Page 1
From Trade to Territory
The Company Establishes Power
2
Aurangzeb was the last of the powerful Mughal rulers. He
established control over a very large part of the territory
that is now known as India. After his death in 1707,
many Mughal governors (subadars) and big zamindars
began asserting their authority and establishing regional
kingdoms. As powerful regional kingdoms emerged in
various parts of India, Delhi could no longer function as
an effective centre.
By the second half of the eighteenth century,
however, a new power was emerging on the political
horizon – the British. Did you know that the British
originally came as a small trading company and were
reluctant to acquire territories? How then did they come
to be masters of a vast empire? In this chapter you will
see how this came about.
Fig. 1 – Bahadur Shah Zafar
and his sons being arrested by
Captain Hodson
After Aurangzeb there was no
powerful Mughal ruler, but
Mughal emperors continued to
be symbolically important. In
fact, when a massive rebellion
against British rule broke out in
1857, Bahadur Shah Zafar, the
Mughal emperor at the time, was
seen as the natural leader. Once
the revolt was put down by the
company, Bahadur Shah Zafar
was forced to leave the kingdom,
and his sons were shot in
cold blood.
chap 1-4.indd 9 4/22/2022 2:49:25 PM
Reprint 2024-25
Page 2
From Trade to Territory
The Company Establishes Power
2
Aurangzeb was the last of the powerful Mughal rulers. He
established control over a very large part of the territory
that is now known as India. After his death in 1707,
many Mughal governors (subadars) and big zamindars
began asserting their authority and establishing regional
kingdoms. As powerful regional kingdoms emerged in
various parts of India, Delhi could no longer function as
an effective centre.
By the second half of the eighteenth century,
however, a new power was emerging on the political
horizon – the British. Did you know that the British
originally came as a small trading company and were
reluctant to acquire territories? How then did they come
to be masters of a vast empire? In this chapter you will
see how this came about.
Fig. 1 – Bahadur Shah Zafar
and his sons being arrested by
Captain Hodson
After Aurangzeb there was no
powerful Mughal ruler, but
Mughal emperors continued to
be symbolically important. In
fact, when a massive rebellion
against British rule broke out in
1857, Bahadur Shah Zafar, the
Mughal emperor at the time, was
seen as the natural leader. Once
the revolt was put down by the
company, Bahadur Shah Zafar
was forced to leave the kingdom,
and his sons were shot in
cold blood.
chap 1-4.indd 9 4/22/2022 2:49:25 PM
Reprint 2024-25
10 OUR PASTS – III
East India Company
Comes East
In 1600, the East India
Company acquired a charter
from the ruler of England,
Queen Elizabeth I, granting
it the sole right to trade with
the East. This meant that
no other trading group in
England could compete with
the East India Company. With
this charter, the Company
could venture across the
oceans, looking for new lands
from which it could buy goods
at a cheap price, and carry them back to Europe to
sell at higher prices. The Company did not have to fear
competition from other English trading companies.
Mercantile trading companies in those days made profit
primarily by excluding competition, so that they could
buy cheap and sell dear.
The royal charter, however, could not prevent other
European powers from entering the Eastern markets.
By the time the first English ships sailed down the
west coast of Africa, round the Cape of Good Hope, and
crossed the Indian Ocean, the Portuguese had already
established their presence in the western coast of India,
and had their base in Goa. In fact, it was Vasco da
Gama, a Portuguese explorer, who had discovered this
sea route to India in 1498. By the early seventeenth
century, the Dutch too were exploring the possibilities
of trade in the Indian Ocean. Soon the French traders
arrived on the scene.
The problem was that all the companies were
interested in buying the same things. The fine qualities
of cotton and silk produced in India had a big market
in Europe. Pepper, cloves, cardamom and cinnamon
too were in great demand. Competition amongst the
European companies inevitably pushed up the prices
at which these goods could be purchased, and this
reduced the profits that could be earned. The only way
the trading companies could flourish was by eliminating
rival competitors. The urge to secure markets, therefore,
led to fierce battles between the trading companies.
Through the seventeenth and eighteenth centuries they
regularly sank each other’s ships, blockaded routes,
and prevented rival ships from moving with supplies of
Fig. 2 – Routes to India in the
eighteenth century
Mercantile – A business
enterprise that makes
profit primarily through
trade, buying goods
cheap and selling them at
higher prices
chap 1-4.indd 10 4/22/2022 2:49:26 PM
Reprint 2024-25
Page 3
From Trade to Territory
The Company Establishes Power
2
Aurangzeb was the last of the powerful Mughal rulers. He
established control over a very large part of the territory
that is now known as India. After his death in 1707,
many Mughal governors (subadars) and big zamindars
began asserting their authority and establishing regional
kingdoms. As powerful regional kingdoms emerged in
various parts of India, Delhi could no longer function as
an effective centre.
By the second half of the eighteenth century,
however, a new power was emerging on the political
horizon – the British. Did you know that the British
originally came as a small trading company and were
reluctant to acquire territories? How then did they come
to be masters of a vast empire? In this chapter you will
see how this came about.
Fig. 1 – Bahadur Shah Zafar
and his sons being arrested by
Captain Hodson
After Aurangzeb there was no
powerful Mughal ruler, but
Mughal emperors continued to
be symbolically important. In
fact, when a massive rebellion
against British rule broke out in
1857, Bahadur Shah Zafar, the
Mughal emperor at the time, was
seen as the natural leader. Once
the revolt was put down by the
company, Bahadur Shah Zafar
was forced to leave the kingdom,
and his sons were shot in
cold blood.
chap 1-4.indd 9 4/22/2022 2:49:25 PM
Reprint 2024-25
10 OUR PASTS – III
East India Company
Comes East
In 1600, the East India
Company acquired a charter
from the ruler of England,
Queen Elizabeth I, granting
it the sole right to trade with
the East. This meant that
no other trading group in
England could compete with
the East India Company. With
this charter, the Company
could venture across the
oceans, looking for new lands
from which it could buy goods
at a cheap price, and carry them back to Europe to
sell at higher prices. The Company did not have to fear
competition from other English trading companies.
Mercantile trading companies in those days made profit
primarily by excluding competition, so that they could
buy cheap and sell dear.
The royal charter, however, could not prevent other
European powers from entering the Eastern markets.
By the time the first English ships sailed down the
west coast of Africa, round the Cape of Good Hope, and
crossed the Indian Ocean, the Portuguese had already
established their presence in the western coast of India,
and had their base in Goa. In fact, it was Vasco da
Gama, a Portuguese explorer, who had discovered this
sea route to India in 1498. By the early seventeenth
century, the Dutch too were exploring the possibilities
of trade in the Indian Ocean. Soon the French traders
arrived on the scene.
The problem was that all the companies were
interested in buying the same things. The fine qualities
of cotton and silk produced in India had a big market
in Europe. Pepper, cloves, cardamom and cinnamon
too were in great demand. Competition amongst the
European companies inevitably pushed up the prices
at which these goods could be purchased, and this
reduced the profits that could be earned. The only way
the trading companies could flourish was by eliminating
rival competitors. The urge to secure markets, therefore,
led to fierce battles between the trading companies.
Through the seventeenth and eighteenth centuries they
regularly sank each other’s ships, blockaded routes,
and prevented rival ships from moving with supplies of
Fig. 2 – Routes to India in the
eighteenth century
Mercantile – A business
enterprise that makes
profit primarily through
trade, buying goods
cheap and selling them at
higher prices
chap 1-4.indd 10 4/22/2022 2:49:26 PM
Reprint 2024-25
FROM TRADE TO TERRITORY 11
goods. Trade was carried on with arms and trading posts
were protected through fortification.
This effort to fortify settlements and carry on profitable
trade also led to intense conflict with local rulers. The
company therefore found it difficult to separate trade from
politics. Let us see how this happened.
East India Company begins trade in Bengal
The first English factory was set up on the banks of
the river Hugli in 1651. This was the base from which
the Company’s traders, known at that time as “factors”,
operated. The factory had a warehouse where goods for
export were stored, and it had offices where Company
officials sat. As trade expanded, the Company persuaded
merchants and traders to come and settle near the factory.
By 1696, it began building a fort around the settlement.
Two years later, it bribed Mughal officials into giving the
Company zamindari rights over three villages. One of these
was Kalikata, which later grew into the city of Calcutta
or Kolkata as it is known today. It also persuaded the
Mughal emperor Aurangzeb to issue a farman granting
the Company the right to trade duty free.
The Company tried continuously to press for
more concessions and manipulate existing privileges.
Aurangzeb’s farman, for instance, had granted only the
Company the right to trade duty free. But officials of
the Company, who were carrying on private trade on
the side, were expected to pay duty. This they refused
to pay, causing an enormous loss of revenue for Bengal.
How could the Nawab of Bengal, Murshid Quli Khan,
not protest?
Fig. 3 – Local boats bring goods
from ships in Madras, painted by
William Simpson, 1867
Farman – A royal edict,
a royal order
chap 1-4.indd 11 4/22/2022 2:49:27 PM
Reprint 2024-25
Page 4
From Trade to Territory
The Company Establishes Power
2
Aurangzeb was the last of the powerful Mughal rulers. He
established control over a very large part of the territory
that is now known as India. After his death in 1707,
many Mughal governors (subadars) and big zamindars
began asserting their authority and establishing regional
kingdoms. As powerful regional kingdoms emerged in
various parts of India, Delhi could no longer function as
an effective centre.
By the second half of the eighteenth century,
however, a new power was emerging on the political
horizon – the British. Did you know that the British
originally came as a small trading company and were
reluctant to acquire territories? How then did they come
to be masters of a vast empire? In this chapter you will
see how this came about.
Fig. 1 – Bahadur Shah Zafar
and his sons being arrested by
Captain Hodson
After Aurangzeb there was no
powerful Mughal ruler, but
Mughal emperors continued to
be symbolically important. In
fact, when a massive rebellion
against British rule broke out in
1857, Bahadur Shah Zafar, the
Mughal emperor at the time, was
seen as the natural leader. Once
the revolt was put down by the
company, Bahadur Shah Zafar
was forced to leave the kingdom,
and his sons were shot in
cold blood.
chap 1-4.indd 9 4/22/2022 2:49:25 PM
Reprint 2024-25
10 OUR PASTS – III
East India Company
Comes East
In 1600, the East India
Company acquired a charter
from the ruler of England,
Queen Elizabeth I, granting
it the sole right to trade with
the East. This meant that
no other trading group in
England could compete with
the East India Company. With
this charter, the Company
could venture across the
oceans, looking for new lands
from which it could buy goods
at a cheap price, and carry them back to Europe to
sell at higher prices. The Company did not have to fear
competition from other English trading companies.
Mercantile trading companies in those days made profit
primarily by excluding competition, so that they could
buy cheap and sell dear.
The royal charter, however, could not prevent other
European powers from entering the Eastern markets.
By the time the first English ships sailed down the
west coast of Africa, round the Cape of Good Hope, and
crossed the Indian Ocean, the Portuguese had already
established their presence in the western coast of India,
and had their base in Goa. In fact, it was Vasco da
Gama, a Portuguese explorer, who had discovered this
sea route to India in 1498. By the early seventeenth
century, the Dutch too were exploring the possibilities
of trade in the Indian Ocean. Soon the French traders
arrived on the scene.
The problem was that all the companies were
interested in buying the same things. The fine qualities
of cotton and silk produced in India had a big market
in Europe. Pepper, cloves, cardamom and cinnamon
too were in great demand. Competition amongst the
European companies inevitably pushed up the prices
at which these goods could be purchased, and this
reduced the profits that could be earned. The only way
the trading companies could flourish was by eliminating
rival competitors. The urge to secure markets, therefore,
led to fierce battles between the trading companies.
Through the seventeenth and eighteenth centuries they
regularly sank each other’s ships, blockaded routes,
and prevented rival ships from moving with supplies of
Fig. 2 – Routes to India in the
eighteenth century
Mercantile – A business
enterprise that makes
profit primarily through
trade, buying goods
cheap and selling them at
higher prices
chap 1-4.indd 10 4/22/2022 2:49:26 PM
Reprint 2024-25
FROM TRADE TO TERRITORY 11
goods. Trade was carried on with arms and trading posts
were protected through fortification.
This effort to fortify settlements and carry on profitable
trade also led to intense conflict with local rulers. The
company therefore found it difficult to separate trade from
politics. Let us see how this happened.
East India Company begins trade in Bengal
The first English factory was set up on the banks of
the river Hugli in 1651. This was the base from which
the Company’s traders, known at that time as “factors”,
operated. The factory had a warehouse where goods for
export were stored, and it had offices where Company
officials sat. As trade expanded, the Company persuaded
merchants and traders to come and settle near the factory.
By 1696, it began building a fort around the settlement.
Two years later, it bribed Mughal officials into giving the
Company zamindari rights over three villages. One of these
was Kalikata, which later grew into the city of Calcutta
or Kolkata as it is known today. It also persuaded the
Mughal emperor Aurangzeb to issue a farman granting
the Company the right to trade duty free.
The Company tried continuously to press for
more concessions and manipulate existing privileges.
Aurangzeb’s farman, for instance, had granted only the
Company the right to trade duty free. But officials of
the Company, who were carrying on private trade on
the side, were expected to pay duty. This they refused
to pay, causing an enormous loss of revenue for Bengal.
How could the Nawab of Bengal, Murshid Quli Khan,
not protest?
Fig. 3 – Local boats bring goods
from ships in Madras, painted by
William Simpson, 1867
Farman – A royal edict,
a royal order
chap 1-4.indd 11 4/22/2022 2:49:27 PM
Reprint 2024-25
12 OUR PASTS – III
How trade led to battles
Through the early eighteenth century, the conflict between
the Company and the nawabs of Bengal intensified.
After the death of Aurangzeb, the Bengal nawabs
asserted their power and autonomy, as other regional
powers were doing at that time. Murshid Quli Khan
was followed by Alivardi Khan and then Sirajuddaulah
as the Nawab of Bengal. Each one of them was a strong
ruler. They refused to grant the Company concessions,
demanded large tributes for the Company’s right to
trade, denied it any right to mint coins, and stopped it
from extending its fortifications. Accusing the Company
of deceit, they claimed that the Company was depriving
the Bengal government of huge amounts of revenue and
undermining the authority of the nawab. It was refusing
to pay taxes, writing disrespectful letters, and trying to
humiliate the nawab and his officials.
The Company on its part declared that the unjust
demands of the local officials were ruining the trade of
the Company, and trade could flourish only if the duties
were removed. It was also convinced that to expand trade,
it had to enlarge its settlements, buy up villages, and
rebuild its forts.
The conflicts led to confrontations and finally culminated
in the famous Battle of Plassey.
The Battle of Plassey
When Alivardi Khan died in 1756, Sirajuddaulah became
the nawab of Bengal. The Company was worried about his
power and keen on a puppet ruler who would willingly
give trade concessions and other privileges. So it tried,
though without success, to help one of Sirajuddaulah’s
rivals become the nawab. An infuriated Sirajuddaulah
asked the Company to stop meddling in the political
affairs of his dominion, stop fortification, and pay the
revenues. After negotiations failed, the Nawab marched
with 30,000 soldiers to the English factory at Kassimbazar,
captured the Company officials, locked the warehouse,
disarmed all Englishmen, and blockaded English ships.
Then he marched to Calcutta to establish control over the
Company’s fort there.
On hearing the news of the fall of Calcutta,
Company officials in Madras sent forces under the
command of Robert Clive, reinforced by naval fleets.
Prolonged negotiations with the Nawab followed. Finally,
in 1757, Robert Clive led the Company’s army against
Sirajuddaulah at Plassey. One of the main reasons for
Did you know?
Did you know how Plassey
got its name? Plassey is an
anglicised pronunciation
of Palashi and the place
derived its name from the
palash tree known for its
beautiful red flowers that
yield gulal, the powder
used in the festival of Holi.
Fig. 4 – Robert Clive
Puppet – Literally, a toy
that you can move with
strings. The term is used
disapprovingly to refer to
a person who is controlled
by someone else.
chap 1-4.indd 12 4/22/2022 2:49:28 PM
Reprint 2024-25
Page 5
From Trade to Territory
The Company Establishes Power
2
Aurangzeb was the last of the powerful Mughal rulers. He
established control over a very large part of the territory
that is now known as India. After his death in 1707,
many Mughal governors (subadars) and big zamindars
began asserting their authority and establishing regional
kingdoms. As powerful regional kingdoms emerged in
various parts of India, Delhi could no longer function as
an effective centre.
By the second half of the eighteenth century,
however, a new power was emerging on the political
horizon – the British. Did you know that the British
originally came as a small trading company and were
reluctant to acquire territories? How then did they come
to be masters of a vast empire? In this chapter you will
see how this came about.
Fig. 1 – Bahadur Shah Zafar
and his sons being arrested by
Captain Hodson
After Aurangzeb there was no
powerful Mughal ruler, but
Mughal emperors continued to
be symbolically important. In
fact, when a massive rebellion
against British rule broke out in
1857, Bahadur Shah Zafar, the
Mughal emperor at the time, was
seen as the natural leader. Once
the revolt was put down by the
company, Bahadur Shah Zafar
was forced to leave the kingdom,
and his sons were shot in
cold blood.
chap 1-4.indd 9 4/22/2022 2:49:25 PM
Reprint 2024-25
10 OUR PASTS – III
East India Company
Comes East
In 1600, the East India
Company acquired a charter
from the ruler of England,
Queen Elizabeth I, granting
it the sole right to trade with
the East. This meant that
no other trading group in
England could compete with
the East India Company. With
this charter, the Company
could venture across the
oceans, looking for new lands
from which it could buy goods
at a cheap price, and carry them back to Europe to
sell at higher prices. The Company did not have to fear
competition from other English trading companies.
Mercantile trading companies in those days made profit
primarily by excluding competition, so that they could
buy cheap and sell dear.
The royal charter, however, could not prevent other
European powers from entering the Eastern markets.
By the time the first English ships sailed down the
west coast of Africa, round the Cape of Good Hope, and
crossed the Indian Ocean, the Portuguese had already
established their presence in the western coast of India,
and had their base in Goa. In fact, it was Vasco da
Gama, a Portuguese explorer, who had discovered this
sea route to India in 1498. By the early seventeenth
century, the Dutch too were exploring the possibilities
of trade in the Indian Ocean. Soon the French traders
arrived on the scene.
The problem was that all the companies were
interested in buying the same things. The fine qualities
of cotton and silk produced in India had a big market
in Europe. Pepper, cloves, cardamom and cinnamon
too were in great demand. Competition amongst the
European companies inevitably pushed up the prices
at which these goods could be purchased, and this
reduced the profits that could be earned. The only way
the trading companies could flourish was by eliminating
rival competitors. The urge to secure markets, therefore,
led to fierce battles between the trading companies.
Through the seventeenth and eighteenth centuries they
regularly sank each other’s ships, blockaded routes,
and prevented rival ships from moving with supplies of
Fig. 2 – Routes to India in the
eighteenth century
Mercantile – A business
enterprise that makes
profit primarily through
trade, buying goods
cheap and selling them at
higher prices
chap 1-4.indd 10 4/22/2022 2:49:26 PM
Reprint 2024-25
FROM TRADE TO TERRITORY 11
goods. Trade was carried on with arms and trading posts
were protected through fortification.
This effort to fortify settlements and carry on profitable
trade also led to intense conflict with local rulers. The
company therefore found it difficult to separate trade from
politics. Let us see how this happened.
East India Company begins trade in Bengal
The first English factory was set up on the banks of
the river Hugli in 1651. This was the base from which
the Company’s traders, known at that time as “factors”,
operated. The factory had a warehouse where goods for
export were stored, and it had offices where Company
officials sat. As trade expanded, the Company persuaded
merchants and traders to come and settle near the factory.
By 1696, it began building a fort around the settlement.
Two years later, it bribed Mughal officials into giving the
Company zamindari rights over three villages. One of these
was Kalikata, which later grew into the city of Calcutta
or Kolkata as it is known today. It also persuaded the
Mughal emperor Aurangzeb to issue a farman granting
the Company the right to trade duty free.
The Company tried continuously to press for
more concessions and manipulate existing privileges.
Aurangzeb’s farman, for instance, had granted only the
Company the right to trade duty free. But officials of
the Company, who were carrying on private trade on
the side, were expected to pay duty. This they refused
to pay, causing an enormous loss of revenue for Bengal.
How could the Nawab of Bengal, Murshid Quli Khan,
not protest?
Fig. 3 – Local boats bring goods
from ships in Madras, painted by
William Simpson, 1867
Farman – A royal edict,
a royal order
chap 1-4.indd 11 4/22/2022 2:49:27 PM
Reprint 2024-25
12 OUR PASTS – III
How trade led to battles
Through the early eighteenth century, the conflict between
the Company and the nawabs of Bengal intensified.
After the death of Aurangzeb, the Bengal nawabs
asserted their power and autonomy, as other regional
powers were doing at that time. Murshid Quli Khan
was followed by Alivardi Khan and then Sirajuddaulah
as the Nawab of Bengal. Each one of them was a strong
ruler. They refused to grant the Company concessions,
demanded large tributes for the Company’s right to
trade, denied it any right to mint coins, and stopped it
from extending its fortifications. Accusing the Company
of deceit, they claimed that the Company was depriving
the Bengal government of huge amounts of revenue and
undermining the authority of the nawab. It was refusing
to pay taxes, writing disrespectful letters, and trying to
humiliate the nawab and his officials.
The Company on its part declared that the unjust
demands of the local officials were ruining the trade of
the Company, and trade could flourish only if the duties
were removed. It was also convinced that to expand trade,
it had to enlarge its settlements, buy up villages, and
rebuild its forts.
The conflicts led to confrontations and finally culminated
in the famous Battle of Plassey.
The Battle of Plassey
When Alivardi Khan died in 1756, Sirajuddaulah became
the nawab of Bengal. The Company was worried about his
power and keen on a puppet ruler who would willingly
give trade concessions and other privileges. So it tried,
though without success, to help one of Sirajuddaulah’s
rivals become the nawab. An infuriated Sirajuddaulah
asked the Company to stop meddling in the political
affairs of his dominion, stop fortification, and pay the
revenues. After negotiations failed, the Nawab marched
with 30,000 soldiers to the English factory at Kassimbazar,
captured the Company officials, locked the warehouse,
disarmed all Englishmen, and blockaded English ships.
Then he marched to Calcutta to establish control over the
Company’s fort there.
On hearing the news of the fall of Calcutta,
Company officials in Madras sent forces under the
command of Robert Clive, reinforced by naval fleets.
Prolonged negotiations with the Nawab followed. Finally,
in 1757, Robert Clive led the Company’s army against
Sirajuddaulah at Plassey. One of the main reasons for
Did you know?
Did you know how Plassey
got its name? Plassey is an
anglicised pronunciation
of Palashi and the place
derived its name from the
palash tree known for its
beautiful red flowers that
yield gulal, the powder
used in the festival of Holi.
Fig. 4 – Robert Clive
Puppet – Literally, a toy
that you can move with
strings. The term is used
disapprovingly to refer to
a person who is controlled
by someone else.
chap 1-4.indd 12 4/22/2022 2:49:28 PM
Reprint 2024-25
FROM TRADE TO TERRITORY 13
the defeat of the Nawab was that the forces led by Mir Jafar, one
of Sirajuddaulah’s commanders, never fought the battle. Clive had
managed to secure his support by promising to make him nawab after
crushing Sirajuddaulah.
The Battle of Plassey became famous because it was the first major
victory the Company won in India.
Fig. 5 – The General
Court Room, East
India House,
Leadenhall Street
The Court of
Proprietors of the
East India Company
had their meetings
in the East India
House on Leadenhall
Street in London.
This is a picture of
one of their meetings
in progress.
The promise of riches
The territorial ambitions of the mercantile East India
Company were viewed with distrust and doubt in England.
After the Battle of Plassey, Robert Clive wrote to William
Pitt, one of the Principal Secretaries of State to the English
monarch, on 7
January 1759 from Calcutta:
But so large a sovereignty may possibly be an object too
extensive for a mercantile Company … I flatter myself
… that there will be little or no difficulty in obtaining
the absolute possession of these rich kingdoms: ... Now
I leave you to judge, whether an income yearly of two
million sterling with the possession of three provinces
… be an object deserving the public attention ...
Source 1
Fig. 6 – Sirajuddaulah
chap 1-4.indd 13 4/22/2022 2:49:30 PM
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