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East India Company and British State

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  • Last Updated : 26 Apr, 2022

In 1600 the British East India Company was set up to engage in trade with India. They were granted a charter by the British Government. This charter gave them the right to be the sole British trading company in India. For the next 150 years, the company concentrated solely on increasing its profits through trade as much as possible. However, they still had to compete with the other European trading companies who were trying to increase their presence as much as possible since India was a valuable market.

To win more and more power the companies would compete to acquire special privileges from the ruling kings. As the Mughal empire began to crumble this meant that they had to build relations with many minor kings and it also meant that many previous concessions had to be renegotiated.
The conflicts exploded in the province of Bengal when the Nawab of Bengal refused to honour the commitments made by the previous Mughal emperor as he felt it was against the interests of his citizens. This led to the battle of Plassey in 1757 and more importantly the battle of Buxar in 1764. When the East India Company won the battle of Buxar it secured the right to collect revenue from Bengal, Bihar, and Orissa. Being granted the ‘Diwani’ as it was known was a big step and led to many changes within the company and in the nature of its relationship with the British government.
            From 1765 the company had the right to raise revenue in the most prosperous parts of India yet it had no responsibilities. This created a situation where employees of the company were enriching themselves at the expense of the company. There was widespread corruption among the employees. They began to oppress the peasants to maximize the revenue they could raise while keeping the lion’s share for themselves instead of enriching the company. This forced the British government to take action. 

The original charter the British government gave to the East India Company was extended every twenty years. In the later years, the British government took to making changes each time it extended the company’s charter based on the rapidly evolving situation.

Regulating Act of 1773:

  • It was passed after the East India Company had won many new privileges. It allowed the company to keep the territory it had acquired in India but in view of the increasing corruption found in the company, it attempted to start regulating how the company was functioning.
  • For the first time, the British cabinet was given the right to exercise control over affairs in India. For this purpose, the post of the Governor-General was introduced. He was to oversee the administration of Bengal with a four-member committee, prior to this, there was a single governor for the region. 
  • The governor of Bombay and Madras was also to report to the newly appointed governor-general. The first governor-general of India was Warren Hastings.
  • Under this act, a supreme court was also set up consisting of a chief justice and three other judges. However, the court had no jurisdiction over the servants of the government or the company in their professional capacity. They could not be judged for any activities undertaken while discharging their work.

Pitt’s India Act of 1784:

  • It introduced the ‘dual system‘ of control. This meant that the company was allowed to keep its control over commercial activities and administration, but it now became a department of the British state and the territory it controlled was henceforth known as ‘British possessions’.
  • The council of the governor-general now had only 3 members including a commander in chief.
  • A board of control was set up to overlook the company’s civil, administrative and military affairs. This board consisted of a secretary of state, the Chancellor of Exchequer, and four members of the Privy Council. 

Charter Act of 1793: 

  • The powers of the Governor-General, which had been expanded under Lord Cornwallis in 1786 were made a part of the Act.
  • All senior officials were now to be appointed with royal permission. No such officer was allowed to leave India without prior permission, to do so would be considered a resignation.
  •  The salaries of the members of the board of council and their staff were to be paid out of the revenues of the company being raised in India.
  •  It was also decided that the company would pay a sum of five lakh pounds every year to the British government.
  • It also allowed the company’s trade monopoly for the next 20 years in India.

Charter Act of 1813: 

  • This act led to major changes for the East India Company; one could say it affected its basic nature. 
  • Under this act, the company’s rule was again extended to the next 20 years, but the company lost its commercial monopoly in India. 
  • Its monopoly on the trade-in tea, opium, and trade with China however continued. 
  • Its granted permission to the missionaries to come to India and allow them to engage in religious proselytization.
  • The state set aside a sum of Rs. 1 lakh money to help in the education of the Indian subjects.

Charter Act of 1833: 

  • This act extended the lease of the company regarding its revenue collection and control over territories but the company’s monopoly over trade in Tea and trade with China was ended. 
  • It gave the Board of Control full authority over the Company and further extended the powers of the governor-general.
  • The post of Governor-General of Bengal was converted into “Governor-General of India“. He was given the authority to superintend, control and direct all civil and military affairs of the Company.
  • All revenues were raised under his name and he had complete control over the expenditure. All business was done in his name.
  •  A law commission was established to consolidate and codify Indian Laws.
  • A fourth ordinary Member was added to the Governor-General’s Council. He was to be a legal expert in the making of laws.
  • This act gave permitted the English to settle freely in India. thus, it effectively legalized the British colonization in India.

     Thus we can see that in less than seventy years, the relationship between the East India Company and the British state changed drastically; The company started off as a purely commercial venture but as its size and importance grew the British state became more involved in its regulation ultimately taking it over and absorbing its territories and powers. The company became reduced to a department under the British state; in a sense, one could say it became a victim of its own success. It did so well that it gradually lost its own identity. 

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