The Mughal Empire

The Diwani of Bengal 1765: The Grant of Revenue Administration to the East India Company

The grant of the diwani of Bengal, Bihar, and Orissa to the British East India Company in 1765 was the most consequential single act in the economic and political history of British India. The grant was made by the Mughal emperor Shah Alam II at Allahabad in the aftermath of the Battle of Buxar 1764 and as part of the Treaty of Allahabad negotiated by Robert Clive. By its terms the Company acquired the right to collect the land revenue of three of the richest provinces of the former Mughal empire, and it thereby acquired the fiscal resources to fund the expansion of British territorial control across the subcontinent. The principal treatment of the British presence is the British East India Company and the Mughals page, and the parallel account of the related battle is the Battle of Plassey 1757. The fiscal background is examined in the economic decline of the Mughal Empire and the land revenue administration pages.

The Background of the Grant

The grant of the diwani must be understood in the context of the British expansion of the 1750s and 1760s. The Battle of Plassey in 1757 had placed Bengal effectively under British control, and the British position in the region had been reinforced by military and diplomatic measures. The French presence in the region, particularly at Chandernagore, had been reduced by the British capture of the French settlement in 1757, and the Dutch position had been weakened by the British action against the Dutch settlement at Hooghly in 1759. The political situation in north India was fluid in the years after Plassey. The Mughal emperor Shah Alam II, who had legitimate claims to large portions of north India, had been dependent on British support since the Battle of Buxar. The Nawab of Awadh, Shuja-ud-Daulah, had been defeated at Buxar and was dependent on British support. The British authorities, with the cooperation of the Nawab of Bengal, Mir Jafar, and his successor Mir Qasim, were in a strong position to extract concessions from the Indian powers.

The Role of Robert Clive

The British negotiator at Allahabad was Robert Clive, the officer who had led the British forces at Plassey and who had acquired deep experience in the British presence in India. Clive had returned to India in 1765 as the Governor of Bengal, and he was in a strong position to negotiate the treaty with the Mughal emperor. The negotiations were conducted at Allahabad, where the emperor had taken refuge after the Battle of Buxar, and the terms of the grant were settled over the course of several weeks. Clive’s role in the negotiations is examined in detail in the British East India Company and the Mughals page, and the broader context of the British expansion is treated in the colonial Mughal legacy page. The administrative setting is surveyed in the Mughal administration overview page.

The Terms of the Grant

The grant of the diwani was made by a farman, or royal decree, of the Mughal emperor Shah Alam II, issued at Allahabad on 12 August 1765. By the terms of the farman, the emperor granted to the East India Company the diwani, the right to collect the land revenue and to administer the civil justice, of the three provinces of Bengal, Bihar, and Orissa. The grant was made in return for an annual payment to the emperor, the restoration of Awadh to the Nawab Shuja-ud-Daulah, and the grant of the territory of Allahabad and an annual pension to the emperor himself. The fiscal terms of the grant are examined in the land revenue administration page, and the political terms are treated in the Treaty of Allahabad 1765 page.

The grant was, in effect, the cession of the fiscal sovereignty of three of the richest provinces of the former Mughal empire. The Company acquired the right to collect the revenue, to administer civil justice, and to appoint the revenue officials of the provinces. The nizamat, the criminal justice and the general administration, was retained by the Nawab of Bengal, who was to be a dependent of the Company. The arrangement divided the administration of the provinces between the Company, which held the diwani, and the Nawab, who held the nizamat, and it was the foundation of the dual system of administration that governed Bengal until 1772.

The Naib Diwan

The Indian deputy who administered the diwani on behalf of the Company was the naib diwan, a position that was held in the early years of the new arrangement by a series of Indian officials, most notably Mohammad Reza Khan, the naib of the Nawab of Bengal, and Sitab Roy, the principal Hindu revenue official. The naib diwan was responsible for the day-to-day administration of the revenue system, and the position was a key element in the Company’s administration of Bengal. The naib diwan system is examined in detail in the British East India Company and the Mughals and the Mughal administration overview pages.

The naib diwan system was reorganised in 1769 by the new Governor of Bengal, and in 1772 Warren Hastings abolished the dual system and placed the diwani directly under the Company’s administration. The reorganisation is a major event in the history of the British presence in India, and it is examined in the mughal successor states page. The longer-term transformation of the revenue system is treated in the economic decline of the Mughal Empire page.

The Impact on the Mughal Emperor

The grant of the diwani had a profound impact on the Mughal emperor. The emperor, who had been a major figure in the politics of north India in the previous centuries, was reduced to a position of dependence on the British. The emperor received an annual pension from the Company and was given the territory of Allahabad as his personal domain, but the grant of the diwani to the Company had the effect of removing from the emperor the principal source of his political and fiscal authority. The emperor’s position after 1765 was a major departure from the position of his predecessors, and the consequences of the grant for the Mughal dynasty are examined in the later Mughal emperors and the colonial Mughal legacy pages.

The grant also had the effect of dividing the Mughal imperial authority. The emperor retained the formal symbols of sovereignty, but the actual power was now in the hands of the British. The political vacuum in north India, which had existed since the weakening of the Mughal state in the early eighteenth century, was now filled by the British presence, and the consequences of this development are examined in the Mughal decline overview and the Mughal history overview pages.

The Impact on the Indian Economy

The impact of the grant on the Indian economy was profound. The Company acquired the fiscal resources of three of the richest provinces of the former Mughal empire, and it used these resources to fund the expansion of British territorial control across India. The fiscal resources of Bengal were also a major contribution to the industrial development of Britain, and the transfer of wealth from India to Britain, examined in detail in the economic decline of the Mughal Empire page, was a major event in the economic history of the early modern world.

The grant also had important effects on the Indian economy. The Company’s monopoly of the Bengal trade, combined with the fiscal resources of the provinces, allowed the Company to disrupt the indigenous trading networks of the region, and the decline of the Indian textile industry in the nineteenth century was a direct consequence of the changes introduced by the British presence. The economic consequences of the grant are examined in the colonial Mughal legacy and the economic decline of the Mughal Empire pages.

The Long-Term Significance

The long-term significance of the grant of the diwani was enormous. The grant established the British presence in India on a fiscal and territorial basis, and it provided the foundation for the subsequent British raj. The grant was the first major step in the transformation of India from a Mughal imperial possession into a British colonial possession, and the consequences of the grant are examined in the British East India Company and the Mughals, the colonial Mughal legacy, the rebellion of 1857, and the broader Mughal decline overview pages.

The grant also had important consequences for the Mughal dynasty. The grant of the diwani to the Company was a major step in the reduction of the Mughal emperor to a position of ceremonial dependence on the British, and the consequences of this development for the Mughal dynasty are examined in the later Mughal emperors and the Bahadur Shah Zafar, the last Mughal emperor pages.

The Mughal Administration and the Revenue System

The revenue system that the Company inherited from the Mughals was complex. The diwani that the Company acquired in 1765 was a central part of the revenue system of the Mughal empire, and the Company inherited the administrative machinery of the Mughal revenue administration. The diwani and its implications are examined in the land revenue administration and the Mughal administration overview pages, and the connection to the mansabdari-jagirdari system is treated in the relevant cluster page. The long-term consequences of the grant for Indian administration are examined in the colonial Mughal legacy page.

The grant of the diwani was, in effect, the transfer of the fiscal sovereignty of three of the richest provinces of the Mughal empire from the Mughal emperor to a foreign trading corporation. The transfer was unprecedented in the history of the Mughal empire, and it had important consequences for the subsequent political and economic history of the subcontinent. The rebellion of 1857, the doctrine of lapse, and the subsidiary alliance system are all incomprehensible without reference to the consequences of the grant of the diwani in 1765.

Sources

  • P.J. Marshall, Bengal: The British Bridgehead (NCHI II.2, 1987), ch. 4.