The second was the
important
Regulating Act.
Cambridge History of India - v5 - British India
In Cob-
bett's Parliamentary History a very large space from 1767 to the end
of the century is devoted to Indian debates. "The affairs of the East
India Company", wrote the editor in 1768, "were now become as much
an object of annual consideration, as the raising of the supplies. ” ?
The Indian question was entangled with a serious constitutional crisis
and with the personal rivalry and political ambitions of the two
greatest statesmen of the time. It caused the fall of the notorious
Coalition Government of Fox and North, gave George III the oppor-
tunity to effect a daring coup d'état, doomed Fox to almost a lifetime
of opposition and put Pitt in power practically for the rest of his
life. From 1772 to 1795 Indian affairs were constantly before
parliament in both its legislative and its judicial aspect.
1 Parliamentary History of England, XVI, 402.
## p. 182 (#210) ############################################
182
THE COMPANY AND THE STATE, 1772-86
»
Now all this was inevitable and, when everything is taken into
consideration, not to be regretted. It is easy to paint the interference
of parliament as mischievous and misinformed, and to complain that
India was made a pawn in the party game; but there was—as some
of the most clear-sighted of contemporary statesmen saw-a serious
risk of a great empire being created and ruled by Englishmen outside
the sphere and control of the British cabinet. “The East India
Company”, as Burke said, "did not seem to be merely a Company
formed for the extension of the British commerce, but in reality a
delegation of the whole power and sovereignty of this kingdom sent
into the East. ” 1 No national government could be expected, 0%
indeed ought, to tolerate such a dangerous shifting of the centre of
political gravity. Some action on the part of the state was necessary;
the question had to be tackled even at the cost of strife, dislocation,
and possibly some injustice to individuals. "In delegating great
power to the India Company", wrote Burke, "this kingdom has not
released its sovereignty. On the contrary, its responsibility is increa-
sed by the greatness and sacredness of the power given. " 2
This bringing into relation of the Company and the state was
from the nature of the case a very difficult problem. It had to be
worked out experimentally, for there were no precedents. We can-
not be surprised that many mistakes were made.
“The British legislature", says Malcolm, “has hitherto but slowly followed
the progress of the power of the Company, in India. It had legislated for
factories on a foreign shore, when that Company was in the possession of pro-
vinces; and when the laws were completed to govern these, it had obtained
kingdoms. "
This was entirely true, but it was inevitable. The rapid developments
in the East out-distanced the efforts of parliament to comprehend
and to deal with them. According as men visualised the position
from the eastern or the western point of view, authority in the East
seemed dangerously circumscribed or perilously unhampered. Hastings
describes the sphere of his administration as "a dominion held by
a delegated and fettered power over a region exceeding the dimen-
sions of the parent state, and removed from it a distance equal in
its cricuit to two-thirds of the earth's circumference”. 4 Its remoteness
postulated the necessity of semi-independence, “distant as it is from
the reach of more than general instruction from the source of its autho-
rity, and liable to daily contingencies, which require both instant
decision, and a consistency of system”. 5 Burke, on the other hand,
from the home aspect, declares, “It is difficult for the most wise and
" 3
1
Speeches. . . in the trial of Warren Hastings (Ed. Bond), I, 15.
2 Idem, p. 13.
3 Malcolm, The Political History of India, I, 8.
+ Selcctions from the State Papers of the Governors-General of Indiu.
Warren Hastings. Ed. by (Sir) G. W. Forrest, 11, 92.
- Idem, p. 93.
## p. 183 (#211) ############################################
POSITION OF THE COMPANY
183
2
upright government to correct the abuses of remote, delegated power,
productive of unmeasured wealth, and protected by the boldness and
strength of the same ill-got riches”;1 and he puts his finger on the
crux of the whole matter, though no doubt he here inculcates a
counsel of perfection, when he says, "I think I can trace all the cala-
mities of this country to the single source of our not having had
steadily before our eyes a general, comprehensive, well-connected and
well-proportioned view of the whole of our dominions, and a just
sense of their true bearings and relations". The question then hefore
the statesmen of the eighteenth century was : How was the Company's
quasi-sovereignty in the East to be reconciled with the necessary
subordination to the imperial parliament? There were three possi-
bilities. The first was that the Company's privileges and powers
should remain untouched, with the hope that some practical modus
vivendi would in time be worked out. But this was felt by the majority
of the nation and even by the more far-sighted of the Company's
own servants to be no longer feasible. Both Clive and Warren Hastings
suggested tentatively to the prime ministers of their time that it
might be advisable for the state to take over the Company's powers.
There seemed a danger not only that misgovernment in India might
tarnish the name of Great Britain as an imperial state, but that the
Indian interest in England, supported by huge revenues and corrupt
parliamentary influence, might gain a preponderating and improper
power in home affairs.
The second possibility was that the state should take over in full
sovereignty the territorial possessions in India and convert the
Company's servants into a civil service of the crown. But this was
felt to be too great and drastic a change. “It was opposed to all
eighteenth-century notions of the sacredness of property, and the
problem was complicated by all kinds of delicate legal and political
questions. It might even be plausibly contended that the Company
had no considerable territorial possessions at all. It administered
Bengal, Bihar and Orissa merely as the diwan of the Moghul emperor.
That was a tenable position for a private corporation; it was not a
tenable position for the government of Great Britain. If the "territo-
rial” possessions were annexed by the crown, the act might be
represented as sheer usurpation against the Moghul Empire, and
Great Britain might be embroiled with the representatives of other
European nations in the East.
It remained that the state should take the Company into partner-
ship, assuming the position of controlling and predominant partner
in all matters relating to the higher branches of government, but
leaving to the Company the monopoly of the trade, the disposal of
its valuable patronage under crown sanction, and the details of the
1 Works of Edmund Burke, m, 193-4.
2 Idem, p. 125.
## p. 184 (#212) ############################################
184
THE COMPANY AND THE STATE, 1772-86
administration. What we see going on during the period 1772-86 is
the gradual realisation of this conception. It must be remembered
that some attempts in this direction had already been made before
1772. . A little band of members of parliament, prominent among
whom were Beckford, Barré and General Burgoyne, had long been
urging that conquests in India should pass to the crown. Their
persistent efforts met with some success in 1767 when five separate
acts were passed. These measures amongst other things interfered
in the regulations for voting in the General Courts of the Company,
regulated the amount of dividends to be paid and the manner of
paying them, and, most important, obliged the Company to pay the
exchequer an annual sum of £400,000 for two years from February,
1767, for the privilege of retaining their territorial acquisitions (the
payment was afterwards extended to 1772). "Thus”, says Sir
.
Courtenay Ilbert, "the state claimed its share of the Indian spoil,
and asserted its rights to control the sovereignty of Indian territories. ”i
These changes were only carried in the teeth of a strong opposition. .
The protests of the dissentients in the House of Lords showed how
strong as yet were the barriers of the rights of property, and the
sanctity of contract.
A legislative interposition controlling the dividend of a trading Company,
legally voted and declared by those to whom the power of doing it is entrusted
is altogether without example.
The solution, it may be admitted, was not particularly logical. It
was on the face of it absurd that a British chartered company should
pay the crown of England an annual sum of money for permission
to hold certain lands and revenues of an eastern potentate, and the
friends of the Company did not hesitate to describe the payment as
mere political blackmail.
But for five years at any rate the attack against the Company was
stayed. Then again in 1772 troubles gathered round it, arising from
the following circumstances. In March, 1772, a dividend at the rate
of 1242 per cent. was declared. In the same month the Company,
obviously endeavouring to forestall a drastic reformation from outside,
attempted through Sulivan their deputy-chairman to introduce a bill
for the better regulation of their affairs. Lord Clive, being assailed,
defended himself by taking the offensive and roundly attacked the
Company. In the debate some interesting points were raised as to
the relations between the Company and the state. Clive had in 1759
proposed to Chatham that the crown should take over the Company's
dominions. Chatham, probably because he had no leisure to face the
practical and exceedingly thorny difficulties, contented himself with
an oracular answer that the scheme was of a very nice nature and,
1 Ilbert, The Government of India, p. 39.
? Parliamentary History, XVI, 356:
## p. 185 (#213) ############################################
DEBATES OF 1772
186
as Clive's agent reported, "spoke this matter a little darkly". 1 Clive
had resented this treatment and now with an imprudence amazing
in a man, around whom his enemies were closing, struck out in all
directions as though his one aim was not to leave himself a single
partisan. With a magnificent recklessness he included the govern-
ment, the directors, the proprietors and the servants in the East in
one comprehensive condemnation :
“I attribute the present situation of our affairs”, he said, "to four causes : a
relaxation of government in my successors; great neglect on the part of admi.
nistration; notorious misconduct on the part of the directors; and the violent
and outrageous proceedings of General Courts. ” 2
The Company had acquired an empire and a revenue of £4,000,000.
It was natural to suppose that such an object would have merited the most
serious attention of administration; that in concert with the Court of Directors
they would have considered the nature of the Company's charter, and have
adopted a plan adequate to such possessions. Did they take it into considera-
tion? No, they did not. They thought of nothing but the immediate division
of the loaves and fishes. They went so far as to influence a parcel of tem-
porary Proprietors to bully the Directors into their terms.
They ought to have forced the directors to produce a plan, or with
the aid of Parliament to have made one themselves.
If administration had done their duty, we should not now have heard a
speech from the throne, intir ing the necessity of Parliamentary interposition,
to save our possessions in India from impending ruin. 3
One of those who took part in the debate, Governor Johnstone,
maintained views of some interest. He declared that:
• • •
The British legislature should not move in the affairs of Asia, unless she
acts with dignity and effect. . . . I am clear we hold those lands by conquest.
I think the conquest was lawfully made by the Company and a small part of
the King's forces in conjunction. I deny that conquest by a subject, lawfully
made, vests the property in the state, though I maintain it conveys the
sovereignty. 4
He went on to advocate that the crown under certain conditions
should grant the lands to the East India Company as was done in
the case of New England and several other of our chartered colonies.
He did not accept the theory that we need consider the susceptibilities
of other European nations.
Does any man believe that foreign nations permit us virtually to hold these
territories under the magic word Devannee? Can it be supposed they are not
equally sensible of the imposition as ourselves, or will it be believed they would
not be much better contented to hold their different privileges under the con-
firmation of a British legislature, than of a cypher of a Nabob, directed by a
Governor and Committee who mthey can never trace? 0
1 Malcolm, The Life of Clive, u, 126.
2 Parliamentary History, XVII, 361.
4 Idem, pp. 376-7.
3 Idem, pp. 363-4.
5 Idem, p. 378.
## p. 186 (#214) ############################################
186
THE COMPANY AND THE STATE, 1772-86
In the end leave to introduce Sulivan's bill was refused, and in
April, 1772, Burgoyne carried a motion to appoint a select committee
of thirty-one to enquire into the affairs of the East India Company.
The debate testifies to the intensity of feeling against the Company.
Burgoyne declared that:
The most atrocious abuses that ever stained the name of civil government
called for redress . . . if by some means sovereignty and law are not separated
from trade . . . India and Great Britain will be sunk and overwhelmed never
to rise again.
Any bill based upon the present state of the Indian Government
must be “a poor, paltry, wretched palliative”. The committee was
to enquire into
that chaos where every element and principle of government, and charters,
and firmauns, and the rights of conquests, and the rights of subjects, and the
different functions and interests of merchants, and statesmen, and lawyers,
and kings, are huddled together into one promiscuous tumult and confusion.
He ended with an impassioned peroration :
The fate of a great portion of the globe, the fate of great states in which
your own is involved, the distresses of fifteen millions of people, the rights of
humanity are involved in this question-Good God! What a call-the native of
Hindustan born a slave-his neck bent from the very cradle to the yokeby
birth, by education, by climate, by religion, a patient, submissive, willing sub-
ject to eastern despotism, first begins to feel, first shakes his chains, . . . under
the pre-eminence of British tyranny. 1
It is interesting to note that Burke, who was himself to write some of
the most condemnatory reports in the 1781 enquiry, spoke againsi
any investigation at all.
The Select Committee was presided over by General Burgoyne
himself, and included among its members Lord George Germain,
Barré, Lord Howe, Sir Gilbert Elliot, Pulteney, and Charles James
Fox. But the Company's troubles were not yet over. In August, 1772,
though it had recently been helped by the bank, it was obliged to
apply to government for a loan of £1,000,000. There was a storm
of opposition, for this application seemed to show that there was no
justification for the dividend declared in March. Parliament was
especially summoned. Lord North moved for a committee of secrecy
on the ground that complaints had been made of the disclosure of
confidential information by the Select Committee. North was careful
to state that he himself believed that, however closely pressed the
Company might be by present exigencies, it was nevertheless in
point of external strength and vigour in full health. Burgoyne rose
in defence of the Select Committee, and in the end, though a new
secret committee of thirteen was set up, the old Select Committee was
continued in being. The Select Committee produced twelve, and the
Secret Committee six, reports, all highly condemnatory. Tremendous
1 Parliamentary. History, XVII, 454-9.
## p. 187 (#215) ############################################
ATTACKS ON THE COMPANY
187
feeling against the Company was aroused. Horace Walpole records
the popular impression : "Such a scene of tyranny and plunder has
been opened up as makes one shudder. . . . We are Spaniards in our
lust for gold, and Dutch in our delicacy of obtaining it”. 1 Responsible
statesmen took a view hardly less grave. Lord Shelburne writes to
Chatham : “Every man of every party acknowledges a blow to be
impending in that part of the world, which must shake to its founda-
tions the revenue, manufactures, and property of this”. 2 As the
reports continued to appear, Chatham's indignation rose, and we
find him writing in 1773, “India teems with iniquities so rank, as to
smell to earth and heaven”. 3 But mere abuse of the servants in India
was of little avail. We have Warren Hastings's authority for the
statement that Shelburne was "better informed in India affairs than
almost any man in England”, 4 and the latter, in a further letter to
Chatham, distributed the blame pretty impartially.
impartially. He declared that
though the crimes and frauds of the servants in India were enormous,
yet the directors appear to be accomplices throughout, while the
proprietors seem to be the most servile instruments of both, "nor",
he continues, "has there been found as yet, to speak impartially, any-
where in the House of Commons that firm, even, judicial spirit,
capable of administering, much less originating, that justice which
the case requires”. 5
The Company now made feverish efforts to conduct its own
reformation and, following the precedent of 1769, nominated six
supervisors, who, with plenary powers and salaries of £10,000 each,
were to proceed at once to India to overhaul the whole system there.
But this was more than parliament could stand, and, on the advice
of the Committee of Secrecy, a bill was passed in December, 1772,
prohibiting the Company from sending out the supervisors. Burke,
still as yet the stalwart friend of Leadenhall Street, opposed the bill;
Clive, on the other hand, supported it. “I could wish”, he said, "the
”
Company had met this house half-way instead of petitioning and
quarrelling with the mouth that is to feed them”, then, in reference
to the supervisors and thinking of his own past history, he added,
“had they, Sir, known the East Indies as well as I do, they would
shudder at the bare idea of such a perplexing and difficult service”.
In March the Company again petitioned parliament for a loan of
£1,500,000. In May, Burgoyne developed his attack upon Clive in
the Commons, and amongst the resolutions accepted by the House
was one “That all acquisitions, made under the influence of a military
force, or by treaty with foreign princes, do of right belong to the
State". ? This was in one sense a definite declaration of sovereignty
>
1 Paget-Toynbee, Letters of Horace Walpole, vm, 149.
2 Correspondence of Chatham, IV, 210.
3 Idem, p. 276.
4 Gleig, Memoirs of Warren Hastings, II, 557.
5 Correspondence of Chatham, IV, 271.
® Malcolm, Life of Lord Clive, 1, 313. i Parliamentary History, XVII, 856.
## p. 188 (#216) ############################################
188
THE COMPANY AND THE STATE, 1772-86
over the Company's territories, but it might be asked first, what is
the exact validity of a resolution of the House of Commons, and
secondly, could the claim apply to the anomalous system created in
Bengal by the grant of the diwanni? The curious form of the ex-
pression used, “under the influence of a military force", instead nf
some similar phrase such as "by conquest", was no doubt intended
to cover the de facto position in Bengal. Burke in various speeches
still resisted all attempts to extend state control over the Company.
He disbelieved in the motives of the government : "The pretence of
rectifying abuses, of nourishing, fostering and protecting the Com-
pany was only made with a design of fleecing the Company". The
pretext for interfering was the same in 1773 as in 1767, but "Have
these evils been rectified? Have any of the criminals been summoned
before you? Has their conduct been enquired into? Not one single
suspected person has been examined”. If these evils really existed,
it could only be concluded that ministers
sanctified this bloodshed, this rapine, this villainy, this extortion . . . for the
valuable consideration of £400,000. This crime tax being agreed to, we
heard no more of malpractices. The sinners were arrayed in white-robed in-
nocence;. their misdeeds were more than atoned for by an expiatory sacrifice
of the pecuniary kind. . . .
And again :
I have studied, God knows; hard I have studied, even to the making dogs'
ears of almost every statute book in the kingdom, and I now thus publicly and
solemnly declare that all you have been doing and all you are about to do, in
behalf of the East India Company, is impolitic, is unwise, and entirely repug-
nant to the letter as well as the spirit of the laws, the liberties, and the con-
stitution of this country. 1
Two acts of parliament were now passed. The first granted the
Company a loan of £1,400,000 at 4 per cent. on certain conditions.
The second was the important Regulating Act. The latter did three
things. It remodelled the constitution of the Company in India, and it
tentatively and incompletely subjected the Company to the super-
vision of the ministry and the subordinate presidencies to the super-
vision of the supreme government in Calcutta. The bill was fiercely
opposed by the Company and its friends. The Company's own
petition declared that the bill "will destroy every privilege which the
petitioners hold under the most sacred securities that subjects can
depend upon in this country". The act "under the colour of Regula-
tion, will annihilate at once the powers of the . . . Company, and
virtually transfer them to the Crown". 2 The City of London also
petitioned against the bill on the ground that “the privileges the City
of London enjoy stand on the same security as those of the East India
Company". 3 One of the directors in the House of Commons stigma-
tised the bill as "a medley of inconsistencies, dictated by tyranny,
1 Parliamentary History, XVII, 819-21, 835.
3 Idem, p. 889.
2 Idem, pp. 889-90.
2
## p. 189 (#217) ############################################
THE REGULATING ACT
189
2
yet bearing throughout each line the mark of ignorance". 1 Burke
described the principle of the measure as "an infringement of national
right, national faith, and national justice". But the bill was passed
by 131 to 21 votes in the Commons and by 74 to 17 in the Lords.
Its main provisions were as follows: The qualification for a vote in
the Court of Proprietors was raised from £500 to £1000 and was
restricted to those who had held their stock for at least twelve months.
Measures were taken to prevent the collusive transfer of stock, and
the consequent multiplying of votes. The directors were henceforth
to be elected for four years, and one-fourth of their number must
retire every year, remaining at least one year out of office. There
was to be a Governor-General of Bengal assisted by four councillors.
The vote of the majority was to bind the whole, the governor-general
having merely a casting vote when there was an equal division of
opinion. The governor-general and council were to have power to
superintend the subordinate presidencies in making war or peace.
The directors were to lay before the treasury all correspondence from
India dealing with the revenues; and before a secretary of state
everything dealing with civil or military administration. The first
governor-general and councillors, Warren Hastings, Clavering,
Monson, Barwell and Philip Francis, were named in the act. They
were to hold office for five years, and future appointments were to
be made by the Company. The act empowered the crown to establish
by charter a Supreme Court of Justice, consisting of a chief justice
and three puisne judges. Liberal salaries were granted, £25,000 to
the governor-general, £10,000 to each councillor and £ 8000 to the
chief justice.
Something by way of detailed criticism may now be attempted on
these clauses. The alteration in the voting qualification of the General
Court was introduced with a view to prevent the Company's servants,
when they returned from the East, from gaining an excessive influ-
ence over the directors. The raising of the qualification meant that
1246 of the smaller holders of stock were disqualified. It was generally
held that the clause failed to attain its object.
“The whole of the regulations concerning the Court of Proprietors”, said the
authors of the Ninth Report of the Select Committee of 1781, "relied upon two
principles, which have often proved fallacious, namely that small numbers
were a security against faction and disorder, and that integrity of conduct
would follow the greater property. " 3
There was certainly a good deal of point in the argument of those
who held that, by abolishing the vote of the £500 stock-holders, the
act punished the small proprietors, who could not split votes, and
rewarded those who could.
The change in the constitution of the court of directors was made
with the view of giving the members of the court greater security of
1 Parliamentary History, XVII, pp. 890-1.
2 Idem, p. 902.
8 Repurts from Committees of the House of Commons, vi, 46.
## p. 190 (#218) ############################################
190
THE COMPANY AND THE STATE, 1772-86
tenure, lessening the temptation to secure votes by a corrupt dispensa-
tion of patronage, and encouraging a more continuous and consistent
policy at home and abroad. Hitherto the twenty-four directors were
elected each year, and might have been completely changed at each
election. As Clive once averred, they spent the first half of their
year of office in discharging the obligations by which they had pur-
chased their seats, and the other half in canvassing and preparing for
a new election. At the first election after the bill passed, six directors
were to be chosen for one year, six for two years, six for three years
and six for the full term of four years. In practice the six who
retired each year were always re-elected for the following year and
the effect therefore was as Kaye notes, “to constitute a body of thirty
directors, of whom six, forming a sort of non-effective list, go out
every year by rotation". 1 It was of course possible for the proprietors
at each election to have chosen six new members, but in practice
they never did so.
It was unfortunate that the governor-general was not given in
the last resort power to override his council. After 1786 this was
found to be necessary, and it has ever since remained a prerogative
of the governor-general. Hastings always felt deeply the restrictions
on his power and more than once declared that experience would
prove the governor-general must have this privilege in reserve. After
five years' experience of the working of the act, he writes in 1779 :
I would not continue. the pageant that I am for all the rewards and
honours that the king could give me. I am not Governor. All the means I
possess are those of preventing the rule from falling into worse hands than my
own. 2
And again :
What I have done has been by fits and intervals of power, if I may so
express it, and from the effects, let a judgement be formed of what this state
and its resources are capable of producing in hands more able and better supo"
ported. 3
It was not perhaps the fault of the framers of the act, for the
matter was very difficult to define, but the clause giving Calcutta
control over the subordinate presidencies worked badly. Calcutta was
given powers of superintending and controlling the subordinate
governments so far that the latter were not to commence hostilities
or make treaties without its consent, but then followed two exceptions
of disastrous latitude; namely, unless the case were one of such immi-
nent necessity as would make it dangerous to await the arrival of
orders, or unless the local government had received orders direct from
home. But the main reason probably was that the other presidencies
had been so long independent that it would take some time before a
tradition of loyalty to the supreme government could grow up.
1 Kaye,' The Administration of the East India Company, p. 123.
Gleig, op. cit. II, 274.
8 Idem, p. 309.
## p. 191 (#219) ############################################
THE REGULATING ACT
191
1
Hastings records his disappointment at the result of the act in this
respect.
"The act gives us a mere negative power and no more. It says the other
presidencies shall not make war nor treaties without the sanction of this govern-
nient, but carefully guards against every expression which can imply a power
to dictate what the other presidencies shall do. . . . Instead of uniting all the
powers of India, all the use we have hitherto made of this act of Parliament
has been to tease and embarrass. " ]
The clause empowering the crown to establish a Supreme Court of
Justice by charter was unhappily vague. It left undefined the field
of jurisdiction, the law to be administered and, above all, the relations
between the council and the court.
It is interesting to note, in view of what happened afterwards, that
when the names of the governor-general and councillors were inserted
in the act, Lord North recommended the name of Hastings "as a
person to whom nobody would object”. For the post of councillor
General Monckton's claims were advocated against Clavering's, but
the other names were accepted without any opposition. The dis-
sentient Lords recorded a protest against the appointment of executive
officers in parliament as plainly unconstitutional.
The Regulating Act was in operation for eleven years till it was
superseded by Pitt's act of 1784. Warren Hastings was the only
governor-general who had to administer India under it. After 1784
we have, as Sir Alfred Lyall has pointed out, a series of parliamentary
governors-general with wider powers and a more independent
position. The act was probably on the whole an honest attempt to
deal with a difficult problem, but it was open to many criticisms.
A speaker in the Commons in 1781 said of it not unfairly, “In the
mode of applying a reform, Parliament was precipitate and individuals
were intemperate". 3
Certain remedial and supplementary legislation followed on the
Regulating Act. It will be remembered that the governor-general
and council were appointed for five years. Their period of office
would therefore normally lapse in 1779. It also happened that by
the act of 1744 the Company's privileges were to determine in 1780
unless definitely extended. The position was a curious one; there
was a possibility of the government in India and the existence of the
Company at home coming to an end almost simultaneously. North, to
call attention to the legal position, moved in 1780 that the state debts
to the Company should be paid off (they amounted to £4,200,000)
and that formal notice should be given to the Company of its dis-
solution. The motion was made the excuse for an acrimonious attack
from the opposition. Fox asked “whether the Noble Lord was not
content with having lost America? Or was he determined not to
? Parliamentary History, XVII, 896.
1 Gleig, op. cit. a, 41-2.
3 Idem, XXI, 1194.
## p. 192 (#220) ############################################
192
THE COMPANY AND THE STATE, 1772-86
quit the situation in which he stood, till he had reduced the dominions
of the Crown to the confines of Great Britain? " i Burke, with
characteristic violence, stigmatised the proposal to give notice to the
Company as “the most wicked, absurd, abandoned, profligate, mad,
and drunken intention that ever was formed”. 2 North replied coolly
that his motion was meant merely "as putting in a claim on the
behalf of the public, to the reversion of a right which undoubtedly
belonged to them, at that moment when it was especially proper that
it should be formally made”. 3 By acts of 1779 and 1780 the Company's
privileges were extended for a year and it was enacted that no changes
were to take place in the offices of governor-general and council at
Calcutta. As North had now for some time shown himself hostile to
Hastings, the reason for this reappointment is undoubtedly that given
by Gleig : "the Minister who had lost America, did not care to risk
the loss of India likewise, and therefore sought to represent matters
as great and prosperous there”. 4 A more permanent act was passed
in 1781. This act, besides other less important regulations, extended
the Company's privileges to three years' notice after 1 March, 1791,
and obliged it to submit to a secretary of state all dispatches proposed
to be sent to India relating to political, revenue and military matters.
The Company was also to pay £400,000 to the state in discharge of
all claims up to 1 March, 1781, to pay dividends out of its profits of
8 per cent. , and out of the remainder of its profits, if any, three-quarters
were to go to the state.
The year 1781 saw also the appointment of two more committees
of enquiry, one select, on the administration of justice in India,
presided over by Burke, and the other secret, on the causes of the war
in the Carnatic, presided over by Dundas. The first committee
resulted in the act of 1781 amending the constitution of the Supreme
Court, which will be dealt with later. Both committees poured forth
voluminous reports. Twelve were issued by the Select and six by
the Secret Committee. The ninth and eleventh reports of the Select
Committee were written by Burke himself. The friends of the Com-
pany naturally did not like them. Lord Thurlow in the House of Lords
said contemptuously that he paid as much attention to them as he
would do to the history of Robinson Crusoe. Johnstone in the Com-
mons on a motion for the printing of one of the reports declared that
he did not object to the publication of what was “frivolous, ridiculous,
and absurd, and fit only to be presented on such a day as this” (it
happened to be 1st April). He accused the majority of the committee
of "heat and violence, . . . passion and prejudice”. 5. Burke angrily
defended the committees; "their conduct", he said, “had been an
instance of the most extraordinary perseverance, and the most steady
and patient assiduity, that perhaps ever had occurred”. Though
1 Parliamentary History, xvi, p. 310.
2 Idem, XXI, 313.
8 Idem, p. 312.
4 Gleig, op. cit. II, 469.
o Parliamentary History, XXIII, 715-16.
6. Idem, p. 717.
## p. 193 (#221) ############################################
HASTINGS'S RECALL DEMANDED
193
the reports undoubtedly display a certain amount of prejudice, yet
they have often been unduly neglected by the historian, and their
value as a storehouse of facts and documents is considerable. At any
rate their effect at the time upon parliament and the nation was very
great. In April, 1782, Dundas moved that the reports of the Secret
Committee should be referred to a committee of the whole house and
followed this up by a long series of forty-five resolutions condemning
many of the principles and practices of the Indian administration as
censured in the reports. But the attempt of the Commons at discipli. .
nary action proved a dismal failure. Bills of pains and penalties were
introduced against Sir Thomas Rumbold and Whitehill, ex-governors
of Madras, but these bills after long discussion were finally dropped
in 1783 because it proved impossible to keep a quorum in the House
to discuss them. Mill says most unfairly that Rumbold "consented
to accept of impunity without acquittal". 1 Rumbold, on the contrary,
had repeatedly urged that it was unfair to him not to come to a
definite verdict, and as late as June, 1783, implored the House in
God's name to "put an end to the business speedily, and either send
him to condemnation or acquittal". But a stroke was now aimed
at greater game. On 30 May, 1782, the Commons resolved that it was
the duty of the directors to pursue all legal and effectual means,
i. e. by representation to the crown, to recall Hastings and Hornby,
governor of Bombay, for “having, in sundry instances, acted in a
manner repugnant to the honour and policy of this nation, and thereby
brought great calamities on India, and enormous expenses on the
East India Company"3 According to the Regulating Act, Hastings
was only removable by the crown on representation from the court
of directors. The Commons therefore could only constitutionally
adopt the roundabout course of calling upon the directors to approach
the crown.
An extraordinary concatenation of events followed,
illustrating the cumbrousness of the state's semi-control of the Com-
pany. In reply to the House of Commons the General Court on 19
June, 1782, passed a resolution of contemptuous defiance against the
recall of Mr. Hastings merely in compliance with a vote of one house
of the legislature. The directors, however, who naturally in their
position of greater responsibility did not find it so easy to flout the
government, decided on 2 October reluctantly by a small majority
after holding eleven meetings that they would approach the crown
for his recall. Scott told Hastings that the governor and deputy-
governor carried the vote against him, "the two chairs are against
you”,4 and declares that the Company's solicitor had shown him the
draft of a resolution by which the directors hoped to soften the blow
as much as possible. The resolution, after acknowledging Hastings's
many very great and meritorious, services, declared
1 Mill, The History of British India, rv, 532.
2 Parliamentary History, XXI, 985.
8 Idem, p. 75
Gleię, op. cit. 2, 485.
4
13
## p. 194 (#222) ############################################
194
THE COMPANY AND THE STATE, 1772-86
that in no one act of his government hath he been actuated by a corrupt motive,
nor is he suspected of peculation; but it is resolved by this court that Warren
Hastings Esq. hath formed wrong opinions upon points of great political im-
portance, and that he hath acted upon those opinions so as to bring great
distress upon this Company. 1
But the letter of recall was never sent, for the General Court by a
large majority rescinded the resolution of the directors. The govern-
ment upon this refused to pass for transmission to India the dispatch
drawn up by the directors informing Hastings of this series of occur-
rences, though of course everyone was aware that unofficially he
would be cognisant of the whole of them. This strange imbroglio
showed three
things : first that the hold of Hastings on the allegiance
of the proprietors, whom indeed he was wont to call his constituents,
was very strong; secondly, that the Company still possessed a large
measure of practical independence; and thirdly, that the clause in
the act of 1781 making it necessary to submit outward dispatches to
the secretary of state was liable to result in a rather ludicrous
deadlock.
Things could obviously not be left in this inconclusive and un-
satisfactory state. The Regulating Act had clearly broken down. It
had neither given the state a definite control over the Company, nor
the directors a definite control over their servants, nor the governor-
general a definite control over his council, nor the Calcutta Presidency
a definite control over Madras and Bombay. The whole question was
reopened in 1783, for the Company in March was again obliged to
petition for financial relief, and the country as a whole was inclined
to agree with Burke that “the relief and reformation of the Company
must go together. The Company had flown in the face of Parliament”. 2
Three successive proposals were put forward, those namely of
Dundas, Fox and Pitt. Dundas introduced his bill in April, 1783.
Its main provisions were : That the crown should have power to
recall the principal servants of the Company (the power was thus no
longer to be consequent on representations from the directors); that
the control of Bengal over the other presidencies should be increased;
that the governor-general should have the power of acting on his
own responsibility in opposition to the opinions of his council, and
also be empowered, if necessary, to hold the office of commander-
in-chief; that the displaced zamindars in Bengal, i. e. those displaced
by the results of the quinquennial settlement, should be restored.
The bill was obviously aiming everywhere at centralisation. It
strengthened the power of the crown over the governor-general and
the control of the governor-general both over his own council and
the subordinate governments. It is from this aspect that Malcolm
called it a
Bill for appointing a person who, under the high title of Governor-Generai
i Gleig, op. cit. II, 493.
2 Parliamentary History, XXIII, 647.
## p. 195 (#223) ############################################
FOX'S BILLS
196
and Captain-General, should exercise in his own person (under certain checks)
complete authority and control over British India. 1
In his introductory speech Dundas already pointed to the desirability
of appointing Cornwallis governor-general by a strong panegyric
on his character :
that man, of whom all men and all parties were lavish in commendation. A
man of family, of fortune, and the most unsullied reputation. On the vir-
tues of this man the late ministry built, and justly built, all their hopes of the
salvation of our dying interests in Asia. Here there was no broken fortune to
be mended, here was no avarice to be gratified. Here was no beggarly mush-
room kindred to be provided for-no crew of hungry followers gaping to be
gorged. 2
But as Dundas was now in opposition there was no chance of his bill
becoming law, and after its introduction it was allowed to drop.
On 18 November, 1783, Fox introduced his two famous bills. The
first dealt in detail with matters of administration and may not
unfairly be said to have definitely forbidden in future most of the
characteristic acts of the Hastings administration. The second and
better known bill gave the Company a new constitution. In the
preliminary debates Pitt himself had clamoured for a bill "not of
temporary palliation or timorous expedients; but vigorous and
effectual, suited to the magnitude, the importance and the alarming
exigency of the case”. The bill was in some respects vigorous and
effectual enough. It proposed entirely to sweep away both the court
of directors and the court of proprietors and to set up two bodies :
(1) seven commissioners, or directors, to administer the revenues and
territories of India and to appoint or dismiss all persons in the Com-
pany's service. They were to be named in the act and were irremovable
except on an address from either house of parliament. Vacancies
were to be filled by the crown. Fox's reason for this last provision was
that he felt already the inconvenience of Parliamentary appointments; for at
present the Governor-General of Bengal, deriving_under an Act of Parliament,
seemed to disavow any power in the Court of Proprietors, Directors, or the
King himself to remove him. 3
The board was to sit in London and parliament was to have oppor-
tunity to inspect the minutes of its proceedings. This was no doubt to
meet the criticism that the commissioners were given too independent
a power.
bett's Parliamentary History a very large space from 1767 to the end
of the century is devoted to Indian debates. "The affairs of the East
India Company", wrote the editor in 1768, "were now become as much
an object of annual consideration, as the raising of the supplies. ” ?
The Indian question was entangled with a serious constitutional crisis
and with the personal rivalry and political ambitions of the two
greatest statesmen of the time. It caused the fall of the notorious
Coalition Government of Fox and North, gave George III the oppor-
tunity to effect a daring coup d'état, doomed Fox to almost a lifetime
of opposition and put Pitt in power practically for the rest of his
life. From 1772 to 1795 Indian affairs were constantly before
parliament in both its legislative and its judicial aspect.
1 Parliamentary History of England, XVI, 402.
## p. 182 (#210) ############################################
182
THE COMPANY AND THE STATE, 1772-86
»
Now all this was inevitable and, when everything is taken into
consideration, not to be regretted. It is easy to paint the interference
of parliament as mischievous and misinformed, and to complain that
India was made a pawn in the party game; but there was—as some
of the most clear-sighted of contemporary statesmen saw-a serious
risk of a great empire being created and ruled by Englishmen outside
the sphere and control of the British cabinet. “The East India
Company”, as Burke said, "did not seem to be merely a Company
formed for the extension of the British commerce, but in reality a
delegation of the whole power and sovereignty of this kingdom sent
into the East. ” 1 No national government could be expected, 0%
indeed ought, to tolerate such a dangerous shifting of the centre of
political gravity. Some action on the part of the state was necessary;
the question had to be tackled even at the cost of strife, dislocation,
and possibly some injustice to individuals. "In delegating great
power to the India Company", wrote Burke, "this kingdom has not
released its sovereignty. On the contrary, its responsibility is increa-
sed by the greatness and sacredness of the power given. " 2
This bringing into relation of the Company and the state was
from the nature of the case a very difficult problem. It had to be
worked out experimentally, for there were no precedents. We can-
not be surprised that many mistakes were made.
“The British legislature", says Malcolm, “has hitherto but slowly followed
the progress of the power of the Company, in India. It had legislated for
factories on a foreign shore, when that Company was in the possession of pro-
vinces; and when the laws were completed to govern these, it had obtained
kingdoms. "
This was entirely true, but it was inevitable. The rapid developments
in the East out-distanced the efforts of parliament to comprehend
and to deal with them. According as men visualised the position
from the eastern or the western point of view, authority in the East
seemed dangerously circumscribed or perilously unhampered. Hastings
describes the sphere of his administration as "a dominion held by
a delegated and fettered power over a region exceeding the dimen-
sions of the parent state, and removed from it a distance equal in
its cricuit to two-thirds of the earth's circumference”. 4 Its remoteness
postulated the necessity of semi-independence, “distant as it is from
the reach of more than general instruction from the source of its autho-
rity, and liable to daily contingencies, which require both instant
decision, and a consistency of system”. 5 Burke, on the other hand,
from the home aspect, declares, “It is difficult for the most wise and
" 3
1
Speeches. . . in the trial of Warren Hastings (Ed. Bond), I, 15.
2 Idem, p. 13.
3 Malcolm, The Political History of India, I, 8.
+ Selcctions from the State Papers of the Governors-General of Indiu.
Warren Hastings. Ed. by (Sir) G. W. Forrest, 11, 92.
- Idem, p. 93.
## p. 183 (#211) ############################################
POSITION OF THE COMPANY
183
2
upright government to correct the abuses of remote, delegated power,
productive of unmeasured wealth, and protected by the boldness and
strength of the same ill-got riches”;1 and he puts his finger on the
crux of the whole matter, though no doubt he here inculcates a
counsel of perfection, when he says, "I think I can trace all the cala-
mities of this country to the single source of our not having had
steadily before our eyes a general, comprehensive, well-connected and
well-proportioned view of the whole of our dominions, and a just
sense of their true bearings and relations". The question then hefore
the statesmen of the eighteenth century was : How was the Company's
quasi-sovereignty in the East to be reconciled with the necessary
subordination to the imperial parliament? There were three possi-
bilities. The first was that the Company's privileges and powers
should remain untouched, with the hope that some practical modus
vivendi would in time be worked out. But this was felt by the majority
of the nation and even by the more far-sighted of the Company's
own servants to be no longer feasible. Both Clive and Warren Hastings
suggested tentatively to the prime ministers of their time that it
might be advisable for the state to take over the Company's powers.
There seemed a danger not only that misgovernment in India might
tarnish the name of Great Britain as an imperial state, but that the
Indian interest in England, supported by huge revenues and corrupt
parliamentary influence, might gain a preponderating and improper
power in home affairs.
The second possibility was that the state should take over in full
sovereignty the territorial possessions in India and convert the
Company's servants into a civil service of the crown. But this was
felt to be too great and drastic a change. “It was opposed to all
eighteenth-century notions of the sacredness of property, and the
problem was complicated by all kinds of delicate legal and political
questions. It might even be plausibly contended that the Company
had no considerable territorial possessions at all. It administered
Bengal, Bihar and Orissa merely as the diwan of the Moghul emperor.
That was a tenable position for a private corporation; it was not a
tenable position for the government of Great Britain. If the "territo-
rial” possessions were annexed by the crown, the act might be
represented as sheer usurpation against the Moghul Empire, and
Great Britain might be embroiled with the representatives of other
European nations in the East.
It remained that the state should take the Company into partner-
ship, assuming the position of controlling and predominant partner
in all matters relating to the higher branches of government, but
leaving to the Company the monopoly of the trade, the disposal of
its valuable patronage under crown sanction, and the details of the
1 Works of Edmund Burke, m, 193-4.
2 Idem, p. 125.
## p. 184 (#212) ############################################
184
THE COMPANY AND THE STATE, 1772-86
administration. What we see going on during the period 1772-86 is
the gradual realisation of this conception. It must be remembered
that some attempts in this direction had already been made before
1772. . A little band of members of parliament, prominent among
whom were Beckford, Barré and General Burgoyne, had long been
urging that conquests in India should pass to the crown. Their
persistent efforts met with some success in 1767 when five separate
acts were passed. These measures amongst other things interfered
in the regulations for voting in the General Courts of the Company,
regulated the amount of dividends to be paid and the manner of
paying them, and, most important, obliged the Company to pay the
exchequer an annual sum of £400,000 for two years from February,
1767, for the privilege of retaining their territorial acquisitions (the
payment was afterwards extended to 1772). "Thus”, says Sir
.
Courtenay Ilbert, "the state claimed its share of the Indian spoil,
and asserted its rights to control the sovereignty of Indian territories. ”i
These changes were only carried in the teeth of a strong opposition. .
The protests of the dissentients in the House of Lords showed how
strong as yet were the barriers of the rights of property, and the
sanctity of contract.
A legislative interposition controlling the dividend of a trading Company,
legally voted and declared by those to whom the power of doing it is entrusted
is altogether without example.
The solution, it may be admitted, was not particularly logical. It
was on the face of it absurd that a British chartered company should
pay the crown of England an annual sum of money for permission
to hold certain lands and revenues of an eastern potentate, and the
friends of the Company did not hesitate to describe the payment as
mere political blackmail.
But for five years at any rate the attack against the Company was
stayed. Then again in 1772 troubles gathered round it, arising from
the following circumstances. In March, 1772, a dividend at the rate
of 1242 per cent. was declared. In the same month the Company,
obviously endeavouring to forestall a drastic reformation from outside,
attempted through Sulivan their deputy-chairman to introduce a bill
for the better regulation of their affairs. Lord Clive, being assailed,
defended himself by taking the offensive and roundly attacked the
Company. In the debate some interesting points were raised as to
the relations between the Company and the state. Clive had in 1759
proposed to Chatham that the crown should take over the Company's
dominions. Chatham, probably because he had no leisure to face the
practical and exceedingly thorny difficulties, contented himself with
an oracular answer that the scheme was of a very nice nature and,
1 Ilbert, The Government of India, p. 39.
? Parliamentary History, XVI, 356:
## p. 185 (#213) ############################################
DEBATES OF 1772
186
as Clive's agent reported, "spoke this matter a little darkly". 1 Clive
had resented this treatment and now with an imprudence amazing
in a man, around whom his enemies were closing, struck out in all
directions as though his one aim was not to leave himself a single
partisan. With a magnificent recklessness he included the govern-
ment, the directors, the proprietors and the servants in the East in
one comprehensive condemnation :
“I attribute the present situation of our affairs”, he said, "to four causes : a
relaxation of government in my successors; great neglect on the part of admi.
nistration; notorious misconduct on the part of the directors; and the violent
and outrageous proceedings of General Courts. ” 2
The Company had acquired an empire and a revenue of £4,000,000.
It was natural to suppose that such an object would have merited the most
serious attention of administration; that in concert with the Court of Directors
they would have considered the nature of the Company's charter, and have
adopted a plan adequate to such possessions. Did they take it into considera-
tion? No, they did not. They thought of nothing but the immediate division
of the loaves and fishes. They went so far as to influence a parcel of tem-
porary Proprietors to bully the Directors into their terms.
They ought to have forced the directors to produce a plan, or with
the aid of Parliament to have made one themselves.
If administration had done their duty, we should not now have heard a
speech from the throne, intir ing the necessity of Parliamentary interposition,
to save our possessions in India from impending ruin. 3
One of those who took part in the debate, Governor Johnstone,
maintained views of some interest. He declared that:
• • •
The British legislature should not move in the affairs of Asia, unless she
acts with dignity and effect. . . . I am clear we hold those lands by conquest.
I think the conquest was lawfully made by the Company and a small part of
the King's forces in conjunction. I deny that conquest by a subject, lawfully
made, vests the property in the state, though I maintain it conveys the
sovereignty. 4
He went on to advocate that the crown under certain conditions
should grant the lands to the East India Company as was done in
the case of New England and several other of our chartered colonies.
He did not accept the theory that we need consider the susceptibilities
of other European nations.
Does any man believe that foreign nations permit us virtually to hold these
territories under the magic word Devannee? Can it be supposed they are not
equally sensible of the imposition as ourselves, or will it be believed they would
not be much better contented to hold their different privileges under the con-
firmation of a British legislature, than of a cypher of a Nabob, directed by a
Governor and Committee who mthey can never trace? 0
1 Malcolm, The Life of Clive, u, 126.
2 Parliamentary History, XVII, 361.
4 Idem, pp. 376-7.
3 Idem, pp. 363-4.
5 Idem, p. 378.
## p. 186 (#214) ############################################
186
THE COMPANY AND THE STATE, 1772-86
In the end leave to introduce Sulivan's bill was refused, and in
April, 1772, Burgoyne carried a motion to appoint a select committee
of thirty-one to enquire into the affairs of the East India Company.
The debate testifies to the intensity of feeling against the Company.
Burgoyne declared that:
The most atrocious abuses that ever stained the name of civil government
called for redress . . . if by some means sovereignty and law are not separated
from trade . . . India and Great Britain will be sunk and overwhelmed never
to rise again.
Any bill based upon the present state of the Indian Government
must be “a poor, paltry, wretched palliative”. The committee was
to enquire into
that chaos where every element and principle of government, and charters,
and firmauns, and the rights of conquests, and the rights of subjects, and the
different functions and interests of merchants, and statesmen, and lawyers,
and kings, are huddled together into one promiscuous tumult and confusion.
He ended with an impassioned peroration :
The fate of a great portion of the globe, the fate of great states in which
your own is involved, the distresses of fifteen millions of people, the rights of
humanity are involved in this question-Good God! What a call-the native of
Hindustan born a slave-his neck bent from the very cradle to the yokeby
birth, by education, by climate, by religion, a patient, submissive, willing sub-
ject to eastern despotism, first begins to feel, first shakes his chains, . . . under
the pre-eminence of British tyranny. 1
It is interesting to note that Burke, who was himself to write some of
the most condemnatory reports in the 1781 enquiry, spoke againsi
any investigation at all.
The Select Committee was presided over by General Burgoyne
himself, and included among its members Lord George Germain,
Barré, Lord Howe, Sir Gilbert Elliot, Pulteney, and Charles James
Fox. But the Company's troubles were not yet over. In August, 1772,
though it had recently been helped by the bank, it was obliged to
apply to government for a loan of £1,000,000. There was a storm
of opposition, for this application seemed to show that there was no
justification for the dividend declared in March. Parliament was
especially summoned. Lord North moved for a committee of secrecy
on the ground that complaints had been made of the disclosure of
confidential information by the Select Committee. North was careful
to state that he himself believed that, however closely pressed the
Company might be by present exigencies, it was nevertheless in
point of external strength and vigour in full health. Burgoyne rose
in defence of the Select Committee, and in the end, though a new
secret committee of thirteen was set up, the old Select Committee was
continued in being. The Select Committee produced twelve, and the
Secret Committee six, reports, all highly condemnatory. Tremendous
1 Parliamentary. History, XVII, 454-9.
## p. 187 (#215) ############################################
ATTACKS ON THE COMPANY
187
feeling against the Company was aroused. Horace Walpole records
the popular impression : "Such a scene of tyranny and plunder has
been opened up as makes one shudder. . . . We are Spaniards in our
lust for gold, and Dutch in our delicacy of obtaining it”. 1 Responsible
statesmen took a view hardly less grave. Lord Shelburne writes to
Chatham : “Every man of every party acknowledges a blow to be
impending in that part of the world, which must shake to its founda-
tions the revenue, manufactures, and property of this”. 2 As the
reports continued to appear, Chatham's indignation rose, and we
find him writing in 1773, “India teems with iniquities so rank, as to
smell to earth and heaven”. 3 But mere abuse of the servants in India
was of little avail. We have Warren Hastings's authority for the
statement that Shelburne was "better informed in India affairs than
almost any man in England”, 4 and the latter, in a further letter to
Chatham, distributed the blame pretty impartially.
impartially. He declared that
though the crimes and frauds of the servants in India were enormous,
yet the directors appear to be accomplices throughout, while the
proprietors seem to be the most servile instruments of both, "nor",
he continues, "has there been found as yet, to speak impartially, any-
where in the House of Commons that firm, even, judicial spirit,
capable of administering, much less originating, that justice which
the case requires”. 5
The Company now made feverish efforts to conduct its own
reformation and, following the precedent of 1769, nominated six
supervisors, who, with plenary powers and salaries of £10,000 each,
were to proceed at once to India to overhaul the whole system there.
But this was more than parliament could stand, and, on the advice
of the Committee of Secrecy, a bill was passed in December, 1772,
prohibiting the Company from sending out the supervisors. Burke,
still as yet the stalwart friend of Leadenhall Street, opposed the bill;
Clive, on the other hand, supported it. “I could wish”, he said, "the
”
Company had met this house half-way instead of petitioning and
quarrelling with the mouth that is to feed them”, then, in reference
to the supervisors and thinking of his own past history, he added,
“had they, Sir, known the East Indies as well as I do, they would
shudder at the bare idea of such a perplexing and difficult service”.
In March the Company again petitioned parliament for a loan of
£1,500,000. In May, Burgoyne developed his attack upon Clive in
the Commons, and amongst the resolutions accepted by the House
was one “That all acquisitions, made under the influence of a military
force, or by treaty with foreign princes, do of right belong to the
State". ? This was in one sense a definite declaration of sovereignty
>
1 Paget-Toynbee, Letters of Horace Walpole, vm, 149.
2 Correspondence of Chatham, IV, 210.
3 Idem, p. 276.
4 Gleig, Memoirs of Warren Hastings, II, 557.
5 Correspondence of Chatham, IV, 271.
® Malcolm, Life of Lord Clive, 1, 313. i Parliamentary History, XVII, 856.
## p. 188 (#216) ############################################
188
THE COMPANY AND THE STATE, 1772-86
over the Company's territories, but it might be asked first, what is
the exact validity of a resolution of the House of Commons, and
secondly, could the claim apply to the anomalous system created in
Bengal by the grant of the diwanni? The curious form of the ex-
pression used, “under the influence of a military force", instead nf
some similar phrase such as "by conquest", was no doubt intended
to cover the de facto position in Bengal. Burke in various speeches
still resisted all attempts to extend state control over the Company.
He disbelieved in the motives of the government : "The pretence of
rectifying abuses, of nourishing, fostering and protecting the Com-
pany was only made with a design of fleecing the Company". The
pretext for interfering was the same in 1773 as in 1767, but "Have
these evils been rectified? Have any of the criminals been summoned
before you? Has their conduct been enquired into? Not one single
suspected person has been examined”. If these evils really existed,
it could only be concluded that ministers
sanctified this bloodshed, this rapine, this villainy, this extortion . . . for the
valuable consideration of £400,000. This crime tax being agreed to, we
heard no more of malpractices. The sinners were arrayed in white-robed in-
nocence;. their misdeeds were more than atoned for by an expiatory sacrifice
of the pecuniary kind. . . .
And again :
I have studied, God knows; hard I have studied, even to the making dogs'
ears of almost every statute book in the kingdom, and I now thus publicly and
solemnly declare that all you have been doing and all you are about to do, in
behalf of the East India Company, is impolitic, is unwise, and entirely repug-
nant to the letter as well as the spirit of the laws, the liberties, and the con-
stitution of this country. 1
Two acts of parliament were now passed. The first granted the
Company a loan of £1,400,000 at 4 per cent. on certain conditions.
The second was the important Regulating Act. The latter did three
things. It remodelled the constitution of the Company in India, and it
tentatively and incompletely subjected the Company to the super-
vision of the ministry and the subordinate presidencies to the super-
vision of the supreme government in Calcutta. The bill was fiercely
opposed by the Company and its friends. The Company's own
petition declared that the bill "will destroy every privilege which the
petitioners hold under the most sacred securities that subjects can
depend upon in this country". The act "under the colour of Regula-
tion, will annihilate at once the powers of the . . . Company, and
virtually transfer them to the Crown". 2 The City of London also
petitioned against the bill on the ground that “the privileges the City
of London enjoy stand on the same security as those of the East India
Company". 3 One of the directors in the House of Commons stigma-
tised the bill as "a medley of inconsistencies, dictated by tyranny,
1 Parliamentary History, XVII, 819-21, 835.
3 Idem, p. 889.
2 Idem, pp. 889-90.
2
## p. 189 (#217) ############################################
THE REGULATING ACT
189
2
yet bearing throughout each line the mark of ignorance". 1 Burke
described the principle of the measure as "an infringement of national
right, national faith, and national justice". But the bill was passed
by 131 to 21 votes in the Commons and by 74 to 17 in the Lords.
Its main provisions were as follows: The qualification for a vote in
the Court of Proprietors was raised from £500 to £1000 and was
restricted to those who had held their stock for at least twelve months.
Measures were taken to prevent the collusive transfer of stock, and
the consequent multiplying of votes. The directors were henceforth
to be elected for four years, and one-fourth of their number must
retire every year, remaining at least one year out of office. There
was to be a Governor-General of Bengal assisted by four councillors.
The vote of the majority was to bind the whole, the governor-general
having merely a casting vote when there was an equal division of
opinion. The governor-general and council were to have power to
superintend the subordinate presidencies in making war or peace.
The directors were to lay before the treasury all correspondence from
India dealing with the revenues; and before a secretary of state
everything dealing with civil or military administration. The first
governor-general and councillors, Warren Hastings, Clavering,
Monson, Barwell and Philip Francis, were named in the act. They
were to hold office for five years, and future appointments were to
be made by the Company. The act empowered the crown to establish
by charter a Supreme Court of Justice, consisting of a chief justice
and three puisne judges. Liberal salaries were granted, £25,000 to
the governor-general, £10,000 to each councillor and £ 8000 to the
chief justice.
Something by way of detailed criticism may now be attempted on
these clauses. The alteration in the voting qualification of the General
Court was introduced with a view to prevent the Company's servants,
when they returned from the East, from gaining an excessive influ-
ence over the directors. The raising of the qualification meant that
1246 of the smaller holders of stock were disqualified. It was generally
held that the clause failed to attain its object.
“The whole of the regulations concerning the Court of Proprietors”, said the
authors of the Ninth Report of the Select Committee of 1781, "relied upon two
principles, which have often proved fallacious, namely that small numbers
were a security against faction and disorder, and that integrity of conduct
would follow the greater property. " 3
There was certainly a good deal of point in the argument of those
who held that, by abolishing the vote of the £500 stock-holders, the
act punished the small proprietors, who could not split votes, and
rewarded those who could.
The change in the constitution of the court of directors was made
with the view of giving the members of the court greater security of
1 Parliamentary History, XVII, pp. 890-1.
2 Idem, p. 902.
8 Repurts from Committees of the House of Commons, vi, 46.
## p. 190 (#218) ############################################
190
THE COMPANY AND THE STATE, 1772-86
tenure, lessening the temptation to secure votes by a corrupt dispensa-
tion of patronage, and encouraging a more continuous and consistent
policy at home and abroad. Hitherto the twenty-four directors were
elected each year, and might have been completely changed at each
election. As Clive once averred, they spent the first half of their
year of office in discharging the obligations by which they had pur-
chased their seats, and the other half in canvassing and preparing for
a new election. At the first election after the bill passed, six directors
were to be chosen for one year, six for two years, six for three years
and six for the full term of four years. In practice the six who
retired each year were always re-elected for the following year and
the effect therefore was as Kaye notes, “to constitute a body of thirty
directors, of whom six, forming a sort of non-effective list, go out
every year by rotation". 1 It was of course possible for the proprietors
at each election to have chosen six new members, but in practice
they never did so.
It was unfortunate that the governor-general was not given in
the last resort power to override his council. After 1786 this was
found to be necessary, and it has ever since remained a prerogative
of the governor-general. Hastings always felt deeply the restrictions
on his power and more than once declared that experience would
prove the governor-general must have this privilege in reserve. After
five years' experience of the working of the act, he writes in 1779 :
I would not continue. the pageant that I am for all the rewards and
honours that the king could give me. I am not Governor. All the means I
possess are those of preventing the rule from falling into worse hands than my
own. 2
And again :
What I have done has been by fits and intervals of power, if I may so
express it, and from the effects, let a judgement be formed of what this state
and its resources are capable of producing in hands more able and better supo"
ported. 3
It was not perhaps the fault of the framers of the act, for the
matter was very difficult to define, but the clause giving Calcutta
control over the subordinate presidencies worked badly. Calcutta was
given powers of superintending and controlling the subordinate
governments so far that the latter were not to commence hostilities
or make treaties without its consent, but then followed two exceptions
of disastrous latitude; namely, unless the case were one of such immi-
nent necessity as would make it dangerous to await the arrival of
orders, or unless the local government had received orders direct from
home. But the main reason probably was that the other presidencies
had been so long independent that it would take some time before a
tradition of loyalty to the supreme government could grow up.
1 Kaye,' The Administration of the East India Company, p. 123.
Gleig, op. cit. II, 274.
8 Idem, p. 309.
## p. 191 (#219) ############################################
THE REGULATING ACT
191
1
Hastings records his disappointment at the result of the act in this
respect.
"The act gives us a mere negative power and no more. It says the other
presidencies shall not make war nor treaties without the sanction of this govern-
nient, but carefully guards against every expression which can imply a power
to dictate what the other presidencies shall do. . . . Instead of uniting all the
powers of India, all the use we have hitherto made of this act of Parliament
has been to tease and embarrass. " ]
The clause empowering the crown to establish a Supreme Court of
Justice by charter was unhappily vague. It left undefined the field
of jurisdiction, the law to be administered and, above all, the relations
between the council and the court.
It is interesting to note, in view of what happened afterwards, that
when the names of the governor-general and councillors were inserted
in the act, Lord North recommended the name of Hastings "as a
person to whom nobody would object”. For the post of councillor
General Monckton's claims were advocated against Clavering's, but
the other names were accepted without any opposition. The dis-
sentient Lords recorded a protest against the appointment of executive
officers in parliament as plainly unconstitutional.
The Regulating Act was in operation for eleven years till it was
superseded by Pitt's act of 1784. Warren Hastings was the only
governor-general who had to administer India under it. After 1784
we have, as Sir Alfred Lyall has pointed out, a series of parliamentary
governors-general with wider powers and a more independent
position. The act was probably on the whole an honest attempt to
deal with a difficult problem, but it was open to many criticisms.
A speaker in the Commons in 1781 said of it not unfairly, “In the
mode of applying a reform, Parliament was precipitate and individuals
were intemperate". 3
Certain remedial and supplementary legislation followed on the
Regulating Act. It will be remembered that the governor-general
and council were appointed for five years. Their period of office
would therefore normally lapse in 1779. It also happened that by
the act of 1744 the Company's privileges were to determine in 1780
unless definitely extended. The position was a curious one; there
was a possibility of the government in India and the existence of the
Company at home coming to an end almost simultaneously. North, to
call attention to the legal position, moved in 1780 that the state debts
to the Company should be paid off (they amounted to £4,200,000)
and that formal notice should be given to the Company of its dis-
solution. The motion was made the excuse for an acrimonious attack
from the opposition. Fox asked “whether the Noble Lord was not
content with having lost America? Or was he determined not to
? Parliamentary History, XVII, 896.
1 Gleig, op. cit. a, 41-2.
3 Idem, XXI, 1194.
## p. 192 (#220) ############################################
192
THE COMPANY AND THE STATE, 1772-86
quit the situation in which he stood, till he had reduced the dominions
of the Crown to the confines of Great Britain? " i Burke, with
characteristic violence, stigmatised the proposal to give notice to the
Company as “the most wicked, absurd, abandoned, profligate, mad,
and drunken intention that ever was formed”. 2 North replied coolly
that his motion was meant merely "as putting in a claim on the
behalf of the public, to the reversion of a right which undoubtedly
belonged to them, at that moment when it was especially proper that
it should be formally made”. 3 By acts of 1779 and 1780 the Company's
privileges were extended for a year and it was enacted that no changes
were to take place in the offices of governor-general and council at
Calcutta. As North had now for some time shown himself hostile to
Hastings, the reason for this reappointment is undoubtedly that given
by Gleig : "the Minister who had lost America, did not care to risk
the loss of India likewise, and therefore sought to represent matters
as great and prosperous there”. 4 A more permanent act was passed
in 1781. This act, besides other less important regulations, extended
the Company's privileges to three years' notice after 1 March, 1791,
and obliged it to submit to a secretary of state all dispatches proposed
to be sent to India relating to political, revenue and military matters.
The Company was also to pay £400,000 to the state in discharge of
all claims up to 1 March, 1781, to pay dividends out of its profits of
8 per cent. , and out of the remainder of its profits, if any, three-quarters
were to go to the state.
The year 1781 saw also the appointment of two more committees
of enquiry, one select, on the administration of justice in India,
presided over by Burke, and the other secret, on the causes of the war
in the Carnatic, presided over by Dundas. The first committee
resulted in the act of 1781 amending the constitution of the Supreme
Court, which will be dealt with later. Both committees poured forth
voluminous reports. Twelve were issued by the Select and six by
the Secret Committee. The ninth and eleventh reports of the Select
Committee were written by Burke himself. The friends of the Com-
pany naturally did not like them. Lord Thurlow in the House of Lords
said contemptuously that he paid as much attention to them as he
would do to the history of Robinson Crusoe. Johnstone in the Com-
mons on a motion for the printing of one of the reports declared that
he did not object to the publication of what was “frivolous, ridiculous,
and absurd, and fit only to be presented on such a day as this” (it
happened to be 1st April). He accused the majority of the committee
of "heat and violence, . . . passion and prejudice”. 5. Burke angrily
defended the committees; "their conduct", he said, “had been an
instance of the most extraordinary perseverance, and the most steady
and patient assiduity, that perhaps ever had occurred”. Though
1 Parliamentary History, xvi, p. 310.
2 Idem, XXI, 313.
8 Idem, p. 312.
4 Gleig, op. cit. II, 469.
o Parliamentary History, XXIII, 715-16.
6. Idem, p. 717.
## p. 193 (#221) ############################################
HASTINGS'S RECALL DEMANDED
193
the reports undoubtedly display a certain amount of prejudice, yet
they have often been unduly neglected by the historian, and their
value as a storehouse of facts and documents is considerable. At any
rate their effect at the time upon parliament and the nation was very
great. In April, 1782, Dundas moved that the reports of the Secret
Committee should be referred to a committee of the whole house and
followed this up by a long series of forty-five resolutions condemning
many of the principles and practices of the Indian administration as
censured in the reports. But the attempt of the Commons at discipli. .
nary action proved a dismal failure. Bills of pains and penalties were
introduced against Sir Thomas Rumbold and Whitehill, ex-governors
of Madras, but these bills after long discussion were finally dropped
in 1783 because it proved impossible to keep a quorum in the House
to discuss them. Mill says most unfairly that Rumbold "consented
to accept of impunity without acquittal". 1 Rumbold, on the contrary,
had repeatedly urged that it was unfair to him not to come to a
definite verdict, and as late as June, 1783, implored the House in
God's name to "put an end to the business speedily, and either send
him to condemnation or acquittal". But a stroke was now aimed
at greater game. On 30 May, 1782, the Commons resolved that it was
the duty of the directors to pursue all legal and effectual means,
i. e. by representation to the crown, to recall Hastings and Hornby,
governor of Bombay, for “having, in sundry instances, acted in a
manner repugnant to the honour and policy of this nation, and thereby
brought great calamities on India, and enormous expenses on the
East India Company"3 According to the Regulating Act, Hastings
was only removable by the crown on representation from the court
of directors. The Commons therefore could only constitutionally
adopt the roundabout course of calling upon the directors to approach
the crown.
An extraordinary concatenation of events followed,
illustrating the cumbrousness of the state's semi-control of the Com-
pany. In reply to the House of Commons the General Court on 19
June, 1782, passed a resolution of contemptuous defiance against the
recall of Mr. Hastings merely in compliance with a vote of one house
of the legislature. The directors, however, who naturally in their
position of greater responsibility did not find it so easy to flout the
government, decided on 2 October reluctantly by a small majority
after holding eleven meetings that they would approach the crown
for his recall. Scott told Hastings that the governor and deputy-
governor carried the vote against him, "the two chairs are against
you”,4 and declares that the Company's solicitor had shown him the
draft of a resolution by which the directors hoped to soften the blow
as much as possible. The resolution, after acknowledging Hastings's
many very great and meritorious, services, declared
1 Mill, The History of British India, rv, 532.
2 Parliamentary History, XXI, 985.
8 Idem, p. 75
Gleię, op. cit. 2, 485.
4
13
## p. 194 (#222) ############################################
194
THE COMPANY AND THE STATE, 1772-86
that in no one act of his government hath he been actuated by a corrupt motive,
nor is he suspected of peculation; but it is resolved by this court that Warren
Hastings Esq. hath formed wrong opinions upon points of great political im-
portance, and that he hath acted upon those opinions so as to bring great
distress upon this Company. 1
But the letter of recall was never sent, for the General Court by a
large majority rescinded the resolution of the directors. The govern-
ment upon this refused to pass for transmission to India the dispatch
drawn up by the directors informing Hastings of this series of occur-
rences, though of course everyone was aware that unofficially he
would be cognisant of the whole of them. This strange imbroglio
showed three
things : first that the hold of Hastings on the allegiance
of the proprietors, whom indeed he was wont to call his constituents,
was very strong; secondly, that the Company still possessed a large
measure of practical independence; and thirdly, that the clause in
the act of 1781 making it necessary to submit outward dispatches to
the secretary of state was liable to result in a rather ludicrous
deadlock.
Things could obviously not be left in this inconclusive and un-
satisfactory state. The Regulating Act had clearly broken down. It
had neither given the state a definite control over the Company, nor
the directors a definite control over their servants, nor the governor-
general a definite control over his council, nor the Calcutta Presidency
a definite control over Madras and Bombay. The whole question was
reopened in 1783, for the Company in March was again obliged to
petition for financial relief, and the country as a whole was inclined
to agree with Burke that “the relief and reformation of the Company
must go together. The Company had flown in the face of Parliament”. 2
Three successive proposals were put forward, those namely of
Dundas, Fox and Pitt. Dundas introduced his bill in April, 1783.
Its main provisions were : That the crown should have power to
recall the principal servants of the Company (the power was thus no
longer to be consequent on representations from the directors); that
the control of Bengal over the other presidencies should be increased;
that the governor-general should have the power of acting on his
own responsibility in opposition to the opinions of his council, and
also be empowered, if necessary, to hold the office of commander-
in-chief; that the displaced zamindars in Bengal, i. e. those displaced
by the results of the quinquennial settlement, should be restored.
The bill was obviously aiming everywhere at centralisation. It
strengthened the power of the crown over the governor-general and
the control of the governor-general both over his own council and
the subordinate governments. It is from this aspect that Malcolm
called it a
Bill for appointing a person who, under the high title of Governor-Generai
i Gleig, op. cit. II, 493.
2 Parliamentary History, XXIII, 647.
## p. 195 (#223) ############################################
FOX'S BILLS
196
and Captain-General, should exercise in his own person (under certain checks)
complete authority and control over British India. 1
In his introductory speech Dundas already pointed to the desirability
of appointing Cornwallis governor-general by a strong panegyric
on his character :
that man, of whom all men and all parties were lavish in commendation. A
man of family, of fortune, and the most unsullied reputation. On the vir-
tues of this man the late ministry built, and justly built, all their hopes of the
salvation of our dying interests in Asia. Here there was no broken fortune to
be mended, here was no avarice to be gratified. Here was no beggarly mush-
room kindred to be provided for-no crew of hungry followers gaping to be
gorged. 2
But as Dundas was now in opposition there was no chance of his bill
becoming law, and after its introduction it was allowed to drop.
On 18 November, 1783, Fox introduced his two famous bills. The
first dealt in detail with matters of administration and may not
unfairly be said to have definitely forbidden in future most of the
characteristic acts of the Hastings administration. The second and
better known bill gave the Company a new constitution. In the
preliminary debates Pitt himself had clamoured for a bill "not of
temporary palliation or timorous expedients; but vigorous and
effectual, suited to the magnitude, the importance and the alarming
exigency of the case”. The bill was in some respects vigorous and
effectual enough. It proposed entirely to sweep away both the court
of directors and the court of proprietors and to set up two bodies :
(1) seven commissioners, or directors, to administer the revenues and
territories of India and to appoint or dismiss all persons in the Com-
pany's service. They were to be named in the act and were irremovable
except on an address from either house of parliament. Vacancies
were to be filled by the crown. Fox's reason for this last provision was
that he felt already the inconvenience of Parliamentary appointments; for at
present the Governor-General of Bengal, deriving_under an Act of Parliament,
seemed to disavow any power in the Court of Proprietors, Directors, or the
King himself to remove him. 3
The board was to sit in London and parliament was to have oppor-
tunity to inspect the minutes of its proceedings. This was no doubt to
meet the criticism that the commissioners were given too independent
a power.
