Regulating Act 1773 – UPSC

The Regulating Act of 1773, formally called the East India Company Act 1772, was passed by the British Parliament in June 1773 to overhaul the management of East India Company’s rule in India. It was the first direct interference by the British government in the affairs of India.


The British East India Company came to India as a trading company in 1600. The Company got the exclusive right of trading in India under the charter granted by Queen Elizabeth I.

However, after the Battle of Buxar in 1764, the Company obtained the ‘Diwani rights’ (i.e., right to collect revenue) of Bengal, Bihar, and Odisha and gradually started interfering in the Indian affairs. Hence, the commercial Company got transferred into a political Company in India.

In 1765, Robert clive instituted the Dual System of Government in Bengal, which continued for seven years (1765 to 1772). According to this system, the East Indian Company had Diwani rights (rights of revenue collection) in Bengal, and the Nawab had the Nizamat rights (judicial and political rights). In other words, the Company had the authority but no responsibility, whereas its Indian representatives had all the responsibility but no authority. This Dual System of Governance resulted in:

  • Rampant corruption among the servants of the Company.
  • Excessive revenue collection and oppression of peasantry.
  • Maladministration in the Bengal presidency.
  • The Company became bankrupt while the servants were flourishing.

In the 1770s, the Company had applied for a loan of four million pounds to the British Government in London. The British Prime Minister Lord North provided a loan of one million pounds to the Company.

However, to bring order into its business, the British government decided to regulate and control the management of East India Company in India with the Regulating Act. Moreover, after the Company transformed into a political company, it became imperative for the British Government in London to regulate the East India Company in India.

In June 1773, the British Parliament enacted the Regulating Act of 1773, which was the first important step toward parliamentary control over the Indian administration of the Company.

Provisions of the Regulating Act 1773

  • The Regulating Act of 1773 permitted the British East India Company to retain its territorial possessions in India but sought to regulate the activities and functioning of the Company. It did not take over power completely, hence known as Regulating Act.
  • The Regulating Act 1773 introduced the executive body of the East India Company, known as the Court of Directors.
    • There were 24 members in the Court of Directors, who were elected individually for four years.
    • The Regulating Act required the Court of Directors (the governing body of the East India Company) to report its revenue, civil, and military affairs in India to the British government. It strengthens the control of the British government over the East India Company.
  • It prohibited the servants of the Company from conducting any private trade or accepting presents/bribes from the ‘native‘ Indians.
  • The Regulating Act raised the status of Governor of Bengal to the Governor-General of Bengal. The Act also created an Executive Council of four members to assist the Governor-General. The Governor-General Executive Council required to be function according to the majority rule. The Governor-General was bound to accept the majority decision and could only vote in case of a tie.
    • Lord Warren Hastings became the first Governor-General of Bengal. The four members appointed with him on Executive Council were: George Monson, John Clavering, Richard Barwell, Philip Francis.
  • The Act laid out the foundation of Central administration in India. The administration in Bengal was to be carried out by the Governor-General and his Executive Council representing the civil and military government.
  • The 1773 Act made the Governors of Bombay and Madras presidencies subordinate to the Governor-General of Bengal.
    • Earlier, the three presidencies Bengal, Bombay, and Madras were independent of one another. But after the Act, the Governors at Bombay and Madras now worked under the Governor-General of Bengal.
  • The Regulating Act 1773 provided the establishment of a Supreme Court at Fort William at Calcutta in 1774, consisting of one chief justice and three other judges. Sir Elijah Impey was appointed as the first Chief Justice of this court.

Significance of the Regulating Act 1773

  • It was the first step taken by the British government to control and regulate the affairs of the East India Company in India.
  • It recognized the political and administrative functions of the Company for the first time.
  • It laid the foundation of central administration in India.

Defects in the Regulating Act 1773

  • The Parliamentary control on the Company proved to be ineffective as there was no effective mechanism to study the reports sent by the Governor-General Executive Council.
  • The Governor-General of Bengal had no veto power.
  • The powers of the Supreme Court were not well defined. Its jurisdiction often came in conflict with that of the Governor-General of Bengal.
  • The Act did not stop corruption among the Company’s officials.
  • The Act did not address the concerns of the Indian population who were paying the revenue to the Company.

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