The first real legislative Act governing the East India Company was the Act ” for establishing certain regulations for the better management of the affairs of the East India Company as well in India as in Europe.” 

This Act is better known as Lord North’s Regulating Act of 1773.

It remodelled the Company’s constitution and also introduced some important changes in the government of its Indian possessions.

The main changes effected by this Act are

Changes in the constitution of the Company in England 

(1) The Regulating Act raised the qualifications to vote at the Court of Proprietors

(2) The term of the Directors was extended from one to four years. One-fourth of them were, however, to retire every year and their places were to be filled up by a fresh election

(3) The Court of Directors was to lay before the Treasury all correspondence from India dealing with the revenues, and before a Secretary of State everything dealing with Civil and Military affairs. 

Establishment of Company’s Central Government in India

(1) The Regulating Act set up a central government for the British territories in India. It was to consist of a Governor-General assisted by four Councillors. The first Governor General  was Warren Hastings and his Councillors were  Clavering, Monson, Barvell and Francis

(2) The decisions in the Council were to be arrived at by a majority of votes, and they were to be binding on the Governor-General and his Councillors. If at any time (due to death, removal or absence of any member) there was an equal division of Opinion, the Governor-General was to have a casting vote. 

(3) The Governor-General and Council were empowered to superintend and control the Presidency Governments in their relations with the native powers. The Presidencies could not commence hostilities or declare war or conclude any treaty with the Indian princes without the previous consent of the Governor-General and Council. In cases of emergency or direct orders from the Directors in London, they could, however, act without leave being first obtained from the Governor-General-in-Council.  

(4) The Governor-General-in-Council were also empowered to make and issue rules, ordinances and regulations for the good order and the civil government of the Company’s territories in India. 

Changes in the Presidency Governments of the Company 

(1) The Presidency governments (i.e. Governors-in-council) were required to pay due obedience to the orders of the Governor-General-in-Council, who had the power to suspend any offending Governor and his Council. 

(2) The Presidencies were required to submit to the Governor-General-in-Council all the information they had concerning the government, revenues or interests of the Company. 

Establishment of the Supreme Court at Calcutta 

(1) The Regulating Act made provision for setting up a Supreme Court at Calcutta, consisting of a Chief Justice and three assistant judges.

(2) The Chief Justice and assistant judges were to hold office at the pleasure of the Crown. 

(3) The Court had the power to try civil, criminal, admiralty, and ecclesiastical cases. Its jurisdiction extended to all British subjects residing in Bengal, Bihar and Orissa to suits, actions on complaints against persons in the service of the Company, or of any of His Majesty’s subjects.’ It had both original and appellate jurisdiction.

Reforms in Civil Service 

(1) All persons in the Indian Civil Service were prohibited from receiving any presents from the native princess or people of India. 

(2) The Governor General, members of his Council and the Judges of the Supreme Court were also prevented from engaging in any commercial transaction whatever. 

(3) Every officer was required to submit to the Board of Directors on his return to England a list of properties acquired by him, with an explanation of how they were acquired. 

DEFECTS OF THE ACT 

First, the Act did not grant veto power to the Governor-General and thus made it difficult for him to maintain his authority in his own council. 

Secondly, the provisions relating to the jurisdiction of the Supreme Court were ‘obscure and defective’. 

Thirdly, the Act did not establish effective control of the Government of Bengal over the Presidencies. 

Fourthly, the Parliamentary control over the Company’s administration was inadequate. 

Fifthly, the changes affecting the Company’s constitution in London also failed to attain their objective. 

SIGNIFICANCE OF THE ACT 

The Regulating Act, with all its defects, was a measure of great constitutional importance. 

The Regulating Act, in the first instance, recognised the fact that the East India Company was not merely a commercial corporation. It had, on the other hand, emerged into a territorial power which could no longer be left beyond the effective control of the British Parliament. 

Secondly, the Regulating Act initiated the process of centralisation in respect of the Company’s Indian administration. The Governor of Bengal was designated as Governor General of Bengal and the scattered British presidencies were subjected to his supreme control. Thus, the Act laid the foundation of the unitary type of government in India. It also, in a way, took the first step towards the unification of India. 

Thirdly, the Regulating Act was the first government measure by which the British nation, as a nation, assumed the actual responsibility of the government of the territories won by the servants of a trading corporation. No other European power had so far made any such attempt.

Fourthly, as a result of this Act, the Company came under the direct control of the British Parliament; its powers and patronage were carefully curtailed; and its internal economy was greatly improved. 

Fifthly, the Act was also significant insofar as it tried to put down bribery and other obnoxious evils which were rampant among the servants of the Company. Since their greedy attitude and oppression had made the lives of the Indians very miserable.

Sixthly, the Regulating Act is also commendable insofar as it made a bold attempt at securing orderly and efficient government in the Company’s territories in India, without the Crown directly assuming the responsibility for the same.