Company Rule in India - Regulation of Company Rule

Regulation of Company Rule

Government House, Fort St. George, Madras, the headquarters of the Madras Presidency. Warren Hastings, the first Governor-General of Fort William (Bengal) who oversaw the Company's territories in India. The trial of Warren Hastings in the Court of Westminster Hall, 1789.

Until Clive's victory at Plassey, the East India Company territories in India, which consisted largely of the presidency towns of Calcutta, Madras, and Bombay, were governed by the mostly autonomous—and sporadically unmanageable—town councils, all composed of merchants. The councils barely had enough powers for the effective management of their local affairs, and the ensuing lack of oversight of the overall Company operations in India led to some grave abuses by Company officers or their allies. Clive's victory, and the award of the diwani of the rich region of Bengal, brought India into the public spotlight in Britain. The Company's money management practices came to be questioned, especially as it began to post net losses even as some Company servants, the "Nabobs," returned to Britain with large fortunes, which—according to rumors then current—were acquired unscrupulously. By 1772, the Company needed British government loans to stay afloat, and there was fear in London that the Company's corrupt practices could soon seep into British business and public life. The rights and duties of the British government with regards the Company's new territories came also to be examined. The British parliament then held several inquiries and in 1773, during the premiership of Lord North, enacted the Regulating Act, which established regulations, its long title stated, "for the better Management of the Affairs of the East India Company, as well in India as in Europe"

Although Lord North himself wanted the Company's territories to be taken over by the British state, he faced determined political opposition from many quarters, including some in the City of London and the British parliament. The result was a compromise in which the Regulating Act—although implying the ultimate sovereignty of the British Crown over these new territories—asserted that the Company could act as a sovereign power on behalf of the Crown. It could do this while concurrently being subject to oversight and regulation by the British government and parliament. The Court of Directors of the Company were required under the Act to submit all communications regarding civil, military, and revenue matters in India for scrutiny by the British government. For the governance of the Indian territories, the act asserted the supremacy of the Presidency of Fort William (Bengal) over those of Fort St. George (Madras) and Bombay. It also nominated a Governor-General (Warren Hastings) and four councilors for administering the Bengal presidency (and for overseeing the Company's operations in India). "The subordinate Presidencies were forbidden to wage war or make treaties without the previous consent of the Governor-General of Bengal in Council, except in case of imminent necessity. The Governors of these Presidencies were directed in general terms to obey the orders of the Governor-General-in-Council, and to transmit to him intelligence of all important matters." However, the imprecise wording of the Act, left it open to be variously interpreted; consequently, the administration in India continued to be hobbled by disunity between the provincial governors, between members of the Council, and between the Governor-General himself and his Council. The Regulating Act also attempted to address the prevalent corruption in India: Company servants were henceforth forbidden to engage in private trade in India or to receive "presents" from Indian nationals.

William Pitt's India Act of 1784 established a Board of Control in England both to supervise the East India Company's affairs and to prevent the Company's shareholders from interfering in the governance of India. The Board of Control consisted of six members, which included one Secretary of State from the British cabinet, as well as the Chancellor of the Exchequer. Around this time, there was also extensive debate in the British parliament on the issue of landed rights in Bengal, with a consensus developing in support of the view advocated by Philip Francis, a member of the Bengal council and political adversary of Warren Hastings, that all lands in Bengal should be considered the "estate and inheritance of native land-holders and families ..." Mindful of the reports of abuse and corruption in Bengal by Company servants, the India Act itself noted numerous complaints that "'divers Rajahs, Zemindars, Polygars, Talookdars, and landholders"' had been unjustly deprived of 'their lands, jurisdictions, rights, and privileges'." At the same time the Company's directors were now leaning towards Francis's view that the land-tax in Bengal should be made fixed and permanent, setting the stage for the Permanent Settlement (see section Revenue settlements under the Company below). The India Act also created in each of the three presidencies a number of administrative and military posts, which included: a Governor and three Councilors, one of which was the Commander in Chief of the Presidency army. Although the supervisory powers of the Governor-General-in-Council in Bengal (over Madras and Bombay) were extended—as they were again in the Charter Act of 1793—the subordinate presidencies continued to exercise some autonomy until both the extension of British possessions into becoming contiguous and the advent of faster communications in the next century. Still, the new Governor-General appointed in 1786, Lord Cornwallis, not only had more power than Hastings, but also had the support of a powerful British cabinet minister, Henry Dundas, who, as Secretary of state for the Home Office, was in charge of the overall India policy. From 1784 onwards, the British government had the final word on all major appointments in India; a candidate's suitability for a senior position was often decided by the strength of his political connections rather than that of his administrative ability. Although this practice resulted in many Governor-General nominees being chosen from Britain's conservative landed gentry, there were some liberals as well, such as Lord William Bentinck and Lord Dalhousie.

British political opinion was also shaped by the attempted Impeachment of Warren Hastings; the trial, whose proceedings began in 1788, ended, with Hastings' acquittal, in 1795. Although the effort was chiefly coordinated by Edmund Burke, it also drew support from within the British government. Burke, accused Hastings not only of corruption, but—appealing to universal standards of justice—also of acting solely upon his own discretion and without concern for law and of willfully causing distress to others in India; in response, Hastings' defenders asserted that his actions were in concert with Indian customs and traditions. Although Burke's speeches at the trial drew applause and focused attention on India, Hastings was eventually acquitted, due, in part, to the revival of nationalism in Britain in the wake of the French Revolution; nonetheless, Burke's effort had the effect of creating a sense of responsibility in British public life for the Company's dominion in India.

Soon rumblings began to appear among merchants in London that the monopoly granted to the East India Company in 1600 to facilitate it to better organize against Dutch and French competition in a distant region, was no longer needed. In response, in the Charter Act of 1813, the British parliament renewed the Company's charter but terminated its monopoly except with regard to tea and trade with China, opening India both to private investment and missionaries. With increased British power in India supervision of Indian affairs by the British Crown and parliament increased as well; by the 1820s British nationals could transact business or engage in missionary work under the protection of the Crown in the three presidencies. Finally, in Charter Act of 1833, the British parliament revoked the Company's trade license altogether, making the Company a part of British governance, although the administration of British India remained the province of Company officers. The Charter Act of 1833 also charged the Governor-General-in-Council (to whose title was now added "of India") with the supervision of civil and military administration of the totality of India, as well the exclusive power of legislation. Since the British territories in north India had now extended up to Delhi, the Act also sanctioned the creation of a Presidency of Agra, later constituted, in 1936, as the Lieutenant-Governorship of the North-Western Provinces (current-day western Uttar Pradesh). With the annexation of Oudh in 1856, this territory was extended, and eventually became the United Provinces of Agra and Oudh. In addition, in 1854, a Lieutenant-Governor was appointed for the region of Bengal, Bihar and Orissa, leaving the Governor-General to concentrate on the governance of India.