The collapse of the Moghul empire after the death of Aurangzeb in 1707 provided opportunity for the company for its political advancement in Northern India. The defeat of Siraj-ud-daula by Clive in the Battle of Plassey in 1757 earned great prestige for the Company in Bengal. Again the English forces defeated the combined forces of Mir Kasim and Nawab Vazir of Oudh in the battle of Buxer in 1764 which marked the decline of Moghul empire. The victory of Clive in 1752 shattered the rising French influence in Deccan and the local conflicts also contributed to Company’s strength. There was political confusion due to frequently changing of Nawabs in Bengal and the English servants of the Company exploited the situation to their advantage. The Nawabs were virtually the puppets in the hands of English Company In pursuance of the victory in the Battle of Plassey and Buxer, the Company became a territorial sovereign and supreme authority in Bengal, Bihar and Orissa. It, however, desisted from taking over the reigns of this territory directly for two obvious reasons, namely-
(i) Direct assumption of the responsibility of administration might invite British Parliament’s interference because of the provision of the British Constitutional law that no British subject can acquire sovereignty for himself; and
(ii) Company’s coming to power might antagonise the indigenous population which may not be in the interest of the company. Besides, it might also arouse jealousy of the French and Portuguese who were rivals of the British Company.
With a view to avoid the above complications, the Company placed its nominee Mir Jafar as the Nawab of Bengal. But he soon lost favour of the Governor and Council of Calcutta and was therefore replaced by Mir Kasim in 1760. However, Mir Jafar was again made the Nawao replacing Mir Kasim in 1763. In 1765, Mir Jafar was replaced by his minor son Najm-ud-daula. Obviously, with every change of Nawab, the power and influence of the Company’s servants increased. The frequent changing of Nawab by the Company itself shows that the real power was vested in the Company. It was in 1765 that Moghul Emperor Shah Alam who still claimed sovereignty, transferred the Diwani of Bengal, Bihar and Orissa to the British Company in lieu of Rs. 26 lakhs per annum. ‘Diwani’ was a term used for fiscal administration and meant the collection of revenues and custones and administration of civil justice. Thus, by obtaining the grant of diwani, Clive gave to the Company’s Government of Bengal a de jure status of an official of the Moghul Emperor although it had real power to rule over this territory.
Company as Diwan (Dual System of Government)
The Company preferred to execute its Diwani functions through the natives under the supervision of its officials instead of appointing its own English servants for this purpsoe. It appointed Mohammad Raza Khan as Company’s Diwan at Murshidabad and Raja Shitab Roy was appointed as Company’s Diwan at Patna. The English officers were appointed at both the places to supervise the working of these two native Diwans. These Diwans were to discharge the functions of revenue collection and administration of civil justice. But, unfortunately the system failed miserably because of the fact that public welfare was totally ignored and everyone tried to exploit the situation to his best advantage. The dual system of government introduced in 1765 by Clive, consequent to taking over of Diwani by the Company, did not prove a successful venture. The reasons were obvious. The Indian officials had no effective power to enforce their decisions nor could they dare to take action against the English servants of the Company. The English Servants of the Company, on the other hand, misused power for their own selfish ends. Corruption and bribery was rampant. In 1767, Governor Clive left India and Veriest was appointed as Governor of Calcutta in his place. He tried to improve the Diwani administration by appointing English servants of the company as Supervisors in districts but there was no significant improvement because these Supervisors misused their powers for their selfish ends and exploited the people. These Supervisors also did not have adequate training and experience to perform their duties efficiently. The natural calamities like famine during 1770-71 made the situation worse. The Company put the blame squarely on the Indian officials and decided to perform its Diwani functions through its own English officials of the Company.
Thus, the collection of revenue and administration of civil justice were brought under the direct control of the company’s servants. The administration of criminal justice, however, continued to be in the hands of Nawab Nazim. The company on April 13, 1772 appointed Warren Hastings as Governor of Bengal to execute the changed policies regarding Diwani functions.