System of dual government developed after the battle of Buxar led to a contradictory situation where the servants of the company were making huge profits, while the company itself was on the verge of insolvency. To deal with this insolvency directors of the company applied to the British government for relief, which lead to starting of intervention in the company’s affairs. This intervention started with regulating act of 1773 which provided the following provisions.
- Laid the foundation of central administration by the British Company in India.
- Governor of Bengal now became Governor General of Bengal (Warren Hastings was the first Governor General), making Governors of Madras and Bombay its subordinates.
- Council of Governor-General was to be elected by the Court of Directors of East India Company. It was initially called the Council of Four, it had important powers to run the administration. All four members of the Council had voting rights along with the Governor-General, who had an additional casting vote. (First council tried to impeach Warren Hastings).
- Provision for Supreme Court in Calcutta in 1774, consisting of a chief justice and three puisne judges.
- Prohibited servants of EIC from engaging in any private trade or accepting presents or bribes from the natives.
- Strengthened the control of the British government over the company by requiring the Court of Directors to report on its revenue, civil, and military affairs in India.
- First step taken by the British government to control and regulate the affairs of the East India Company in India.
- Recognised for the first time the political and administrative functions of the company.
- Appointed a Governor-General but shackled him with a council that might reduce him to impotence.
- Established a Supreme Court but did not attempt to define its field of jurisdiction.
- It was a compromise throughout and intentionally vague in many of its provisions.
- Did not openly assert the sovereignty of the British Crown.
- Neither gave the British Government definite control over the company nor the directors definite control over the servants.
- It made Bombay and Madras subordinate to Bengal, but this authority was insufficient.