 August 21
10
Vishakha Gupta, Regulating Act, 1773, Vskills, (https://www.vskills.in/certification/blog/regulating-act-
1773/) Accessed on 18 August 2021
11
Pukhrj Agarwal, Regulating Act 1773, Indian Legal& Constitutional History, August 24, 2015
(https://ilchslcu.wordpress.com/2015/08/24/regulating-act-1773/) Accessed on 18 August 21
Treasury in England. As a result, administrators had to preserve a sense of accountability,
transparency, and responsibility.12

THE SUPREME COURT ESTABLISHED IN CALCUTTA

The formation of the Supreme Court in Calcutta under SECTION 13 of the Regulating Act
was a significant innovation. The Royal Charter established the Supreme Court in Calcutta.
On March 26, 1774, King George III issued the charter that established the Supreme Court. It
was a court of the king.

Justices of Peace were appointed by the Governor General, members of the Council, and
Supreme Court judges, and they were given the authority to hold Quarter Sessions for the
administration of criminal justice.

The first Chief Justice of the Supreme Court of Calcutta was Sir Elijah Impey. With more
elaborate apparatus, it replaced the former Mayor's Court. The Court was made up of a Chief
Justice and three puisne judges, all of whom were nominated by the King from among
barristers with at least five years of experience. These judges had the same authority as the
English King's Bench. Commercial pursuits and receiving gifts, both of which were
widespread among company servants at the period, were strictly prohibited.

The Court had the authority to hear civil, criminal, and admiralty cases, and it had to be a
Court of Record, with the ability to hear both civil and criminal cases. It was given supreme
authority over all British subjects, including Bengal, Bihar, and Orissa provinces. It included
majesty's servants, corporation servants, and others.

The Supreme Court was not entitled to hear matters involving the Governor General and
Council, with the exception of felony or treason charges. The Supreme Court was also
ordered to take into account and respect Indian religious and societal practices. Appeals from
provincial courts might be made to the Governor-General-in-Council, who would then appeal
to the King-in-Council.

The Governor General and Council were given the authority to enact laws and rules, but only
on the condition that they be registered in the Supreme Court and that they not become
effective until they were registered and published in the Supreme Court. Any Indian citizen
had the right to appeal such rules to the King's council within sixty days, which then
overturned or altered the law. The appeal had to be filed in the Calcutta Supreme Court
12
Penderel Moon, “Warren Hastings and British India”, 1962.Pg no.92. (https://indianculture.gov.in/warren-
hastings-and-british-india) Accessed on 18 August 2021
within a certain time frame. All of the Governor General's rules had to be sent to a secretary
of state in England. Suo moto power was given to the King in Council to change or disallow
any law. As a result, the Supreme Court had to review the statute before it became law.

CONSTITUTIONAL IMPORTANCE OF THE ACT

A writ is a formal written order issued by an administrative or judicial body in common law;
it is generally described as a formal order issued by a government entity in the name of
sovereign power.

The Regulating Act of 1773, which established the Supreme Court in Calcutta, introduced
writs in India. The charter also established High Courts, which had similar powers to the
Supreme Court in terms of issuing writs. Both courts' writ authority was confined to their
original civil jurisdiction, which they had under the Specific Relief Act of 1877.13

The Regulating Act was crucial to the constitution. It was a watershed moment in India's
constitutional history for the following reasons:

 For the first time, the British country, as a nation, assumed actual responsibility for
the management of the territories won by the servants of the trade corporation, thanks
to the Act of 1773.14 The idea that Britishers, through their Parliament, should be
responsible for British governance in India grew through time.
 The Act is noteworthy because it was the first of its type, allowing a European
government to assume responsibility for managing regions outside of Europe. So yet,
no other European country has attempted something similar.
 It was the first of a series of parliamentary acts that placed control of Indian matters in
the hands of the legislature.
 The Act put a stop to the appalling misrule and corruption that plagued the Company's
personnel. No one in the Indian service was allowed to earn vast fortunes or fill his
coffers with enticing gifts from the natives. Even the Governor-General, his Council,
and Supreme Court justices were not allowed to yield to such temptations.15

13
Shivangi M. Rana, Role of Writs in The Administrative Law, Legal Service India,
(https://www.legalserviceindia.com/article/l402-Role-Of-Writs-In-The-Administrative-Law.html) Accessed on
21 August 2021
14
David Anthony Washbrook, The Oxford Companion to British History JOHN CANNON, Encyclopedia.com,
June 08 2018, (https://www.encyclopedia.com/history/modern-europe/british-and-irish-history/british-east-
india-company) Accessed on 21 August 2021
15
Hrishikesh Brahma, Interferences of British Parliament in East India company’s administration in India,
Global Research Methodology Journal, V0l-II, 8th issue, Feb-Mar-Apr, 2013, (www.grmgrlaranya.com)
Accessed on 22 August 2021
The act amended the Company's constitution at home, changed the Company's structure in
India, subordinated the entire territory to some degree of supreme control in India, and
allowed for the Ministry's supervision of the Company in a highly efficient manner.16

WHAT MAKES THIS ACT DIFFERENT FROM MODERN-DAY CORPORATE

REGULATION?

In modern-day India, there are a number of regulations that control the operations of huge
corporations in order to ensure that they run smoothly and to avoid monopolies from being
created by multiple private entities. Competition Law, Company Law, SEBI Guidelines, and
others are examples of laws that control corporations.

The Regulating Act of 1773 was passed by British parliament in order to oversee and manage
the East India Company's operations. The Regulating Act's jurisdiction was limited to only
one private enterprise, the British East India Company. This act had no effect on any other
private or public company in England or anywhere in the world. The current regulating act
for firms, the Companies Act 2013, on the other hand, has authority throughout India. 17 All
private and public businesses created by this act or any prior companies act will be governed
by the Companies Act 2013 and will be required to follow the act's regulations and
procedures. As a result, to summaries the differences, the Regulating Act 1773 exercised
power and was limited to British corporations, but the current Companies Act 2013 has
jurisdiction over different companies throughout the country.

Another distinction is that the previous regulating act was enacted to establish the legal
system in the country, but the current regulating act operates within the confines of the
judicial system. This is a subtle but significant change, as the previous act resulted in the
construction of a centralized administrative structure, whereas the current act operates within
this framework.

Inspection, inquiry, and investigation requirements are included in the current Companies
Act, as well as other acts of legislature, in order to keep a check on the company's operations
and records, but this was not included in the previous Regulating Act 1773. 18 The legislation
did not contain any provisions for punishment of any kind for those who violated the
businesses' rules and procedures, or the act itself, but the current companies act does include

16
UNIT 23, CONSTITUTIONAL DEVELOPMENTS, eGyanKosh, Indira Gandhi National Open University,
(https://egyankosh.ac.in/bitstream/123456789/20342/1/Unit-23.pdf) Accessed on 21 August 2021
17
Section 1(2), Companies Act, 2013 and Section 1(4), Companies Act, 2013.
18
Chapter XIV: Inspection, Inquiry and Investigation of Companies Act, 2013
provisions for fines and penalties for defaulters. Another aspect to note is that the current
company law includes a particular provision to establish tribunals where appeals can be
lodged, whereas the previous act did not. As a result, we may conclude that the current
Companies Act, or any other similar regulation, is well-defined, comprising all of the
necessary sections and definitions, as opposed to the older Regulating Act. The main
distinction to note is between today's competition rules and the regulating legislation of the
past. The regulatory statute at the time permitted the East India Firm to maintain its
monopoly, i.e., even after seizing power and passing the act, the company maintained its
monopoly in the east. The act did not address monopoly laws in general, i.e., there was no
rule in place if someone violated a monopoly. There were no laws in place to control the
monopoly. However, there are several laws in place today that identify monopolistic
competition and provide rules and processes to govern it.

The key similarity between the regulating act of 1733 and the SEBI Act of 1992 is that both
provide provisions for appeals to higher authorities in order to ensure adequate and fair
justice and prevent the arbitrariness of the East India Company at the time and the non-
statutory board of SEBI this time. Both of these provisions are two-layered, with the Act
providing for the establishment of a Supreme Court of Judicature at Fort Williams, as well as
appeal provisions from lesser courts, on the first layer, and further appeal to the privy council
on the second layer. Section 63 of the Securities and Exchange Board of India (Employees
Service) Regulations, 2001, i.e., Conduct, Discipline and Appeals, is one of the regulations of
the Securities and Exchange Board of India that is related to the Regulating Act, 1773. "No
employee shall engage in or pursue any commercial enterprise on his own account or as an
agent for others, nor shall he operate as an agent for an insurance company, nor shall he be
linked with the formation or operation of a joint stock company."19

THE ACT’S DRAWBACKS

Despite the fact that the act is regarded as a watershed moment in Indian legal history, it left a
gap because it did not address the concerns that existed at the time in the legal system. The
Act's key flaws are outlined below.

 The situation was contradictory because the Governor-General had no veto authority
and was held accountable to the Directors for all acts relating to Indian administration.

19
Section 63, Securities and Exchange Board of India (Employees Service) Regulation, 2001, Securities Ans
Exchange Board of India (Employees Service) Regulation, 2001, (2001)
(https://www.sebi.gov.in/sebi_data/attachdocs/jun2017/1498020514030.pdf) Accessed on 18 August 2021
 However, the Governor-General lacked the authority to make an independent
judgement because he was bound by the council's majority decision. Because of this,
the council decided to make its choice using the Governor-General as a puppet.
 Though the Governors were nominally subordinate to the GG, this approach resulted
in the Governor and his subordinates wielding ultimate power, resulting in rampant
corruption and a weakening of the government at the lower levels.
 There was a lot of misunderstanding about the Supreme Court's powers and
jurisdiction. There was also a conflict between the Supreme Court's and the Governor-
jurisdictions. General's Council's
 Furthermore, the Act did not address the concerns of the Indian locals, who were the
ones who suffered the most.

CONCLUSION

“What period was it, were we raided or surrendering to be robbed?” it is still asked. Why
couldn't we perceive the corporation as a pest to our Indian roots? In the name of trade, the
firm exploited Indian labor and took unfair advantage of the impoverished. Now that we are
independent, Article 19 of the Indian Constitution grants us the freedom to free trade and
commerce. India is presently a democratic and independent nation.

To summaries, the purpose of this short piece was to inform the reader about the then-current
regulatory statute under British control, as well as what it meant and why it was enacted in a
country like India.