Shah Alam II and the Company’s Diwani Rights

Shah Alam II (Ali Gauhar) reigned as the eighteenth Mughal Emperor from 1759 to 1806. His tenure witnessed the collapse of Mughal authority, leaving him dependent on regional powers like Awadh, the Marathas, and the British East India Company. His grant of the Diwani rights to the East India Company in 1765 converted a commercial enterprise into a territorial ruler in eastern India.

Early Struggles and the Campaign in Bihar

Ali Gauhar escaped Delhi in 1758 to avoid assassination by the imperial Grand Wazir, Imad-ul-Mulk. He proclaimed himself Emperor Shah Alam II in December 1759 following the death of his father, Alamgir II.

Invasions of Bengal and Bihar (1759–1761)

• Shah Alam II launched military incursions into Bihar between 1759 and 1761 to reassert imperial authority over the eastern provinces.
• Supported by French commander Jean Law and local zamindars, he besieged Patna in 1760.
• British forces under Major John Carnac defeated Shah Alam II at the Battle of Suan in 1761.
• Following his defeat, the Emperor recognized Mir Qasim as the Nawab of Bengal in exchange for an annual tribute promise.

Protection Under Shuja-ud-Daula

• Lacking a military base and financial resources to enter Delhi, Shah Alam II sought refuge with Shuja-ud-Daula, the Nawab of Awadh.
• Shuja-ud-Daula held the title of Grand Wazir of the Empire and provided the Emperor with asylum at Faizabad and Allahabad.

The Battle of Buxar (1764)

The political crisis in Bengal brought Shah Alam II directly into conflict with the East India Company.

The Triple Alliance

• Deposed Bengal Nawab Mir Qasim fled to Awadh in late 1763, seeking military assistance.
• Shah Alam II, Shuja-ud-Daula, and Mir Qasim formed a triple alliance to restore imperial authority over Bengal and Bihar.
• Mir Qasim agreed to pay 11 lakh rupees daily to fund the campaign.

Military Defeat

• On October 22, 1764, British commander Major Hector Munro defeated the triple alliance at the Battle of Buxar.
• Shah Alam II broke away from Shuja-ud-Daula during the retreat and entered the British military camp at Varanasi, placing himself under Company protection.

The Treaty of Allahabad (1765) and Grant of Diwani

Robert Clive returned to Bengal as Governor in May 1765 to establish a permanent political settlement. On August 12, 1765, Clive concluded the historic Treaty of Allahabad with Shah Alam II.

The Diwani Imperial Farman

• Shah Alam II issued an imperial farman granting the East India Company the permanent Diwani (right to collect land revenue and administer civil justice) over Bengal, Bihar, and Orissa.
• In return, the Company agreed to pay the Emperor an annual tribute of 26 lakh rupees out of the revenues of Bengal.
• The Company secured the districts of Kora and Allahabad from the Nawab of Awadh and handed them over to Shah Alam II as his personal demesne.
• Shah Alam II agreed to confirm all territorial gains made by the Company across India.

Operational Setup of the Diwani

• The Company gained absolute control over provincial finances while leaving executive authority (Nizamat) with the puppet Nawab of Bengal, Najm-ud-Daulah.
• To avoid direct involvement in local administration, Clive appointed Muhammad Reza Khan as Naib Diwan for Bengal and Raja Shitab Rai for Bihar.
• The revenue collected from Bengal was used to purchase Indian goods for export, ending the import of British silver and gold bullion into India.

Return to Delhi and Subsequent Dependence

Shah Alam II lived at Allahabad Fort under British protection from 1765 to 1771, acting as an imperial pensioner.

Maratha Alliance and Return (1771–1772)

• Maratha leader Mahadaji Shinde captured Delhi in 1771 and invited Shah Alam II to reclaim the throne.
• Shah Alam II left British protection and entered Delhi in January 1772 escorted by Maratha troops.
• In response, Governor-General Warren Hastings stopped the payment of the annual tribute of 26 lakh rupees and confiscated Kora and Allahabad, selling both districts back to the Nawab of Awadh.

Afghan Attack and Blindness (1788)

• Rohilla Afghan chief Ghulam Qadir captured Delhi in July 1788.
• Ghulam Qadir deposed and blinded Shah Alam II in August 1788 while searching for hidden imperial treasures.
• Mahadaji Shinde recaptured Delhi weeks later, executing Ghulam Qadir and restoring the blind Emperor to the throne under Maratha guardianship.

British Capture of Delhi (1803)

• During the Second Anglo-Maratha War, British General Gerard Lake defeated Maratha forces at the Battle of Delhi in September 1803.
• Shah Alam II accepted British protection, becoming a pensioner of the East India Company until his death in November 1806.

Key Aspects of the Diwani Settlement

Historical Facts

Shah Alam II wrote poetry in Persian, Urdu, and Braj Bhasha under the pen name Aftab. He authored the Persian prose romance Amli-i-Shatir and several Urdu ghazals detailing his political misfortunes. During his period as a fugitive in Bihar between 1759 and 1761, Shah Alam II minted coins bearing his own name before receiving formal coronation in Delhi. His royal titles included Empress-Protector of the Faith and King of the World, though popular contemporary street rhymes in Delhi mocked his reduced territorial reach with the verse “Sultanat-e-Shah Alam, Az Dilli ta Palam” (The empire of Shah Alam runs from Delhi to Palam). The grant of the Diwani in 1765 provided the East India Company with an annual revenue surplus exceeding two million pounds. This wealth financed the Company’s standing armies during the Anglo-Mysore and Anglo-Maratha wars, enabling complete territorial conquest across India in the nineteenth century. Shah Alam II was succeeded upon his death in 1806 by his son, Akbar Shah II.