On this day in history, an Act of Parliament in Great Britain provided for more government control over the affairs of India, which previously had been mainly in the hands of the East India Company.
The East India Company was founded in 1600, when Elizabeth I granted a company of 218 merchants a monopoly of trade to the east of the Cape of Good Hope, although it ended up trading mainly with the Indian subcontinent. The Company began to establish factories in India and eventually accounted for half of the world’s trade with India. Faced with the “opportunities” afforded by weak and dispersed rule in India, the Company became increasingly ambitious and powerful, eventually coming to be the de facto ruler of large areas of India by distributing bribes, negotiating treaties with local rulers, assuming administrative functions, and using its own private armies to exercise military power. Company men themselves became “princes” of India.
A significant increase in the Company’s influence followed a military action in 1757 (The Battle of Plassey), which established Company rule in Bengal, producing a guaranteed income from Bengal’s taxpayers. The Company used this revenue to expand their military might and push the other European colonial powers such as the Dutch and the French out of South Asia. However, it also dragged the Company even deeper into the business of government, with revenue replacing commerce as the Company’s first concern.
By 1772, however, the Company was seeking loans from the British Government to stay afloat. A famine in 1770 had wiped out a third of the population of Bengal, reducing local productivity and depressing the Company’s business. Government inquiries revealed corruption and mismanagement. In 1773, Parliament passed the Regulating Act, which established regulations “for the better Management of the Affairs of the East India Company, as well in India as in Europe”. As The Economist observed: “The government subjected the Company to ever-tighter supervision, partly because it resented bailing it out, partly because it was troubled by the argument that a company had no business in running a continent.”
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. However, the imprecise wording of the Act left a number of problems unresolved.
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.
A governing board was created with six members, two of whom were members of the British Cabinet and the remaining from the Privy Council. The Board also had a president, who soon effectively became the minister for the affairs of the East India Company. The constitution set up by Pitt’s India Act did not undergo any major changes until the end of the company’s rule in India in 1858.
You can read the text of the India Act of 1784 here.
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