The early administrative structure; The Regulating Act (1773), From diarchy to direct control

The Early Administrative Structure; The Regulating Act (1773), From Diarchy to Direct Control

Dual System (Diarchy) of Government(1765-1772)

  • During Dual System, Nawab-ud-Daulla and Saif-ud-Daull were the Nawabs of Bengal.
  • Following the Treaty of Allahabad (1765), Robert Clive set up the infamous dual system of administration in Bengal.
  • Following the Treaty of Allahabad (1765), Robert Clive set up the infamous dual system of administration in Bengal. Under this system, the administration of Bengal was divided into Nizamat and Diwani. Diwani being the right to collect revenue was given to East India Company and Nizamat (administrative responsibility) was entrusted to Bengal Nawab.
  • The British administration acquired the functions of the Diwani or revenue Diwani (Fiscal) from the Mughal emperor. [The Diwani was concerned with revenue and civil justice and the Nizamat with police, criminal justice etc]
  • Though the administration theoretically divided between the Company and the Nawab, the whole power was actually in the hand of the Company.
  • Under this system, the fiction of sovereignty of Mughal emperor and formal authority of Nawab was maintained.
  • As the diwan, the Company was authorised to collect revenues of the province, while through the right to nominate the deputy Nizam (deputy subahdar) it was in a position to control the Nizamat or the police and judicial powers. The deputy subahdar (appointed to help Nawab) could not be removed without the consent of the Company.
  • However, at this point of time, the Company was neither willing nor able to collect the revenue directly. Hence, it appointed two deputy diwans for exercising diwani functions – (1) Mohammad Reza Khan for Bengal and (2) Raja Sitah Roy for Bihar. Mohammad Reza Khan also functioned as deputy Nizam. In this way, the whole administration of Bengal was exercised through Indian agency, although the actual authority rested with the Company.

Merits and reasons of the Dual Government

  • Clive showed his sagacity by following the policy of decentralization in the matter of Company’s administration in Bengal. By this policy he could save the British in India from the wrath of the Indian rulers who might have taken drastic steps to oust the British from India had it been done otherwise.
  • By the dual system of Government in Bengal Clive could save the company from the jealousy of the other European powers like the French, the Dutch and the Portuguese. These European powers would have withdrawn their payment of tariff to the servants of the Company on the event of Clive’s full occupation of Bengal.
  • Clive was wise enough not to take upon the administration of Bengal directly. He knew fully well that the servants of the company were not conversant with the languages, customs, traditions and laws prevailing among the people of Bengal.
  • They would have cut a very sorry figure had they been entrusted with the administration of Bengal in the event of Clive’s occupation of the state. In addition to their ignorance of the task of administration, their number was also too small to manage it.
  • Both the Board of Directors and the British Parliament were not in favour of direct administration in Bengal. Clive did not like to insure displeasure of the home authority by taking over the administration of Bengal directly. By establishing Dual Government in Bengal, Clive showed his honour to the Board of Directors on the one hand and saved the Company from the wrath of British parliament on the other.
  • The dual Government in Bengal helped the East India Company to remain free from the real responsibility of the administration of Bengal. The English Company got power and pelf by this system of Government by successfully keeping themselves away from the hazards of administration. For every omission and commission in the Government the Nawab of Bengal was to be held responsible.
  • Clive established Dual Government in Bengal because the exigencies of time demanded it. It provided a conducive atmosphere for the growth of British power in India under the prevailing circumstances. Any alternative would have led the company to disaster. It was stop-gap arrangement. It was make-shift agreement which aimed at tiding over the difficulties confronting the English in 1765.

Demerit of the Dual Government

  • The Dual Government of Clive has been criticized in various ways. It led to disastrous results. The administration in Bengal almost collapsed. Power was divorced from the responsibility. The British were in possession of power and money whereas the Nawab had neither power nor money. He had only the responsibility of running the administration and take the blame for any failure.
  • The Nawab failed to manage the administration smoothly with a small annual grant of rupees 50 lakhs only. The company tried to improve its own lot by the revenue it collected from Bengal, Bihar and Orissa. The Nawab could not do any work of public utility due to paucity of fund. The Nawab also had no power to enforce law.
  • As a result lawlessness prevailed in most parts of Bengal. The cases of theft and rubbery increased by lips and bounds. The common people had to suffer a lot due to want of justice.
  • The condition of agriculture in Bengal gradually deteriorated under the Dual Government of Clive. The power of collection of revenue rested in the hands of the company only. So, the Nawab could not make any provision like irrigation for the development of agriculture in Bengal. He also failed to advance loan to the needy farmers due to shortage of fund. The great famine of 1770 was an indirect outcome of the above difficulties.
  • The poor administration in Bengal led to rapid increase of private trade. The servants of the East India Company carried on trade and commerce privately without paying any tax. They earned a lot of profit out of this illegal trade. But on the other hand the merchants of Bengal suffered a lot, because they were over burdened with tax. Thus, the Dual Government dealt a terrible blow to the local trade and commerce.
  • The servants of the Nawab became wayward and oppressive when they came to know that the Nawab was a great puppet in the hands of the English company. This led to the suffering of the people of Bengal.
  • The Dual Government of Clive was further responsible for the downfall of local industries. The company’s people forced the local weavers to work exclusively for the company. Many other small local industries also were brought under the control of the company.
  • People failed to get proper justice under the Dual system of Government. The judges of the Nawab were influenced by British authority, because the latter played vital role in their appointment. Thus, the judges failed to give impartial verdict which was detrimental to the interest of the public.
  • The downfall of agriculture under the Dual Government ultimately led to the downfall of Company’s income due to decrease of revenue collection.
  • Thus, the Dual Government of Clive proved to Bengal a failure. It gave rise to several complications in the administration of Bengal. The absence of responsibility on the part of the company led to abuses of power and corruption.
  • This dual system was proved to be unsuccessful and in 1772 it was ended by Lord Warren Hastings on the orders of the directors of the company.
  • At the time of end of this system Mubaraq-ud-Daulla was the nawab of bengal.

The Regulating Act (1773)

Why Regulating Act 1773?

  • By 1773, the East India Company was in dire financial crisis. The Company was important to Britain because it was a monopoly trading company in India and in the east and many influential people were shareholders. The Company paid £400,000 annually to the government to maintain the monopoly but had been unable to meet its commitments because of the loss of tea sales to America since 1768 as Dutch were able to enter the American Markets. The East India Company owed money to both the Bank of England and the government; it had 15 million lbs of tea rotting in British warehouses. The mismanaged Finances made the company almost insolvent and the company was forced to apply to the British Government for a loan.
  • The East India Company was basically a trading farm that made business over a vast area of India but also maintained an army to protect its interests. PM Lord North decided to start Governmental control, as East India Company had no experience in ruling it conquered few areas.
  • The British Parliament appointed two committees: (1) Secret Committee (2) Select committee. Based on the recommendations of the two committees there two Act were passed (1) Granted to the company a loan of £ 14,00000 at 4% interest (2) Regulating Act, 1773
  • Lord North decided to overhaul the management of the East India Company and to provide some form of legal government for the Indian possessions of the East India Company with the Regulating Act 1773. This was the first step along the road to government control of India. The Act set up a system whereby it supervised (regulated) the work of the East India Company but did not take power for itself.
  • Since the Government in Britain regulated the company and did not take it over, it was termed “Regulating Act”.
  • East India Company had a very powerful lobby in Parliament in spite of the financial crises of the Company. The Shareholders along with this lobby of Parliament opposed the act.
  • Summery: The Regulating Act of 1773 was passed because:
    1. Being a trading company, EIC had difficulties in Governance.
    2. Address the problem of management of company in India.
    3. Address the problem of corruption
    4. Terrible famine in Bengal
    5. Address the problem of dual system of governance instituted by Lord Clive
    6. To control the company, this was so far a business entity but now a semi-sovereign political entity in India
    7. Lack of proper judicial administration
    8. Company’s defeat in 1769 at the hands of Hyder Ali

Provisions of Act

  • The Regulating act of 1773 permitted the Company to retain its former possessions and power in India but the management was brought under control by the British Government.
  • Election for Directors: The directors of the company were elected for four years. One- fourth of them retire for every year and the retiring Directors were not entitled to be elected again.
  • In order to assert parliament’s control over the company, the directors were required to place regularly all their correspondence, regarding civil military affairs with the Indian authorities, before the secretary of the state in England. All correspondence regarding to revenues in India was required to be placed before the Treasury in England.
  • The Act limited Company dividends to 6% until it repaid a GB £1.5 Million loan and restricted the Court of Directors to four-year terms.
  • It prohibited the servants of company from engaging in any private trade or accepting presents or bribes from the natives to curb corruption.
  • First Governor General of India: The Act elevated Governor of Bengal, Warren Hastings to Governor-General of Bengal and subsumed the presidencies of Madras and Bombay under Bengal’s control. Now, no other presidency could give orders for commencing hostilities with the Indian Princes, declare a war or negotiate a treaty. Now, the Governor General of India and his council of 4 members got a legal status. Their term of office was five years and the king was empowered to dethrone them even earlier on recommendation of the court of directors.
  • [Commonly we call Warren Hastings as First Governor General of India. But the official title of Warren Hastings was the Governor of the Presidency of Fort William. This office became Governor General of India in 1833 from the times of Lord William Bentinck and in 1858, when India was taken over by England; it remained Viceroy and Governor-General of India till 1947]
  • Council of Four: The Act named four additional men (as explained in earlier paragraph) to serve with the Governor-General on the Supreme Council of Bengal: Lt-Gen John Clavering, George Monson, Richard Barwell, and Philip Francis. Barwell was the only one with previous experience in India. These councillors were commonly known as the “Council of Four“.
  • The governor general in council was given all the power to govern the company’s territorial acquisition in India, to administer the revenue of Bangal, Bihar, Orissa and to supervise and control the general civil and military government of the Presidency. The presidencies of Bombay and Madras were placed under the control and superintendence of the Governor General in Council while exercising their power to make war and peace. The Governor General and the Council were to keep the court of directors fully informed of all their activities affecting the interests of the company and they were also to work in entire obedience to the orders and instructions of the court of directors.
  • India’s First Supreme CourtA supreme court was established at Fort William at Calcutta. British judges were to be sent to India to administer the British legal system that was used there. This Supreme Court consisted a Chief Justice and three other regular judges or Puisne Judges, being barristers of not less than five years standing and to be appointed by His Majesty. Sir Elijah Imphey was the first Chief Justice. The Supreme Court was the supreme judiciary over all British subjects including the provinces of Bengal, Bihar and Orissa.
  1. Position of the Supreme Court Calcutta: There was nothing comprehensible in the act with regard to the relation of the Supreme Court with the Government of Bengal. The Supreme Court subjected the company to the control of British Government.
  2. Jurisdiction: Supreme court was given very wide jurisdiction. Cases against company and corporation of Calcutta also placed under the court Civil jurisdiction: His Majesty’s subjects or persons employed directly or indirectly by the company or persons who have voluntarily agreed in writing to refer their disputes to the supreme court were under the jurisdiction. (Various terms like the “British subjects”, “subjects of His majesty”, “persons employed directly or indirectly in the service of the company” were used to define the personal jurisdiction of the Supreme Court. The significance of these terms by no means clearly defined). Supreme Court was also given permission to accept cases against the Governor General and any of his Council members.
  3. Criminal Jurisdiction:The court was not given jurisdiction over all the native Indian residing in Calcutta and with in the territory Bengal, Bihar and Orissa. It was only vested with the jurisdiction over all British subjects (though it was not clear who were British subject? If Calcutta was under British, all residents could be British Subjects?), their servants and the persons employed by the company.  Supreme Court was given permission to accept the cases against Governor General and his council members, but court had no power to arrest or imprison any of them in any action
  4. The Supreme Court was also made to consider and respect the religious and social customs of the Indians. Appeals could be taken from the provincial courts to the Governor-General-in-Council and that was the final court of appeal. The rules and regulations made by the Governor General-in-Council were not to be registered with the Supreme Court.
  5. Later an amendment in this act was made (The amending act of 1881), in which the actions of the public servants in the company in their official capacity were exempted from the jurisdiction of the Supreme Court.

Assessment of the Act

  • There was nothing in the act which could address the people of India, who were paying revenue to the company but now were dying in starvation in Bengal, Bihar and Orissa.
  • The Regulating Act of 1773 is called the First step of Government Control in India. From 1773 onwards, the executive and judicial administration of the country was placed on a regular, though imperfect, footing by parliamentary act.
  • Provisions of the Act were also towards stopping corruption but it failed to do so.The major charges were brought against the first Governor General, Warren Hastings and he was impeached in the trial for corruption. In fact the whole council was divided into two factions based on the corruptions- the Hastings Group and the Francis Group. They fought against each other on the issues of corruption charges alleged on them. Consequently, Pitt’s India act, 1784 was passed to prevent corruption and an uncorrupted person, Lord Cornwallis, was appointed in order to bring a corruption free environment in the company.
  • Due to decision of council was to be by majority, many times decisions could not be taken as per Hasting as Governor General in Council was first among equal with no veto. This problem was resolved in Pitt’s India Act 1784 by reducing the number of Council members apart from Governor General in Council to three and giving The Governor General the right of casting vote, in case the members present in a meeting of the council shall any time be equally divided in opinion. Also he was given veto power in major decision in Act of 1784.
  • Another problem was regarding jurisdiction of Supreme Court.There were many confusions regarding its jurisdictions and also on whom its jurisdiction was applicable.
  • Many defects of the Act were removed by the Declaratory Act 1781, The Pitt’s India Act 1784 and the Amendment Act of 1786.

Nanda Kumar Case

  • This case is example of corruption, nepotism, injustice during British era.
  • Raja Nanda Kumar of Bengal was a big Zamindar. In March, 1775 he laid a letter before the Council member with charging allegation against Warren Hastings. According to the letter Warren Hastings received bribe from former Nawab wife Munni Begum for granting Zamindari. The case was entertained by Sir Philip Francis (he encouraged Nanda Kumar to expose Hasting) and the other members of the Supreme Council of Bengal.
  • The council majority decided that Hasting received a sum of Rs.3,45,105 as bribe and directed him to refund the money in the Company’s treasury however Warren Hastings could overrule the Council’s charges. While charges against Warren Hastings were still pending which were subsequently dropped, Nanda Kumar was suddenly arrested at the instances of a Calcutta merchant Mohan Das on a charge of forgery at the instigation of Warren Hasting.
  • Nanda Kumar was tried under Elijah Impey, India’s first Chief Justice, was found guilty and hanged in Kolkata in 5 August 1775 as per statute of British parliament.
  • Peculiar features of trail:
  1. Charge preferred against Raja Nanda Kumar was shortly after he had levelled charges against Warren Hastings.
  2. Chief Justice Imphy was a close friend of Hastings.
  3. Every Judge of the Supreme Court cross examined the defense witness due to which the whole defense of Nanada Kumar collapsed.
  4. After the trail, when Nanda Kumar was held guilty by the court he filed an application for granting leave to appeal to the King-in-Council but the court rejected his application.
  5. Nanda Kumar committed the offence of forgery nearly five years ago, i.e much before the establishment of Supreme Court.
  6. Neither under Hindu Law nor under Mohammedan Law was forgery regarded a capital crime.
  • Warren Hastings was impeached for crimes and misdemeanour during his time in India in the House of Commons upon his return to England, especially for the alleged judicial killing of Nanda Kumar. The House of Lords finally made its decision on April 1795 acquitting him on all charges. The Company subsequently compensated him with 4,000 Pounds Sterling annually.

From Diarchy to Direct Control

  • In 1773, Warren Hastings became the first Governor-General of Bengal and had administrative powers over all of British India.

Practices of Warren Hastings

  • The arrival of Warren Hastings in Bengal as Governor of the presidency of Fort William in 1772 proved to be a turning point. The same year, the Company was ordered by the Court of Directors to stand forth as ‘Diwan’ which meant the termination of system of ‘dual government’ and imposition of an administrative task upon the commercial men and thus the foundation of the civil service was formally laid.
  • Accordingly, Englishmen were to be appointed as Collectors in district under the overall control of a ‘Board of Revenue’ at Calcutta, a weak system, rightly characterized by Hastings as “petty tyrants and heavy rulers of the people”. The foundation of the civil service in the modern sense was, nonetheless, laid down during his regime.
  1. Under Hastings’s term as Governor General, a great deal of administrative precedent was set which profoundly shaped later attitudes towards the government of British India.
  2. Hastings, having proficiency in Bengali, Urdu, Persian, understood the relationship between on acculturated civil servant and an efficient one and accordingly he emphasized on the creation of an ‘oriental elite club of the civil servants’, competent in Indian languages and responsible to Indian tradition.
  3. He made efforts at lifting the moral tone and intellectual standards of servants. ‘Dastaks’ were abolished in 1773 and those engaged in the private trade had to pay a duty of 2.5 % to the Board of customs.
  4. Hastings separated the revenue and commercial branches.
  5. The Regulation Act of 1773 prohibited all officials of the Company, from the Governor-General and his councillors and Chief Justice and other judges of the Supreme Courts, from accepting gifts, donations, gratuity or rewards. If found guilty of doing so, they could be legally convicted by the Supreme Court or the court of the Mayor.
  6. In 1780-81, revenue and judicial administration in districts was entrusted to English officers which was the beginning of the ‘nucleus’ of the civil service with systematization and specialization of functions, essential to such service.
  7. By Pitt’s India Act of 1784, they were provided with definite scales of pay and emoluments.

More about Warren Hasting

  • In 1758 Hastings was made the British Resident in the Bengali capital of Murshidabad, a major step forwards in his career, at the instigation of Clive. In 1771 he was appointed to be Governor of Calcutta, the most important Presidency. In Britain moves were underway to reform the divided system of government and create a single rule across all of British India with its capital in Calcutta. Hastings was considered the natural choice to be the first Governor General. While Governor, Hastings launched a major crackdown on bandits operating in Bengal which was largely successful.
  • Hastings had a great respect for the ancient scripture of Hinduism and set the British position on governance as one of looking back to the earliest precedents possible. This allowed Brahmin advisors to mould the law, as no English person thoroughly understood Sanskrit until Sir William Jones; it needed to be elucidated by religious commentators who were well-versed in the lore and application.
  • In 1781, Hastings founded Madrasa ‘Aliya’; (in 2007, it was transformed into Aliah University by the Government of India, at Calcutta). In 1784, Hastings supported the foundation of the Bengal Asiatic Society (now the Asiatic Society of Bengal), by the oriental scholar Sir William Jones; it became a storehouse for information and data pertaining to the subcontinent.
  • Hastings’ legacy has been somewhat dualistic as an Indian administrator: he undoubtedly was able to institute reforms during the time he spent as governor there that would change the path that India would follow over the next several years. He did, however, retain the strange distinction of being both the “architect of British India and the one ruler of British India to whom the creation of such an entity was anathema.” He respected Indian customs but was loyal to the British mission.
  • In 1784, after ten years of service, during which he helped extend and regularise the nascent Raj created by Clive, Hastings resigned.


Q. Discussed the causes that led to the economic drain in Bengal following the battle of Plassey.


  • It was through Bengal that the British started their colonization. In 1757, a historic battle was fought at Plassey in which the British won Bengal, Bihar and Orissa. This was the battle that changed the course, not only of Bengal or India, but of western history as well.
  • This battle would be the beginning of the fall of India and rise of the west, which had been backwaters until then. Robert Clive is noted as the hero to the British of this battle. It was Robert Clive who laid the foundation of British rule in India. Bengal was a strong’ Mughal province and it would have been quite hard to imagine conquering Bengal from the Mughals, but Robert Clive did the impossible.
  • At that time Nawab Sirajuddowla was the Nawab of Bengal under the Mughal Empire. He had many enemies and rivals within his family who wanted to be the Nawab. The British (Robert Clive) made alliance with these family rivals. The alliance changed the balance of power.
  • Mir zafar and other generals were bribed and they betrayed Sirajuddowla in battle. A major part of Sirajuddowla’s army never took part in the battle at Plessey. With the mercenary army and using the internal dissension against the Nawab, the British had their biggest victory, the victory at Plassey. After the victory, Sirajuddowla was killed by Miran, son of Mirzafar. Mirzafar was made the Nawab of Bengal. He was but a puppet of the British. Soon the British made him abdicate in favour of his son in law, Mir Kasim who gave them the Zamindari of Burdwan, Midnapore and Chittagong districts. Once again the British used internal rivalry to their favour.
  • For some time, the East India Company put up puppet rulers but power virtually lay in their hands. In 1763 Mir Kasim was defeated by the Company and Mir Jafar was restored. The mercenary armies led by Major Hector Munro defeated the alliance of Mir Kasim, Nawab of Oudh and the Mughall emperor at the battle of Buxar. This was another significant victory for the British. After this battle, the East India Company virtually became master of half of North India. These victories paved the way for the drain of wealth from Bengal.
  • The Mughal emperor became’ a virtual prisoner of the British. Clive assumed governorship of Bengal after this in 1765 and in 1772, became bold enough to remove the Nawab completely and thus turning Bengal (Bengal, Bihar and Orissa) into a British colony, defector.
  • Of course, technically, it was still not part of the British Empire, since it was under the East India Company. The Company army at this point consisted of 1000 Europeans and 59, 000 mercenary sepoys. It was with Indian troops that the British defeated the Mughal emperor and took over Bengal. Bengal, Madras and Bombay continued as separate armies until 1895. The commander-in-chief of the whole was the commander of the Bengal army.
  • The people of Bengal had been used to tyranny, but had never lived under an oppression so far reaching in its effects, extending to every village market and every manufacturer’s loom. They had been used to arbitrary acts from men in power, but had never suffered from a system which touched their trades, their occupations, their lives so closely. The springs of their industry were stopped, the sources of their wealth dried up.
  • From the very beginning in 1757, when Sirajuddowla was defeated, the British plundered Bengal and this plunder directly contributed to the industrial revolution in England. The plunder from Bengal was invested in the new British industries while the loss of capital and fall of demand of Bengal goods combined and caused the final ruin of Bengal.
  • By 1756 the English East India Company’s servants sent home nearly 6 million pounds; this amount is more than four times the total land revenue collection of the Nawab of Bengal. By 1765-1770 the English East India Company sends out nearly 4 million pounds worth of goods or about 33 % of the net revenue of Bengal, in the form of the Company’s ‘Investments’, From 1766 to 1767 Nearly 5.7 million pounds are drained from Bengal to England. In the early 19th Century the drain of wealth from India to Britain in the form of the English East India Company’s ‘Investments’ constitutes nearly 9 % of India’s national income.
  • The British Parliamentary Select Committee of 1812 was appointed to discover how they (Indian manufactures) could be replaced by British manufactures, and how British industries could be promoted at the expense of Indian industries. The British in Bengal collected tax without having any responsibility for the country.
  • In 1813, the British decided that India should no longer be an industrial nation (which it had been a leader since the earliest records) but an agricultural nation and colony of an industrialized England. British goods were sold in India and Indian goods were gradually replaced. The trade was made one way. Britain no longer wanted to import from India but only export to India.
  • To discourage Indian exports Indian goods were taxed heavily, tax of 67.5% was levied of Indian calicos and a tax of 37.5% was levied on muslins on entry into Britain. Over 300% import tax was placed Indian sugar. Possession of Indian imported goods in England such as cotton items were fined heavily to further hurt the Indian industry. While massive industrialization began in Britain, Bengal (and the rest of India) was de- industrialized. Indian exports were slowly being stiffled, with that its economy.
  • Bengal was hurt tremendously since it was an exporting province. They took raw materials from Bengal and sold industrial products from Britain back to the Bengali people. The Muslin still caused a threat for sale of British fabric and so the weavers were forced to stop producing Muslin or passing on their skill to their children. To enforce these thumbs of the weavers were cut off.
  • Muslin was the softest fabric ever produced.  20 meter length of Muslin fabric could be folded into a matchbox… today it survives in museums only. Muslin production began thousands of years ago and survived various foreign invaders in Bengal. However, it did not survive the British colonial period. In Bengal a new fabric is now called Muslin, but is not the Muslin of history. Under such conditions as imposed by the British, Bengal, once one of the richest, collapsed and is since one of the poorest regions in the world.

Q. How did the east India company become de jure power in India?

11 thoughts on “The early administrative structure; The Regulating Act (1773), From diarchy to direct control”

    1. You have done a great service to Tha seekers of knowledge. Thanks to the Civils service syllabus which makes it relevant. I am eager to know your journey to this post and your views on how the govt could promote such endeavours, especially in the realm of value addition relevant to the emerging trends of economy and job creation. I am a retired I AS officer. Contact BK Srivastava, 9417791431

Leave a Reply