The chaotic situation brought about by the misgovernment of Bengal forced the British parliament to enquire into the affairs of the East India Company. This revealed gross malpractices of the senior officials of the company. The company was also facing a financial crisis at this time and had applied to the British government for a loan of one million pounds. The British Parliament found it necessary to regulate the activities of the company in India and for this, the Regulating act of 1773 was passed.
This was the first direct interference made by the British government in the affairs of India. Its purpose was to take a step towards removing the political power from the hands of a trading company. The act also provided specific measures to set up a new administrative framework. The president of the company’s Calcutta factory, who used to be the Governor of Bengal, was made the Governor-General of all the Indian territories of the company.
The other two governors of Bombay and Madras were made subordinate to him. He was to have a council of four members. For the administration of justice, the act proposed the setting up of a supreme court at Calcutta. The defects of the regulating act became clear very soon. There were constant quarrels between Warren Hastings, the first Governor General, and the members of his council.
The Supreme Court also could not function smoothly as its jurisdiction and its relations with the council were not clear. It was also not clear which law Indian or English was to follow. This court had sentenced to death an Ex-Diwan of Murshidabad, Maharaja Nanda Kumar, and a Brahman by caste, which was charged with committing forgery. But in India a Brahman could not be sentenced to death for such an offence. This matter created much sensation in Bengal. Moreover, the control of the British government over the company remained vague even after the enactment of the Regulating act.
1. It designated the Governor-General of Bengal and created an Executive Council of four members to assist him. Lord Warren Hastings was the first Governor-General of Bengal.
2. Governors of Bombay and Madras presidencies subordinate to the Governor-general of Bengal.
3. It provided for the establishment of a Supreme Court at Calcutta (1774) with one Chiel Justice and three other Judges.
4. It prohibited the servants of the Company from engaging in any private trade or accepting presents or bribes from the natives.