British Regulating Act

Context

The great wealth of the Indian Subcontinent had attracted European interest for centuries before the Regulating Act of 1773. The arrival of the Portuguese at Calicut, in southern India, in 1498 gave rise to a long and sustained European presence in the region. However, the Portuguese were short-lived as the dominant trading power on the subcontinent. By 1600 the Dutch had clearly established themselves as the prevailing European power with regard to the Indian Ocean trade of textiles and spices. This trade zone encompassed much of Southeast Asia and the Indian Subcontinent.

The East India Company was granted a charter to conduct business in India by Queen Elizabeth I in 1600. The objectives of the company were to gain access to the lucrative spice trade and to find new markets for British textile exports. Initially, the British company was unable to compete with the massive Dutch trading company and was forced to focus its trading interest on India while the Dutch company controlled the lucrative islands of present-day Indonesia.

In the late seventeenth century and into the eighteenth century, European trading companies began organizing more permanent enclaves to facilitate trade in the region. The East India Company established factories on the east and west coasts of the subcontinent, in Bombay, Madras, and Bengal. The company operated in India through a combination of diplomacy and force, building important alliances with Mogul rulers and local elites. Competition between French and British companies in India also led the outposts to assume a more and more military character. The East India Company established sepoy armies, that is, armies that consisted of local soldiers led by British company officials.

The East India Company grew increasingly powerful and faced resistance from local authorities and nabobs (provincial governors) as they expanded operations. Fort William was established in Bengal under the British, and in 1756 it became the site of conflict between the local ruler, Sirajud-Dawlah, and the East India Company. On June 19, 1756, the fort was captured by the nabob’s forces. According to the British commander of the fort, John Holwell, the nabob’s troops took 146 prisoners of war, including civilian women and children, crowding them into a single holding room and keeping them there overnight. The conditions were so terrible, he claimed, that 123 of the prisoners suffocated from the confinement and heat. This incident became highly sensationalized in the British press, which gave the name “Black Hole of Calcutta” to the guard room of the fort.

While no British survivors countered Holwell’s depiction, the circumstances of the event remain highly controversial. No evidence was found to support the story, and later investigation raised issue with whether the terms of Howell’s description were even physically possible. Some historians believe that Holwell’s account must have been exaggerated, while others doubt the occurrence at all. Regardless, following the event in Britain, many tabloids and newspapers ran serial accounts of the episode, emphasizing the civilian deaths and referencing the event as evidence of the need for greater governmental and military control in India. The “Black Hole of Calcutta” became a regular reference throughout the imperial presence in India as a coded symbol of the “uncivilized” nature of the Indian people under rule.

Within a year the Battle of Plassey occurred (1757), in which a sepoy army controlled by the East India Company defeated the troops of the local nabob to regain political control of Calcutta. By then the British had made several inroads into establishing influence in different regions of the subcontinent. The results of the Battle of Plassey were wide ranging; among the important consequences was the granting, in 1765, of diwan by the Mogul emperor to the East India Company for the provinces of Bengal, Bihar, and Orissa. The right of diwan was essentially the right to collect revenue, but as the power of the Mogul throne and of the local nabobs declined, the East India Company gained increasing control of the overall administration of the provinces, and the Mogul emperor became virtually dependent on the company.

The revenue collected, however, was soon realized to be grossly inadequate to maintain the costs of the East India Company presence in the provinces. In addition to massive famine, the provinces were undergoing significant environmental and political changes that led to unrest and conflict in various areas throughout the region. Company officials were frequently discovered to be abusing their power and funneling revenue toward their personal interests. The British government and public were growing more aware that company officials were not qualified to operate in such a political capacity. In 1772, John Burgoyne, chairman of a select committee of the House of Commons, brought forward three separate motions accusing East India Company officials of abuse of power. Other members of the House came to the defense of the company officials, and no punitive action was taken. One particularly outspoken defender of the East India Company was Alexander Wedderburn, who was highly influenced by a former company official, Robert Clive, and had even put forth a motion defending Clive in the face of Burgoyne’s 1772 charges of abuse. In effect, two camps emerged in the House of Commons with one highly critical of the East India Company and one highly defensive.

In 1773, however, the East India Company came under scrutiny again by two separate house committees, one of which was a secret committee investigating the behavior of the company’s highest officials. By 1773 the East India Company was in financial ruin and was considering bankruptcy. The most recent version of the charter granted to the company stipulated that the company was required to pay £400,000 annually to the British government in order to maintain the monopoly, but it had not been able to pay since 1768. The British government had extended several loans to the company, and all were in danger of default. In addition, there was significant public dissatisfaction over the scandals associated with the conduct of company officials in India. The Secret Committee of the House of Commons was charged with investigating the mismanagement of a national asset, and the report of their findings served as the basis for the institutional reform of the British Regulating Act of 1773. The act maintained the same sentiment as the investigation of the special committee but represents the compromise of an act negotiated through a political body that was highly polarized. Straddling the faction was the prime minister, Frederick North, 2nd Earl of Guilford, known as Lord North, who agreed with the recommendations of the investigation but was also influenced by members of Parliament with substantial financial stakes in the East India Company.