Dual System of Government

The Dual System of Government was an administrative arrangement introduced by Robert Clive in Bengal following the Treaty of Allahabad in 1765. Under this arrangement, authority was divided between the English East India Company and the Nawab of Bengal. The system continued until 1772, when Warren Hastings abolished it.

Historical Background

The outcome of two major military conflicts created the foundation for this administrative framework:

• Battle of Plassey (1757): The East India Company defeated Nawab Siraj-ud-Daulah, establishing political influence over Bengal.
• Battle of Buxar (1764): The combined forces of Nawab Mir Qasim of Bengal, Nawab Shuja-ud-Daulah of Awadh, and Mughal Emperor Shah Alam II were defeated by Hector Munro.
• Treaty of Allahabad (1765): Robert Clive signed treaties with Shah Alam II and Shuja-ud-Daulah. The Mughal Emperor granted the Diwani (right to collect land revenue and administer civil justice) of Bengal, Bihar, and Orissa to the East India Company in exchange for an annual payment of 26 lakh rupees.

Division of Power: Diwani vs. Nizamat

The administration was divided into two distinct functional branches:

Diwani Functions

• Definition: Management of revenue collection and civil justice.
• Authority: Exercised directly by the East India Company.
• Execution: The Company appointed native officials called Deputy Diwans to collect revenues on its behalf. Mohammad Reza Khan was appointed for Bengal, while Raja Shitab Rai was appointed for Bihar.

Nizamat Functions

• Definition: Defense, police administration, military maintenance, and criminal justice.
• Authority: Retained nominally by the Nawab of Bengal (Najm-ud-Daulah).
• Execution: The Nawab managed these duties through a Deputy Subahdar. The Company controlled the appointment and removal of this official. The Nawab received a fixed annual allowance of 53 lakh rupees (later reduced to 32 lakh rupees) to run the administration.

Structural Breakdown of the Dual System

Key Consequences of the Dual System

The separation of financial power from administrative responsibility caused severe breakdown across governance, agriculture, and commerce.

Administrative Collapse

• The Nawab lacked the financial resources to maintain law and order or fund public works.
• The Company possessed financial authority without any legal obligation to protect the local population.
• Lawlessness increased, and local judicial administration failed completely.

Economic Exploitation and Agricultural Decline

• Revenue collection rights were auctioned off to the highest bidders, leading to excessive extraction from farmers.
• Peasants were forced to pay heavy taxes regardless of crop yield.
• Internal trade monopolies formed by Company officials destroyed local merchant networks and handicraft industries, especially silk and cotton weaving.

The Great Bengal Famine of 1770

• A severe drought struck Bengal in 1769, leading to crop failures.
• The Dual System provided no relief mechanism, and revenue collection was enforced aggressively despite widespread starvation.
• Approximately 10 million people—one-third of Bengal’s population—perished in the famine.

Abolition of the System

In 1772, the Court of Directors of the East India Company decided to act as Diwan directly and manage the revenue administration without Indian intermediaries.

• Warren Hastings was appointed Governor of Bengal in 1772.
• Hastings dismissed Deputy Diwans Mohammad Reza Khan and Raja Shitab Rai.
• The Company brought revenue collection directly under its own Board of Revenue.
• The Nawab’s allowance was reduced to 16 lakh rupees, reducing his role to a pensioned title holder.
• The British Parliament subsequently passed the Regulating Act of 1773 to formalize state control over the Company’s territorial acquisitions.

Key Historical Facts

Robert Clive served as Governor of Bengal twice: first from 1757 to 1760 and second from 1765 to 1767. He established the Dual System during his second tenure. The district of Midnapore, Burdwan, and Chittagong were surrendered to the Company earlier in 1760 by Mir Qasim. These revenues helped finance British military campaigns prior to the 1765 treaty. Before the grant of Diwani rights, the Company imported silver bullion from Britain to buy Indian goods. After 1765, Bengal’s internal tax revenue was used to purchase Indian spices and textiles for export to Europe. This process marked the formal beginning of the drain of wealth from India.