The East India Company: The World's Most Powerful Corporation (The Story of Indian Business) (12 page)

Contracts with the weavers also suffered from the perennial suspicion of fraud. The system of buying cloth went through four stages in the entire period between 1620–1800. In the beginning, the Company simply bought cloth in the way it bought pepper in Southeast Asia, that is, from markets and bazaars. By the 1680s, contractual deals were made with a number of merchants who came to the factory with samples. The Masulipatnam consultations were written in this phase. In the early eighteenth century, the Company preferred to deal mainly with the chief brokers, or substantial merchants. After the Company became a ruler of Bengal, it tried to replace the independent merchant-contractors with paid employees. In this way, over time, the contractual ties between the trader and the producer strengthened in place of spot market purchases, and a more diverse group of middlemen got involved in the textile business.

Enforcement of contract was a serious problem. In the textile trade, delivery time was never predictable. Weavers routinely contracted with more buyers than they could supply to. Goods were diverted from contract sales to other bidders, from contract to spot markets, from the Company to private traders, and in Bengal, the Dutch and the English were played off against one another. The absence of a system of laws governing contractual sale made the Company overly dependent on the broker. And when the broker shifted the blame on the weaver for delays in delivery, the officers could only fret in impotent rage.

The European private traders functioned in much the same way as the Company did, that is, they too hired agents. But they operated on a smaller scale than the chartered firms. And therefore, the relationship between the Europeans and the Indian agents worked rather more like a partnership than as an employer-employee one. As soon as he landed in Calcutta, the aspiring private trader would seek the help of friends in hiring ‘writers’ (clerks) and ‘banyans’ (agents). Those who arrived with substantial resources would be besieged by candidates for banyanship, ‘quarreling like vultures for
their prey’, a Madras merchant explained. At the end of the eighteenth century in Bengal, it was usual for the writers to come from the Anglo-Indian society, and the banyan to be a Bengali. According to Stavorinus, the banyan’s job was to ‘note down all payments and receipts’, and through his hands, ‘all pecuniary matters go, as well as buying and selling’. They did not necessarily receive salaries, but ‘they know how much more they may charge upon every rupee, than they have in reality paid.’ Once again, suspicion of unfair prices was built into a relationship of dependence.

In the Company’s correspondence, the business relation between Indians and Europeans were called ‘contract’ or ‘compact’ and some of the frictions that arose were called breach of contract. The word had no known Indian counterpart in the context of sale of goods. For all we know, the term was introduced in a one-sided manner by the Europeans. Clearly, this was so because large-scale purchase of any commodity on an advanced agreement by so large a firm was, if not an unknown form of exchange in India, certainly quite rare. It needed a new term.

The system of ordering and receiving cloth involved
elaborate written contracts between the chiefs of Bombay, Madras or Calcutta, and the merchants and master-weavers, specifying quantity, price, dimension, quality, advance payment and wages paid to the helping hands. When goods were delivered at the factory, senior officers examined the cargo and satisfied themselves that the terms of the contract had been fulfilled. In later years, ‘contract’ was extended to a wide variety of exchanges, for example, promises made by the Banjara caravan runners to supply grain to the Company’s army. The insistence upon a written contract might seem surprising given that there was no law in India to deal with breach of contract. What good did a contract do then? In part, the contract made book-keeping easier. The head office in London did not trust its employees in India, and hence insisted on an unusual volume of paperwork. Moreover, the contract served as a binding moral obligation to some extent. Breaking a sale contract, if not exactly punishable under the Islamic law in force, was condemned as a sinful action.

In this way, a whole new world of business was created via the Company in the three port towns and the hinterland as well. Within India, the most far-reaching effect was seen in the unorthodox forms of business partnerships that this world made possible. Individuals without a family history of business entered business.
Indians joined Europeans in running firms. Eventually, such collaborations made these cities ideal sites for large-scale factories, which drew capital, enterprise and institutional support from many of the same groups who had been nurtured by Indo-European trade. Despite the advantages for both parties the principal-agent relations that developed around the Company were also fraught with discord and dispute. While it would be farfetched to attribute the drive to colonize India to these discords, it cannot be denied that colonization did bring down the frequency of discords.

The immediate impetus to colonization, however, was the state of warfare in India.

A fleet of East Indiamen at sea, 1803, painting by Nicholas Pocock. A fleet returning from China, the group is dominated by the Hindostan, a large East Indiaman of 1248 tons, built in 1796.
© National Maritime Museum, London.

IN 1707, EMPEROR Aurangzeb died. The vast empire the Mughals had ruled over for 180 years was on a decline and many provinces broke away to form independent states. Former provinces of the empire like Awadh, Hyderabad and Bengal became independent kingdoms, the Marathas based in western Maharashtra established dominions over Mughal provinces in Malwa, Berar and Bundelkhand and Rajput and Nayaka warlords consolidated their authority over smaller bits of territory in western and southern India.

This political turmoil was one of the factors for the emergence of English power in India. Both for safeguarding the Company’s and their own interests as private traders, the Company employees began to take an active interest in Indian politics. Although initially they managed to maintain a distance from the turmoil,
it was impossible for them to stay aloof for very long. In Bombay, there was a conflict with the Mughals over piracy in the 1690s. In Bengal, by the last years of Aurangzeb’s reign, the Company had a considerable commercial stake, which led to disputes with the local authorities. The entry of the rival London Company occurred at the same time that Aurangzeb’s grandson Azimusshan was appointed viceroy of Bengal. Azimusshan, a competent and successful military commander, first collected money from both the rivals and then decided that he could do better for himself by taking over the trading monopoly in Bengal. The English decide to tackle the threat by opening diplomatic relations with the Crown in Delhi and quietly arming themselves at the same time.

More than the external factors, it was the very functioning and structure of the Company in the eighteenth century that consolidated its political character. In their role as private traders, the employees interacted closely with local rulers, Indian merchants and landlords, often without the knowledge of the headquarters in London. Acquainted well with ground realities, these commercially ambitious employees had a deep understanding of local political situations. They had as allies the officers of the army that had been formed to guard the three territorial possessions of
Madras, Bombay and Kolkata. Alike in terms of social origin, these two groups shared similar ambitions and sometimes jointly planned undertakings to make money for the Company and for themselves. Many of their actions from 1746 onwards did not follow orders from the administrators in London.

This chapter describes the transformation of the Company into a war machine during that momentous time in Indian history, the eighteenth century.

It was Anglo–French rivalry in the European theatre that upset what was until 1740 a barely stable equilibrium in India.

Of the major maritime nations in Western Europe, the French were the last to enter the race for India. One early initiative in 1604 came to nothing because of infighting. A second one in 1615 was too heavily dependent on Dutch sailors for its own good. In the next twenty years, a loosely organized effort to build a trading station in Madagascar did not yield any results. However, small settlements began in the islands of Mauritius, Reunion and Mascarenhas in the Indian Ocean. When La Compagnie des Indes was reconstituted in 1642, Madagascar was again a focal point as a possible base for
a slave trade. But little was achieved except serious enmity with the inhabitants.

In 1661, Jean-Baptiste Colbert took over the reins of the French treasury. A merchant and banker by background, Colbert’s priorities were the navy and overseas trade. A new company was formed in 1666, and the very next year the first mission to India set off. Certain events in the next five years led to strengthening of the French presence in India. Survivors of a bloody encounter in Madagascar in 1672 joined colleagues in India, bolstering the French manpower here. After trying to erect a fort in a number of places, from where the Dutch shooed them away, the French under François Martin (1634–1706) succeeded in building a fort in Pondicherry. In 1740, the French settlements in the Indian Ocean region consisted of the islands Pondicherry and Karaikal on the Coromandel, Mahé on the Malabar coast and Chandannagore in Bengal.

When hostilities broke out between the English and the French in Europe during the war of the Austrian succession, two French stalwarts dominated the politics in the Indian Ocean. In 1742, Joseph François Dupleix (1697–1763) was appointed the governor general of all French possessions in India. Marquis Dupleix, the scion of a landowning family, enlisted on a French Company ship when eighteen years old, built a large personal
fortune, and briefly headed the mission in Bengal before taking over as the overall commander. What made him a special kind of leader was the ambition to establish French hegemony in Coromandel by military means. To this effect, he overhauled the army and looked for opportunities to form an alliance against the English. The other key individual was Bertrand-François Mahé de La Bourdonnais (1699–1753). Having distinguished himself as a naval officer in the employment of the French Company from 1718 to 1724, La Bourdonnais took up French government service and was deputed to the governorship of the islands in 1735.

These two lines, Dupleix and La Bourdonnais, joined in the Carnatic, a state located in the region presently bordering Tamil Nadu and Karnataka. In the previous sixty years, this region had been the theatre of a power struggle between the Telugu Nayakas, the states of Golkonda, Bijapur and the Marathas. Eventually a vassal of the Hyderabad state established a dynastic rule here. In 1740, a succession dispute broke out in the ruling family. The English in Madras and the French in Pondicherry were both worried about political instability in the region. Spurred by enmity in Europe, they took sides in the dispute and started a proxy war. Between 1746 and 1748, the British suffered reverses. They had to give up Madras and start a settlement in
Fort St David, a few miles to the south of Pondicherry. When peace was declared in Europe, and Madras was returned to the Company, the nervous leaders of Madras decided that their own well-being did not depend on following orders from London. Instead it lay in becoming a stronger military force. Robert Clive, a young clerk in Madras who had distinguished himself in the battles, soon had a voice in the push for autonomy.

In 1748, the palace dispute flared up again. The British sided with a claimant to the throne, Muhammad Ali, whereas the French backed Chanda Sahib, the rival. The Company gave shelter to the young prince in Madras, awarding an estate (jagir) for his upkeep. The jagir amounted to no more than two villages, but the gesture irritated the policymakers in London who wanted to keep out of local wrangling. Between 1749 and 1754, a series of disorderly battles were fought near Tiruchirappalli, with participation of European commanders and mercenaries on both sides. In these battles, which came to be known as the Second Carnatic Wars, the French side lost. Muhammad Ali, now with the additional title Walajah, assumed kingship of the Carnatic.

The Carnatic Wars had little effect on the political future of India, but it changed the character of the Company in Madras from a trading to a military entity.
Dupleix welcomed the shift, thinking that the Company was writing its own death warrant by committing itself to expensive deals at home and military adventures abroad. He told Ananda Ranga Pillai, ‘The English Company is bound to die out. It has long been in an impecunious condition, and what it had to its credit has been lent to the King, whose overthrow is certain … Mark my words.’ Upon this calculation, Dupleix waited for the right moment to deliver the mortal blow. The third and final encounter between the English and the French erupted in the wake of the Seven Years War. Clive was one of the commanders on the English side. The French army was led by a royal officer Thomas Arthur, or Comte de Lally, the son of an Irish Jacobite and a French noblewoman. In the decisive encounter in Wandiwash in 1760, the French were defeated. Clive was now a kingmaker.

The negotiations leading up to the signing of the Treaty of Paris in 1763 became an occasion when disagreements between London and India came out in the open. The British government, for the first time, represented the East India Company to bring Indian territorial questions in a European forum. But it did not fully understand the clauses that Clive wanted to impose upon the French, which would guarantee an almost total French retreat in India. The directors of the
Company, represented by Laurence Sullivan, took a mediatory role. Their heart was with Clive, but their mind, guided as it was by mercantile considerations, dictated caution. In the end, Clive prevailed, but not before the relations between Clive and the Company had soured beyond repair. The treaty ensured that the French military power in India would be destroyed. The three heroes of the French political mission in India, La Bourdonnais, Dupleix and de Lally, faced severe criticism at home for adventures that had cost the treasury and the French Company an enormous sum of money. La Bourdonnais had already lost his property, was imprisoned, and died in poverty in 1753. Dupleix, who had staked his personal fortune on the Indian mission, went bankrupt and died unknown and poor in 1763. De Lally was executed in 1766.

In the Carnatic, the Company was a proxy for local dynastic struggles, whose outcomes were often unknown. The real test of Clive’s generalship was Bengal, where the Company confronted a strong army.

Hailing from a minor gentry family of Shropshire overburdened with numerous children, Robert Clive (1725–74) grew up more or less away from home in the
care of relatives and in boarding schools. As a young boy not known for his diligent scholarship, he had an adventurous and aggressive temperament. Having been trained in bookkeeping, a clerkship with the Company must have been a coveted and natural move. But the life of a ledger clerk in Madras bored him no end. Suffering from depression he attempted suicide but survived only because the pistol jammed. Amidst such gloominess, the Carnatic Wars came in as a breath of fresh air. When the wars ended, his superior, Stringer Lawrence, procured for him a commissariat job, which entailed a large private income for an entrepreneurial person. Clive built his fortune while still suffering from bouts of depression. In 1753, he married in Fort St David and returned with his wife to England. He had just settled down to the life of a politician when Clive was offered the position of governor of Fort St David.

Within months of his arrival, reports of a massacre of British officers and merchants of Calcutta reached Fort St David. Calcutta, it was reported, had been attacked by the nawab of Bengal, Siraj-ud-Daula, leading to a flight and genocide. How did things come to such a pass?

In Bengal, Aurangzeb’s death had left little lasting political effect. One of his most efficient administrators, Murshid Quli Khan, continued to rule as the nawab,
slowly breaking free from obligations to the court at Delhi. At Murshid Kuli’s death in 1727, Bengal was nominally a Mughal province, but practically an independent state. Despite minor frictions, these events in Bengal politics did not trouble the English much. The nawabs were preoccupied. Murshid Kuli’s main worry was the zamindars, who had grown too powerful during the collapse of the empire. His successors were harassed by Maratha raids. On their part, the English needed to keep leading courtiers in good humour because the Company could not get anywhere without the help of the nawab and his advisers. The system of currency and coinage, for example, was largely controlled by the firm of Jagatseth under state license; for any financial transaction the English necessarily had to appeal to him.

In the 1740s, the Maratha army of Berar attacked Bengal, seeking a share of the revenues. The nawab Alivardi Khan could do little to defend his territory from the repeated raids in western Bengal. When refused money by the king, the ill-disciplined mercenaries ransacked the villages, raided granaries and merchant homes, and abducted village women. The nightmarish memory of these raids still lives on in Bengali folklore. While these raids embarrassed the state and impoverished the people, Calcutta was growing in prosperity, population and military strength, very largely because
of the raids. Unlike the other European factories that were located on the west bank of the river Hooghly, and therefore exposed to Maratha attacks, Calcutta was wisely situated on the east bank. In addition to the natural barrier of the river, the authorities dug a moat that they named Maratha Ditch. The moat was later filled to make for the Circular Road.

Calcutta in 1750 was not a pretty town. Swampy, dirty and disease-ridden, the city had a high death rate, so bad indeed that a Dutch visitor in the 1730s called it Golgotha. With all its ugliness, it was a haven of safety as well as a flourishing centre of trade. Between 1704 and 1756, the profit of the Company’s estate in Calcutta had risen from less than Rs 500 to more than Rs 3000, the population of the city from 10,000 to 400,000, and the area of human settlement from eighty to 1600 acres. The rise in revenues from the markets enabled better policing of the city and measures to secure the defence in case of a Maratha attack. Attracted by the strong defence, a large number of Indian merchants, artisans and elite literate families resettled in Calcutta. It was not just a Company town any more; Calcutta was fast becoming the centre of Bengali enterprise and culture. The families of two illustrious Bengalis of late-eighteenth-century Calcutta, Nabakrishna Deb and Ramdulal Dey, were driven out of their ancestral homes
in western Bengal by the Maratha raiders and took refuge in Calcutta in this time. In later life, Nabakrishna distinguished himself as an administrator under the English, and Ramdulal as a merchant. A number of other prominent Bengalis worked as administrators of the zamindari estate of Calcutta.

In this way, for some time, the nawab had been getting weaker and the Company stronger when the relationship soured rather suddenly in 1756. The bone of contention was the operation of English private traders in Bengal, who used the Company’s license to refuse paying customs duty. The attack on Calcutta was the nawab’s nervous remedy for the insolence of the English traders.