The East India Company: The World's Most Powerful Corporation (The Story of Indian Business) (13 page)

When Calcutta was attacked by Siraj-ud-Daula, many European residents of the city boarded the available boats and sailed away into safe distance, taking the cash boxes of the Company with them. But 146 English officers and a few women, many of them wounded, surrendered. In a sweltering night of June 1756, these prisoners were crammed into a dungeon 18-feet-square inside the Fort William. The room was walled on three sides and the remaining side was blocked by heavy iron bars. The prisoners offered huge bribes to the guards to be accommodated in two rooms. Mysteriously, the offer was rejected. When day came, more than a hundred were dead from suffocation, dehydration and trampling.
In the morning, the nawab received the news of the deaths with indifference, but flew into a rage on being told that the cash boxes were missing.

This incident was an important one in the history of India. Much like the Jallianwalla Bagh massacre 170 years later, it snapped a chord that had so far held a fragile relationship in delicate balance. Negotiation, which was the merchant’s preferred method of dispute settlement, gave way to a desire for revenge. Conflicts so far had been a proxy war with the French; now for the first time a direct war with an Indian king was on the horizon.

Six months after Calcutta was lost, Clive and Vice-Admiral Charles Watson arrived at the mouth of the Hooghly with the entire forces of Madras, 1400 men in all. Watson and Clive did not particularly care for each other. Watson thought Clive was a scheming civilian masquerading as a soldier, and Clive thought Watson was an inept politician. Given their deep mutual dislike, it was a miracle how they managed to recapture Calcutta. For Watson the story was over with this victory. But Clive was in no mood to rest. He had guessed correctly that the young king’s position was weak. With his impetuous behaviour, he had turned many friends into enemies, and was forsaken by his merchant allies and family elders. Through the mediation of prominent
merchants, Clive opened secret negotiations with rivals to the throne.

The most powerful of these mediators was Amir Chand. At the time of these incidents, he was the largest of the Company’s brokers in Bengal. Although a valuable ally, Amir Chand evoked much suspicion and wariness in the minds of his English friends. The night when Calcutta fell, he was already in prison, and Siraj-ud-Daula forgot to set him free. Some of the English officers who survived the dungeon deaths were told by the Indian guards that they were dumped in the ‘black hole’ under Amir Chand’s secret instructions. He was, however, too powerful in the court to suffer on that account. In return for gathering the support of rival nobles, he demanded from Clive a 5 per cent cut on the treasure stored in the palace, ‘or he would betray the whole design to the reigning nabob’. Not overburdened by ethics, and convinced that Amir Chand would double cross him, Clive drew up a false contract to secure the deal. After the Battle of Plassey, when Amir Chand was told that the contract was a forgery, he lost his mind.

Assured of support from nearly every potential claimant to the throne, merchants and key officers of the state, barring a few loyal military chiefs, Clive pressed on to the capital Murshidabad. In the Battle of Plassey on 13 June 1757, the nawab’s forces fought a listless
battle, surrounded by friends and relatives of the nawab who betrayed him.

When the victorious generals reached Murshidabad the next day, Siraj had left the city (to be caught and murdered a few days later). A court was summoned in the afternoon. Clive took Mir Jafar’s hand and walked him to the throne, he then stood back and deeply bowed to the new nawab. These rituals over, the English officers went to inspect Siraj’s treasury, and were rewarded with cash worth £2 million. Contemporary accounts state that the knowledge of a secret chamber in the nawab’s inner quarters was carefully concealed from the English by four key Indian conspirators. When all was quiet, these four, including Mir Jafar and Nabakrishna Deb, visited the chamber and helped themselves to £8 million worth of pearls, jewels and gold coins. Over the next three years that he lived in India, Clive, now the Baron of Plassey, sent back several hundred thousand pounds in the form of bills drawn on the Dutch Company and Golconda diamonds.

There now began in the history of Bengal and the Company a sordid period that lasted almost twenty-five years. Bengal had effectively no ruler, because the English governed by proxy. Clive and his closest aide Henry Vansittart left the nawab in charge of the state while the Company was to defend Bengal on behalf of the nawab
for a share of the revenue. English merchants fanned into the interior of Bengal. They used the Company’s name to trade, evade duties and sometimes harass local people. The new nawab, an opium addict and respected by none, was happy with the arrangement. But some of his patrons were not. They feared that simply by doing nothing, he was losing the grip on the state finances on which the Company now depended so much.

In 1760, in a move that Vansittart proudly announced as a ‘revolution’, a rival noble Mir Qasim was installed as the king. Mir Qasim was a better administrator. But he also had ambitions. He wanted to raise the resources of the state, tax the English private traders, use the money to strengthen the state army and free himself of the odious dependence on the English. Vansittart was sympathetic to the king’s drive to impose fiscal discipline. But others more mindful of the interests of the private traders wanted him out. One of the individuals who felt threatened by Mir Qasim’s reforms was murdered in 1763, thrusting an unwanted war with the English on the nawab. In desperation, he sought the help of the tottering Muslim nobility of northern India, and found allies in the Mughal emperor Shah Alam II and the nawab of Awadh. All of them shared an anxiety about rising British power. But the armies that they got together proved to be a ragbag collection. Battles in Katwa, Giria,
Udhuanala (all in 1763) and Buxar (1764) were lost to disastrous decisions, divided command and desertion.

The thoroughly beaten Mughal emperor, in a face-saving gesture, gifted the charge of the revenues of Bengal, Bihar and Orissa to the Company against the payment of a tribute. Although the tribute was stopped ten years later, the aged emperor became a great friend of the Company. He began to admire many things European and lived under English protection.

The key moment in the transformation of the Company from a trader to a sovereign had now arrived. It was ‘invested now with full powers from the Mogul to act in a civil, military, and judicial capacity, without control’ (Bartholomew Burgess, merchant, 1782). How did it use this power?

Soon after Plassey, state revenues were used to finance exports from India. Peasants were taxed and taxpayer’s money was used to buy cloth for export. The availability of this option raised hopes among contemporaries of an end to silver import into India. H.V. Bowen has shown in a recent work that the hope was only partly fulfilled. The Company, from time to time, continued to bring in large quantities of silver long after 1760 and moved
silver around between India and China more than before. Further, silver was also being imported by private traders, of which accurate estimates cannot be made. Ways to finance exports other than by silver, such as import of British goods and bills sold in India, were growing too. Nevertheless, the average import of silver did fall in the thirty years after the battle in Buxar.

Political power enabled the Company to address a problem that had plagued its business in India for a long time—poor contract enforcement. As the English settled in as rulers, a command-and-control system was devised to replace the unstable contracts which were in force. Brokers and agents were dispensed with. In Bengal and in Coromandel, the Company attempted to enforce closer control on the producers and appointed salaried officers to supervise contracts. These officials, armed with policing power, coerced the weavers to fulfill obligations and collected bribes and protection money right and left.

The wilderness continued in Bengal. Zamindars were rebellious, finances were in disarray, good administrators were in short supply and most Company officers, ‘nabobs’ as they were known, saw service in Bengal as an opportunity to get rich quick by milking the still rich treasury of the nawab. In London, the value of share of the Company crashed repeatedly, ruining many
speculators, including some Parliamentarians. A violent famine in Bengal in 1770 exposed the indifference and incompetence of the state.

A short stint at leadership by Clive and his successor Harry Verelst saw only limited check on the rot. Verelst himself had owed his rise from a writer to a governor to private trade. The irony was not lost on other private traders. One of his many detractors, a former employee and merchant William Bolts, published a book attacking the corruption and chaos in Bengal. The book drew a rebuttal from Verelst. Back home in England, the two men continued to fight fruitless legal battles that bankrupted both of them. Both had assets in Bengal they were unable to recover. These exchanges brought about no great changes in Bengal itself, but drew public attention to the corruption that surrounded Company’s rule in Bengal.

In one way, though, Verelst proved a visionary. He initiated the first formal discussion on how India should be ruled by Englishmen. He favoured indirect rule that would guarantee legal, social and cultural autonomy to the Indians, a principle that his more illustrious successor Warren Hastings (1732–1818) would enact into policy.

Governor of Bengal (1772–73) and governor general of British India (1774–84), Hastings’ leadership was significant for two important, though contradictory reasons. First, he instilled order in the administration and gave the Bengal government an institutional foundation. And second, through his own questionable conduct, he strengthened the lobby that favoured greater governmental regulation of India. Through these two ways, Hastings’s tenure could be said to have ushered in imperialism in India.

Son of a clergyman and abandoned early by his father, Hastings was educated by his uncle at the Westminster School in London. His education was cut short by his uncle’s death in 1750, so perforce Hastings had to take the job of a ‘writer’ of the Company. His first years in Bengal had formative effect on his personality. He learnt Persian from Nabakrishna. Being of the same age, the two men developed a close personal friendship. Hastings, therefore, attained maturity with a more intimate knowledge of the cultural and social life of the Indians than any other British officer in his milieu could claim to have.

Through the intrigue that led to the battle of Plassey, Hastings served in the army as a volunteer, and in 1758 was rewarded for his hard work with the senior position
of resident at Murshidabad. While in Murshidabad, he sided with his friend Vansittart in supporting Mir Qasim. When Mir Qasim turned against his patrons, Hastings’s life came in danger. For three days, as the nawab’s men looked for him, he hid in a hut owned by a Bengali acquaintance, Kantobabu. In a dark room, Hastings survived on the diet of the poor Bengali, fermented rice and shrimp curry. He escaped unhurt, and so did Kantobabu. But the episode was a life-changing experience for Hastings. He became a blind believer in rewarding loyalty. And he developed a lifelong fondness for fermented rice and shrimp curry cooked in the rural Bengali style.

Immediately on returning to Calcutta, he faced the wrath of those colleagues who had opposed Vansittart’s friendship with Mir Qasim. Having acquired neither money nor fame, he was sent back to England. In England, however, his public speeches on Indian affairs drew an interested audience. It was here that he outlined a future policy for India. The central tenet of the policy was that Bengal was a British province; that is, it could not be governed any more by the agents of the Company intent on making quick profits, and would need professional and experienced administrators. On the other hand, Bengal was also a complex entity with strong inherited cultural and administrative traditions.
Therefore, an effective British administration of the territory would need the officers to learn Persian, Sanskrit and Bengali, and rule by means of Indian traditional law.

In 1772, Hastings moved back to India and had the chance to implement his vision.

He took control of governance, reformed the administration of justice and the fiscal system. His judicial reforms incorporated the Indian legal systems that he had espoused earlier. His policy towards the local rulers in India was one of maintaining a peaceful distance, for which his cultural tolerance came in handy. He knew Persian well enough to hold conversations with Persian speakers without the aid of interpreters. With such accomplishments, it was no surprise that he was choosy about picking English officers. He dispensed with many whom he considered to be inexperienced, poorly trained, or driven by the prospect of personal gain, and replaced them with seasoned Indian hands. Hastings, in short, created a new model that could be called British India, one dominated by bureaucrats largely recruited from among the elites of India rather than merchants.

But he was also a failure on many levels mainly due to contradictions in his personality. While he wanted to rule justly, Hastings was also tolerant of his Indian
protégés, the zamindars, turning a blind eye to the rampant exploitation and oppression they employed to raise revenues. Kantobabu, who had saved his life, was allowed to buy one zamindari after another using fraudulent means. Another loyal zamindar Devi Singh terrorized poor tenants, giving rise to peasant rebellion in Rangpur. Among lesser-known objects of Hastings’ affection was one Jaffar, possibly a senior member of his personal guard, who had been presented with a large chunk of prime land near the Dharmatalla Street in Calcutta. Hastings’ military campaigns led to much distress. In Benares, Rohilkhand and Awadh, the Company created dependencies against the promise of protecting them from Maratha raids. Peace reigned, but the Rohilkhand economy was in ruins, and the Awadh rulers lost any semblance of authority.

Hastings, finally, could do little to get rid of the factional fighting among members of the council of officers ruling Bengal, which escalated when the Parliament set up a Supreme Council to oversee the governor-general’s work. The most formidable member of that body was Philip Francis, an able and knowledgeable writer on India who was secretly eyeing Hastings’ job. The bad blood between the two men eventually claimed a high-profile Indian victim, Nandakumar.