“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.”
Introduction:
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 Bengal[1], 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 governance structure for the future. Then, in 1781, the Act of Settlement was enacted to correct the defects in the previously passed Act of 1773[3].
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 before 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, 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 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 with 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, the act established a written constitution for British control in India. A framework was put in place to prevent the Governor General from becoming autocratic or acting in a dictatorial manner.
The Regulatory Act’s Provisions
The Regulating Act was explicitly characterized as an “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 with 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 regularly. 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]
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 regularly. 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.[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 are 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 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]
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, several regulations 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 the 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 summarize 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 the 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 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 identifies 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 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]
Drawbacks of The Act
Even though 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 the Indian administration. However, the Governor-General lacked the authority to make an independent judgment 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 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 the 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 summarize, 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.
References:
[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.
[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
[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
[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
[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
[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
[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
[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
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