Honourable Company: A History of The English East India Company

by John Keay

  Penang would prove ideal neither as a commercial emporium for the produce of the archipelago, nor as a half-way house on the route to China, nor even as a naval base in the Bay of Bengal. But it would slowly acquire the security and permanence which had eluded Negrais and Balambangan. From Penang political and commercial opportunities would tempt the Company to intervene on the Malay peninsula and to exploit the weakness of the Dutch in the archipelago. And on Prince of Wales Island Thomas Stamford Raffles would take up his first overseas post. All that stood between Penang and Singapore was just over 300 miles of dazzling coastline and just over thirty years of burgeoning trade, plus the global repercussions of the Napoleonic Wars.

  CHAPTER SEVENTEEN

  The Transfer of Power

  LONDON AND BENGAL

  Turning again from the tinkling East to the ever grinding importunity of India, it is as if the East India Company were now in fact two companies, one maritime, the other continental; one commercial, the other territorial; one East, the other India. This dualism could conceivably be traced back to the Company’s origins and the rival establishments at Bantam and Surat; or indeed forward to the Victorian juxtaposition of, on the one hand, a free trade or ‘informal’ empire of the seas with, on the other, that colossal landed dominion that was ‘our Indian empire’.

  Tempting as it is, such theorizing would, though, be as misplaced as the commoner fallacy of concentrating on one of these strands to the neglect of the other. For it is only in the late eighteenth century that anything like parity between them emerges. Thanks as much to the ever expanding China trade as to political developments in Bengal, then indeed the Company seemed to be straddling two horses. Inevitably questions began to be asked; should it continue purely as a mercantile association and follow the suggestions eagerly proffered by the likes of Dalrymple for opening up China, the Pacific, and even Australia and north-west America? Or should it abjure such speculative markets and embrace what seemed the surer prospect of trade and revenue on the Indian subcontinent?

  Logically Clive had surely been right when in that letter to Pitt (Chatham) of 1759 he had urged the idea that ‘so large a sovereignty’ as was available in Bengal was ‘too extensive for a mercantile company’ and required ‘the nation’s assistance’. Like a building contractor whose excavations had unexpectedly unearthed some fabulous city, it was appropriate that the Company should be relieved of responsibility for its ‘find’ by those who understood how to manage such things. Let it instead concentrate on that for which it was constituted – ‘trading to the East Indies’ – and let the business of sovereignty and government be left to sovereign governments.

  But in fact, and for reasons that will be examined, precisely the opposite would occur. If, as an independent mercantile association, the Company was ill equipped for ‘so large a sovereignty’ as India, the solution that transpired was that it should be restrained and reformed until eventually it ceased to be either independent or mercantile and became instead a manageable and responsible administrative service. It was like designating the building contractor as a preservation society, dressing the brickies up as curators and expecting the digger-drivers to switch to trowels. The whole idea was crazy; unsurprisingly its implementation would prove slow, painful, and fraught with misery both for the Company and the people of Bengal.

  Whoever considers the nature of our territorial acquisitions in the East Indies and the constitution of the several Courts of Proprietors and Directors [of the Company] by which they are governed, will, if he is a wise man, see, and if he is an honest man, confess, that nothing can be more absurd and preposterous than the present system.

  Thus wrote John Robinson, Secretary to the Treasury and the British government’s leading authority on Indian affairs in the 1770s. Yet ‘absurd and preposterous’ as it was, Robinson was adamant ‘that the Government should not take the management of these acquisitions into its own hands’. He gave five reasons. He could not see how the Bengal acquisitions could be ‘properly’ transferred, that is, without infringing the Company’s chartered rights; he was against severing the commerce of Bengal from its administration because it was only through trade that the Bengal revenue could find its way to Britain; and he was ‘violently against’ any arrangement which would make the British government and the British exchequer responsible for Indian commitments.

  This last concern was undoubtedly prompted by current experience of the American colonies. Indeed another of Robinson’s reasons for not wanting the Government to take on direct responsibility for India was that it already had one colonial revolt on its hands without inviting another. Had the whole Indian debate not coincided precisely with the loss of Britain’s first overseas empire in America it might well have taken a very different path. It would certainly have been conducted with less caution and less passion. But what was happening in North America dictated what must not happen in India. Hence, while ducking direct involvement by the Government, Robinson insisted that the independence of the Company and the ‘democratic’ nature of its shareholders must be suppressed.

  Finally he suggested that, since there were bound to be ‘errors’ in the management of such distant acquisitions, it was convenient that the Company’s directors should remain the scapegoats rather than the King’s ministers. In fact, given that these same ministers could scarcely command respect and authority at home, he thought that Leadenhall Street, once reformed, would be in a much better position to run Bengal than would Whitehall.

  Robinson was writing in the context of Lord North’s ailing administration; but he could just as well have been referring to any of its weak predecessors or its immediate successors. This was an age of ministries rather than governments, each representing a coalition of factions rather than parties, and each serving self-interest rather than principle. In England notions of public service were scarcely more developed than in India. Office, however transitory, was seen more as a reward than a responsibility and incumbents agonized more over the dispensing of its perquisites than over the mastering of its paperwork. Direct state administration of Bengal promised to be no more disinterested and distinctly less consistent than Company administration. Indeed the great fear, voiced by both Government and Company, was that a state takeover would confer such a reservoir of desirable patronage on the King and his ministers as to enable them to buy off all opposition and thus subvert the constitution and possibly subordinate domestic priorities to the exigencies of Indian policy.

  Looked at in retrospect, then, one might conclude that the Company was ‘set up’. If the prospects for corruption, exploitation, mismanagement and censure made Bengal too hot to handle for the Government, it was obvious that an association of self-confessed fortune-seekers would be virtually incinerated. Echoing Burke, imperial historians would invariably shudder and blush over the enormities perpetrated by the Company’s servants in the aftermath of Plassey. Misappropriation was commonplace; so were extortion and outright oppression. But it is noteworthy that at the time, and well into the 1780s, Burke himself remained silent. He wholly approved of the Company’s rule, vigorously supported it during the debates on the 1773 Regulating Act, and let fly with his first salvoes of indignation only when the worst abuses had been curbed and the main culprits replaced. Thus Warren Hastings, his chosen target, is now generally regarded not as the dragon who laid low the Bengali economy but as the St George who by ending the most draconian ravages laid the foundations of a more equitable empire.

  Faced with the bonanza that was Bengal, it was inevitable that riot should precede rule and that flagrant grounds for state intervention would result. But what is surprising is that state intervention was initially so casual and counter-productive as to suggest collusion; and that eventually the Company in India was so successful in conducting its own reform that, by the time state intervention was formalized, the Company’s administration was well on the way to becoming a model of its kind and indeed the envy of Whitehall.

  The troubles may be s
aid to have started with the return from Bengal in 1760 of a sick but vengeful Clive determined to employ fame and fortune in acquiring in England the eminence he had recently enjoyed in Bengal. At first he stood aloof from Company politics just as in Calcutta he had considered himself above the squabbles of the Bengal Council. But he had not forgotten the directors’ carping criticism of his administration; nor had the directors, although probably ignorant of his secret correspondence with Pitt, forgotten that scathing response, signed by Clive, in which the Bengal councillors accused them of listening to knaves and dwelling on ‘mere inadvertencies and casual neglects’. For such unheard-of defiance all the other signatories were now dismissed. But many, like Clive, were already heading home with fortunes made and grievances festering. It was they who would make the running while Clive waited in the wings, convalescing and accumulating influence including an Irish peerage, a seat in the Commons, and a modest parliamentary following.

  With good reason to fear an inquisition into the source of their instant wealth, the returnees – soon known as the ‘Bengal Club’ and then the ‘Bengal Squad’ – were fortunate to find in Leadenhall Street a Company which behind its sober new frontage was already in some disarray. Entering the labyrinth now commonly known as ‘India House’, the Bengal Squad therefore made straight for the source of this disturbance by wheeling right for the double doors and doubtful acoustics of the General Court Room. Here, in the largest of the building’s public rooms, the twenty-four directors (previously ‘committees’) seated in line behind the bar confronted their shareholders, now known as ‘proprietors’, who packed the opposing tiers of benches.

  Since the formation of the United Company (following the amalgamation of the New and Old Companies) the General Court, or Court of Proprietors, met quarterly, its function being to rubber-stamp policy decisions, approve the dividend, and elect the directors from a previously agreed list. Anyone with more than £500 of Company stock was currently entitled to vote and, although many of the proprietors represented particular ‘interests’, or syndicates (concerned with shipping, finance, etc), the directors could expect to control them thanks to their monopoly of patronage. In other words they ‘managed’ the General Court just as the government of the day ‘managed’ Parliament – by the judicious distribution of perquisites and offices. But in 1758 this cosy equilibrium had broken down with a split amongst the directors, an appeal from the disappointed minority to the proprietors, and a hotly contested election.

  The victor was the formidable if unexciting Lawrence Sulivan, a one-time Bombay councillor described by H. H. Dodwell as ‘a man without an idea in advance of the low level of his time’. This is true only in so far as Sulivan, by resisting Clive and betraying no sympathy with the idea of a Crown dominion in India, would find few champions amongst the historians of British India. On the other hand his integrity was unimpeachable, which in the ‘low level of his time’ is more than can be said for most. He understood the Company’s business thoroughly, respected its traditions, and for the next twenty years would aggressively champion its traditional role as an independent mercantile enterprise.

  Of the gold-digging Bengal servants he ever disapproved and the 1758 controversy had in fact arisen over who should succeed Clive as President Governor in Bengal. Its bitterness was a clear indication of the enormous value that now attached to Indian patronage. In Bengal, and to a lesser extent in the Carnatic, the Company was seen to have in its gift a dazzling new array of appointments by means of which aspirants, whether civilian or military and regardless of age, experience or ability, could expect to acquire such wealth as would sustain the comforts of opulence and the fruits of influence for several generations to come. Calcutta had become a veritable Klondike; the stampede was on. In Burke’s emotive phrasing of twenty years later, ‘animated with all the avarice of age, and all the impetuosity of youth, they roll in [to Bengal] one after another; wave upon wave; and there is nothing before the eyes of the natives but an endless, hopeless, prospect of new flights of birds of prey and passage, with appetites continually renewing for a food that is continually wasting…’

  Such rampant profiteering was taking its toll of the Company as well as India. Already the directors, who met round a handsome horseshoe table in a chamber adjacent to the General Court Room, had shown their disapproval of the vast presents being dispensed by the Nawab and of the misuse of dastak, both of which diverted specie from the Bengal treasury into English pockets. They had also protested against the deluge of bills of exchange reaching London whereby their servants remitted home this same specie, in effect lending money to the Company in India against repayment, with interest, in London. With the Bengal land revenues foreseen by Clive proving hard to collect and being readily absorbed by military costs, this source of Indian finance helped to pay for the Company’s commercial purchases in India without the need to export silver. But silver was needed more than ever for the China trade, and whatever saving was being made in respect of Bengal was offset by the need to meet those bills of exchange in London. Thus the Company was experiencing severe and worsening financial embarrassment at the very moment when its erstwhile servants of the Bengal Squad were to be seen purchasing estates and influence – and, worse still, mobilizing their wealth to undermine the direction of the Company.

  The first clash came in 1763 when, supported by the Bengal Squad, the parliamentary Opposition questioned the Government’s and Sulivan’s handling of the Indian arrangements contained in the Treaty of Paris which ended the Seven Years War. Clive, who was only too aware that his infamous jagir, far and away the most valuable asset acquired by any individual, was also the most vulnerable, had thus far held his fire. But he did join in this protest and, when it was duly defeated, he issued a direct challenge by serving notice that he would raise the matter in Leadenhall Street and would contest the forthcoming election of directors in the Court of Proprietors.

  Once again Sulivan would triumph. But the important feature of the 1763 election is that Clive and his colleagues introduced tactics which, familiar enough to any city tycoon today, were unprecedented in the Company’s history and would have won the grudging regard even of that arch ‘manager’, Sir Josiah Child. Indeed, in what many have seen as a personal vendetta between Clive and Sulivan there are frequent echoes of that earlier tussle betwen Child and Papillon. But whereas Child had confined himself to manipulating stock and bribing shareholders, Clive and his supporters hit on the idea of actually creating shareholders. This was done by forming an elaborate consortium of brokers, jobbers and banking houses to buy up and then split large shareholdings into £500 lots which were then distributed to their followers for the duration of the contest. In this way something like 100 new votes were created within the General Court of Proprietors.

  Initially funded by wealth acquired in the Company’s service, this system of ‘splitting’ was, in the words of Dame Lucy Sutherland, its tenacious analyst, ‘to prove a veritable Frankenstein’s monster to its creators’. For it ‘called into action a number of forces in no way directly concerned with the welfare of the Company’, notable among which were His Majesty’s Government and then the Opposition. To offset Clive’s ‘splitting’ tactics Sulivan called to his aid the Ministry of the day. Public funds were thus deployed to match Bengal fortunes and more stock was split. The parliamentary Opposition responded in kind by ‘splitting’ further holdings on behalf of Clive. His tally rose to 220 newly created votes while Sulivan’s rose to 163, most of which were provided by the Government’s influence. The General Court’s debate over the terms of the Treaty of Paris, which rivalled that in Parliament and attracted enormous public interest, went in favour of Clive’s party; but in the even better attended elections for the Directorate, Clive and his nominees were routed. Two weeks later Sulivan took his expected revenge by ordering that the payment of Clive’s jagir be stopped pending investigation.

  To Clive the £23,000 a year was everything. It was unprecedented recognition for
unprecedented services; in the Moghul hierarchy it placed him where he ever yearned to be, above the Company and its wretched sermonizing; and it guaranteed his political prospects in England. ‘My future power,’ he wrote, ‘my future grandeur, all depend upon the receipt of the Jaghire money.’ To regain it became an obsession, first dictating an appeal to his old friends in the parliamentary Opposition and, when this failed, an appeal to the new Ministry of Lord Grenville. Grenville also advised that no redress would be likely at Westminster; but, in return for the support of Clive’s parliamentary following, he agreed to pressurize the Company. When this too failed, another trial of strength in the General Court of Proprietors was inevitable. Much the same frantic lobbying and ‘splitting’ preceded it. The difference was that this time the Ministry was on the side of Clive and his colleagues and the Opposition was for Sulivan and the majority in the Court of Directors. It would still have been a close-fought contest had there not arrived from India in early 1764 news so dismal that it spelt doom to Sulivan and glorious vindication to Clive.

  ii

  While the Company in London was entering its stormiest decade, something equally disruptive and ominous had been brewing in Bengal. There Clive had been briefly succeeded by Holwell, the unctuous ‘hero’ of the Black Hole, and then by Henry Vansittart, a young star from Madras. Vansittart enjoyed the support of both Clive and Sulivan. It boded well for firm leadership and, as if to display it, Vansittart’s first move had been to implement a scheme, hatched by Holwell, for replacing the Nawab.

  Mir Jafar, though lulled by Clive’s promises that the English never deserted an ally, had always refrained from open defiance. He had simply failed to play the quite impossible role assigned to him. Clive and the Bengal Council had assured him that they would not interfere with his administration so long as he discharged his financial and military obligations. But such were their expectations of his generosity, such the demands of their trade, the expense of their troops, and the burden of compensation due to the Company, that the Nawab’s treasury was permanently empty and his troops permanently mutinous. However anxious to please, there was no way that he could discharge such obligations.