The British East India Company, sometimes referred to as "John Company," was a joint-stock company which was granted an English Royal Charter by Elizabeth I on December 31, 1600, with the intention of favoring trade privileges in India. The Royal Charter effectively gave the newly created The Honourable Company of Merchants of London Trading into the East Indies (HEIC) a 15 year monopoly on all trade in the East Indies. The Company transformed from a commercial trading venture to one which virtually ruled India as it acquired auxiliary governmental and military functions, until its dissolution in 1858. Increasingly, the company had been compelled to promote the material and moral progress of its Indian subjects, as, while trade remained the main goal of Empire, the British started to justify imperialism by speaking of a duty to “civilize” and “educate.” Servants of the company, though, could make vast amounts of money and were highly paid while their counterparts at home received modest salaries. The Utilitarian philosopher, John Stuart Mill, who worked for the company, defended its record and argued that it ought to continue to govern India, since it was above party-politics and completely devoted to Indian affairs while London was too distant from India to administer it properly. The company's policy of annexing Indian states whose rulers they considered “corrupt” (or when they refused to recognize a ruler's heir) was one of the main causes of the revolt of 1857–1858. Technically, the company had always governed as agent of the Moghul Emperor. The last emperor was deposed and exiled after lending nominal leadership to the revolt. After this anti-British rebellion (or First War of Indian Independence), the British government decided that direct rule would be more appropriate.
A close study of the history of the company shows how the British imperial project was re-imagined over the course of its history. It began unashamedly as a money-making, commercial activity but increasingly re-conceived itself as a moral enterprise. This was arrogant but it resulted in many initiatives, such as education provision and measures aimed at creating social equality that raised many people out of poverty and imbued them with a sense of shared values and human dignity. The eminent British historian, Thomas Babbington Macauley (1800–1859) made his fortune from a few years spent in the company's service, and advised in his 1835 Minute on Indian Education that official funds should only be spent on English and Western education in India to produce a class of persons who would be racially Indian, “but English in taste, in opinions, in morals, and in intellect.” Such people would also be loyal to the British out of recognition of their superior moral worth. He claimed to never have met anyone who believed that, “the Arabic and Sanscrit poetry could be compared to that of the great European nations.” The founding fathers of independent India later said that they admired English literature for its concern for liberty, justice, and the underdog. However, they found the British hypocritical, since they applied these high ideals at home and not in India.
Based in London, the company presided over the creation of the British Raj. In 1717 the company received a royal dictate from the Moghul Emperor exempting the company from the payment of custom duties in Bengal, giving it a decided commercial advantage in the Indian trade. A decisive victory by Sir Robert Clive at the Battle of Plassey in 1757 established the British East India Company as a military as well as a commercial power. By 1760 the French were driven out of India, with the exception of a few trading posts on the coast, such as Pondicherry.
The company also had interests along the routes to India from Great Britain. As early as 1620 the company attempted to lay claim to the Table Mountain region in South Africa and later it occupied and ruled St. Helena. The company also established Hong Kong and Singapore, employed Captain William Kidd (1645–1701) to combat piracy, and cultivated the production of tea in India. Other notable events in the company's history were that it held Napoleon captive on St. Helena and made the fortune of Elihu Yale (1649–1721), the benefactor of what became Yale University. Its products were the basis of the Boston Tea Party in Colonial America.
Its shipyards provided the model for St. Petersburg, elements of its administration survive in the Indian bureaucracy, and its corporate structure was the most successful early example of a joint stock company. However, the demands of company officers on the treasury of Bengal contributed tragically to the province's incapacity in the face of a famine which killed millions in 1770–1773.
The company was founded as The Company of Merchants of London Trading into the East Indies by a coterie of enterprising and influential businessmen, who obtained the Crown's charter for exclusive permission to trade in the East Indies for a period of 15 years. The company had 125 shareholders, and a capital of seventy-two thousand pounds. Initially, however, it made little impression on the Dutch control of the spice trade and at first it could not establish a lasting outpost in the East Indies. Eventually, ships belonging to the company arrived in India, docking at Surat, which was established as a trade transit point in 1608. In the next two years, it managed to build its first factory (as the trading posts were known) in the town of Machilipatnam in the Coromandel Coast in the Bay of Bengal. The high profits reported by the company after landing in India (presumably owing to a reduction in overhead costs effected by the transit points), initially prompted King James I to grant subsidiary licenses to other trading companies in England. But, in 1609, he renewed the charter given to the company for an indefinite period, including a clause which specified that the charter would cease to be in force if the trade turned unprofitable for three consecutive years.
The company was led by one governor and 24 company directors who made up the Court of Directors. They were appointed by, and reported to, the Court of Proprietors. The Court of Directors had ten committees reporting to it.
Traders were frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian Ocean. A key event providing the company with the favor of Moghul emperor Jahangir was their victory over the Portuguese in the Battle of Swally in 1612. Perhaps realizing the futility of waging trade wars in remote seas, the English decided to explore their options for gaining a foothold in mainland India, with official sanction of both countries, and requested the Crown to launch a diplomatic mission. In 1615 Sir Thomas Roe (1581–1644) was instructed by James I to visit the Moghul emperor Jahangir, who ruled over most of the Indian subcontinent, along with Afghanistan. The purpose of this mission was to arrange for a commercial treaty that would give the company exclusive rights to reside and build factories in Surat and other areas. In return, the company offered to provide goods and rarities from the European market to the emperor. This mission was highly successful and Jahangir sent a letter to the king through Sir Thomas Roe. He wrote:
Upon which assurance of your royal love I have given my general command to all the kingdoms and ports of my dominions to receive all the merchants of the English nation as the subjects of my friend; that in what place soever they choose to live, they may have free liberty without any restraint; and at what port soever they shall arrive, that neither Portugal nor any other shall dare to molest their quiet; and in what city soever they shall have residence, I have commanded all my governors and captains to give them freedom answerable to their own desires; to sell, buy, and to transport into their country at their pleasure.
For confirmation of our love and friendship, I desire your Majesty to command your merchants to bring in their ships of all sorts of rarities and rich goods fit for my palace; and that you be pleased to send me your royal letters by every opportunity, that I may rejoice in your health and prosperous affairs; that our friendship may be interchanged and eternal.
The company, under such obvious patronage, soon managed to eclipse the Portuguese, who had established their bases in Goa and Bombay, which was later ceded to England as part of the dowry of Catherine of Braganza (1638–1705) Queen consort of Charles II of England. It managed to create strongholds in Surat (where a factory was built in 1612), Madras (Chennai) in 1639, Bombay in 1668, and Calcutta in 1690. By 1647 the company had 23 factories and 90 employees in India. The major factories became the walled forts of Fort William in Bengal, Fort St. George in Madras, and the Bombay Castle. In 1634 the Mughal emperor extended his hospitality to the English traders to the region of Bengal and in 1717 completely waived customs duties for the trade. The company's mainstay businesses were by now in cotton, silk, indigo, saltpeter, and tea. All the while, it was making inroads into the Dutch monopoly of the spice trade in the Malaccan straits. In 1711 the company established a trading post in Canton (Guangzhou), China, to trade tea for silver. In 1657 Oliver Cromwell renewed the charter of 1609 and brought about minor changes in the holding of the company. The status of the company was further enhanced by the restoration of the monarchy in England. By a series of five acts around 1670, King Charles II provisioned the company with the rights to autonomous territorial acquisitions, to mint money, to command fortresses and troops, to form alliances, to make war and peace, and to exercise both civil and criminal jurisdiction over the acquired areas. The company, surrounded by trading competitors, other imperial powers, and sometimes hostile native rulers, experienced a growing need for protection. The freedom to manage its military affairs thus came as a welcome boon and the company rapidly raised its own armed forces in the 1680s, mainly drawn from the indigenous local population. By 1689 the company was arguably a "nation" in the Indian mainland, independently administering the vast presidencies of Bengal, Madras, and Bombay and possessing a formidable and intimidating military strength. From 1698 the company was entitled to use the motto "Auspico Regis et Senatus Angliae" meaning, "Under the patronage of the King and Parliament of England."
The prosperity that the employees of the company enjoyed allowed them to return to their country with the ability to establish sprawling estates and businesses and obtain political power. Consequently, the company developed for itself a lobby in the English parliament. However, under pressure from ambitious tradesmen and former associates of the company (pejoratively termed Interlopers by the company), who wanted to establish private trading firms in India, a deregulating act was passed in 1694. This act allowed any English firm to trade with India, unless specifically prohibited by act of parliament, thereby annulling the charter that was in force for almost one hundred years. By an act in 1698, a new "parallel" East India Company (officially titled the English Company Trading to the East Indies) was floated under a state-backed indemnity of £2 million. However, the powerful stockholders of the old company quickly subscribed a sum of £315,000 in the new concern, and dominated the new body. The two companies wrestled with each other for some time, both in England and in India, for a dominant share of the trade. But it quickly became evident that in practice the original company scarcely faced any measurable competition. Both companies finally merged in 1702, by a tripartite indenture involving the state and the two companies. Under this arrangement, the merged company lent to the treasury a sum of £3,200,000, in return for exclusive privileges for the next three years—after which the situation was to be reviewed. The amalgamated company became the United Company of Merchants of England Trading to the East Indies.
What followed in the next decades was a constant see-saw battle between the company lobby and the parliament. The company sought a permanent establishment, while the parliament would not willingly relinquish the opportunity to exploit the company's profits by allowing it a greater autonomy. In 1712 another act renewed the status of the company, though the debts were repaid. By 1720 fifteen percent of British imports were from India, almost all passing through the company, which reasserted the influence of the company lobby. The license was prolonged until 1766 by yet another act in 1730.
At this time, Britain and France became bitter rivals, and there were frequent skirmishes between them for control of colonial possessions. In 1742, fearing the monetary consequences of a war, the government agreed to extend the deadline for the licensed exclusive trade by the company in India until 1783, in return for a further loan of £1 million. The skirmishes did escalate to the feared war, and between 1756 and 1763 the Seven Years' War diverted the state's attention towards consolidation and defense of its territorial possessions in Europe and its colonies in North America. The war also took place on Indian soil, between the company troops and the French forces. Around the same time, Britain surged ahead of its European rivals with the advent of the Industrial Revolution. Demand for Indian commodities was boosted by the need to sustain the troops and the economy during the war, and by the increased availability of raw materials and efficient methods of production. As home to the revolution, Britain experienced higher standards of living and this spiraling cycle of prosperity. Demand and production had a profound influence on overseas trade. The company became the single largest player in the British global market, and reserved for itself an unassailable position in the decision-making process of the government.
William Pyne notes in his book The Microcosm of London (1808) that
on the 1st March, 1801, the debts of the East India Company amounted to £5,393,989 their effects to £15,404,736 and their sales increased since February 1793, from £4,988,300 to £7,602,041.
Sir John Banks, a businessman from Kent who negotiated an agreement between the king and the company began his career in a syndicate arranging contracts for supplying the navy, an interest he kept up for most of his life. He knew the diarists Samuel Pepys (1633–1703) and John Evelyn (1620–1708) and founded a substantial fortune from the Levant and Indian trades. He also became a director and later, as Governor of the East Indian Company in 1672, he was able to arrange a contract which included a loan of £20,000 and £30,000 worth of saltpeter (used to make gunpowder) for the king “at the price it shall sell by the candle”—that is, by auction—where an inch of candle burned and as long as it was alight, bidding could continue. The agreement also included with the price “an allowance of interest which is to be expressed in tallies.” This was something of a breakthrough in royal prerogative because previous requests for the king to buy at the company's auctions had been turned down as “not honorable or decent.” Outstanding debts were also agreed and the company permitted to export 250 tons of saltpeter. Again in 1673 Banks successfully negotiated another contract for seven hundred tons of saltpeter at £37,000 between the king and the company. So urgent was the need to supply the armed forces in the United Kingdom, America, and elsewhere that the authorities sometimes turned a blind eye on the untaxed sales. One governor of the company was even reported as saying in 1864 that he would rather have the saltpeter made than the tax on salt.
The Seven Years' War (1756–1763) resulted in the defeat of the French forces and limited French imperial ambitions, also stunting the influence of the industrial revolution in French territories. Robert Clive, the Governor General, led the company to an astounding victory against Joseph François Dupleix, the commander of the French forces in India, and recaptured Fort St. George from the French. The company took this respite to seize Manila in 1762. By the Treaty of Paris (1763), the French were forced to maintain their trade posts only in small enclaves in Pondicherry, Mahe, Karikal, Yanam, and Chandernagar without any military presence. Although these small outposts remained French possessions for the next two hundred years, French ambitions on Indian territories were effectively laid to rest, thus eliminating a major source of economic competition for the company. Contrastingly, the company, fresh from a colossal victory, and with the backing of a disciplined and experienced army, was able to assert its interests in the Carnatic from its base at Madras and in Bengal from Calcutta, without facing any further obstacles from other colonial powers.
However, the company continued to experience resistance from local rulers. Robert Clive led company forces against French-backed Siraj Ud Daulah to victory at the Battle of Plassey in 1757, thereby snuffing out the last known resistances in Bengal. This victory estranged the British and the Mughals, who had been served by Siraj as an autonomous ruler. But the Mughal Empire was already on the wane after the demise of Aurangzeb, and was breaking up into pieces and enclaves. After the Battle of Buxar, the ruling emperor Shah Alam gave up the administrative rights over Bengal, Bihar, and Orissa. Clive thus became the first British Governor of Bengal. Haider Ali and Tipu Sultan, the legendary rulers of Mysore (in Carnatic), also gave the British forces a tough time. Having sided with the French during the war, the rulers of Mysore continued their struggle against the company with the four Anglo-Mysore Wars. Mysore finally fell to the company forces in 1799, with the slaying of Tipu Sultan. With the gradual weakening of the Maratha Empire in the aftermath of the three Anglo-Maratha wars, the British also secured Bombay and the surrounding areas. It was during these campaigns, both of Mysore and of the Marathas, that Arthur Wellesley, later Duke of Wellington, first showed the abilities which would lead to victory in the Peninsular War and at the Battle of Waterloo. A particularly notable engagement involving forces under his command was the Battle of Assaye.
Thus, the British had secured the entire region of Southern India (with the exception of small enclaves of French and local rulers), Western India, and Eastern India. The last vestiges of local administration were restricted to the northern regions of Delhi, Oudh, Rajputana, and Punjab, where the company's presence was ever increasing amidst the infighting and dubious offers of protection against each other. Coercive actions, threats, and diplomacy aided the company in preventing the local rulers from putting up a united struggle against it. The hundred years from the Battle of Plassey in 1757 to the ant-British rebellion of 1857 were a period of consolidation for the company, which began to function more as a nation and less as a trading concern.
In the eighteenth century, opium was highly sought after by the Chinese so in 1773, the company assumed the monopoly of opium trading in Bengal. Company ships were not allowed officially to carry opium to China, so the opium produced in Bengal was sold in Calcutta on condition that it be sent to China.
Despite the official Chinese ban on opium imports, which was reaffirmed in 1799, opium was smuggled into China from Bengal by traders and agency houses averaging nine hundred tons per year. The proceeds from drug-runners at Lintin were paid into the company’s factory at Guangzhou (Canton) and by 1825 most of the money needed to buy tea in China was raised by the opium trade. In 1838 the Chinese imposed a death penalty on opium smuggling which was then close to 1,400 tons per year, and sent a new governor, Lin Zexu, to curb smuggling. This finally resulted in the Opium War of 1840, eventually leading to the British seizing Hong Kong.
Though the company was becoming increasingly bold and ambitious in putting down resisting states, it was becoming clearer day by day that the company was incapable of governing the vast expanse of the captured territories. The Bengal Famine of 1770, in which one-sixth of the local population died, set the alarm bells ringing in Britain. Military and administrative costs mounted beyond control in British administered regions in Bengal due to the ensuing drop in labor productivity. At the same time, there was commercial stagnation and trade depression throughout Europe following the lull in the post-Industrial Revolution period. Britain became entangled in the rebellion in America, one of the major importers of Indian tea, and France was on the brink of a revolution. The desperate directors of the company attempted to avert bankruptcy by appealing to Parliament for financial help. This led to the passing of the Tea Act in 1773, which gave the company greater autonomy in running its trade in America. Its monopolistic activities triggered the Boston Tea Party in the province of Massachusetts Bay, one of the major events leading up to the American War for Independence.
By this Act (13 Geo. III, c. 63), the Parliament of Great Britain imposed a series of administrative and economic reforms. By doing so, Parliament clearly established its sovereignty and ultimate control over the company. The act recognized the company's political functions and clearly established that the "acquisition of sovereignty by the subjects of the Crown is on behalf of the Crown and not in their own right."
Despite stiff resistance from the East India lobby in Parliament and the company's shareholders, the act was passed. It introduced substantial governmental control and allowed the land to be formally under the control of the Crown, but leased to the company at £40,000 for two years. Under this provision, the governor of Bengal, Warren Hastings (1732–1818) was promoted to the rank of Governor General, having administrative powers over all of British India. It provided that his nomination, though made by a court of directors, should in future be subject to the approval of a Council of Four from India appointed by the Crown—namely Lt. General John Clavering, George Monson, Richard Barwell, and Philip Francis. Hastings was entrusted with the power of peace and war. British judicial personnel would also be sent to India to administer the British legal system. The Governor General and the council would have complete legislative powers. Thus, Warren Hastings became the first Governor General of India. The company was allowed to maintain its virtual monopoly over trade in exchange for the biennial sum and an obligation to export a minimum quantity of goods yearly to Britain. The costs of administration were also to be met by the company. These provisions, initially welcomed by the company, backfired. The company had an annual burden on its back, and its finances continued steadily to decline.
This Act (24 Geo. III, s. 2, c. 25) had two key aspects:
Pitt's Act was deemed a failure because it was immediately apparent that the boundaries between governmental control and the company's powers were obscure and highly subject to interpretation. The government also felt obliged to answer humanitarian voices pleading for better treatment of natives in British occupied territories. Edmund Burke (1729–1797), the politician and philosopher, a former East India Company shareholder and diplomat, felt compelled to relieve the situation and introduced before parliament a new Regulating Bill in 1783. The bill was defeated due to intense lobbying by company loyalists and accusations of nepotism in the bill's recommendations for the appointment of councilors.
This Act (26 Geo. III c. 16) enacted the demand of Lord Cornwallis, that the powers of the governor general be enlarged to empower him, in special cases, to override the majority of his council and act on his own special responsibility. The act also enabled the offices of the governor general and the commander-in-chief to be jointly held by the same official.
This act clearly demarcated borders between the Crown and the company. After this point, the company functioned as a regularized subsidiary of the Crown, with greater accountability for its actions and reached a stable stage of expansion and consolidation. Having temporarily achieved a state of truce with the Crown, the company continued to expand its influence to nearby territories through threats and coercive actions. By the middle of the ninteenth century, the company's rule extended across most of India, Burma, Singapore, and Hong Kong, and one- fifth of the world's population was under its trading influence.
The aggressive policies of Lord Wellesley and the Marquis of Hastings led to the company gaining control of all India, except for the Punjab, Sind, and Nepal. The Indian Princes had become vassals of the company. But the expense of wars leading to the total control of India strained the company’s finances to the breaking point. The company was forced to petition Parliament for assistance. This was the background to the Charter Act of 1813 (53 Geo. III c. 155) which, among other things:
The Industrial Revolution in Britain, the consequent search for markets, and the rise of laissez-faire economic ideology form the background to this act.
Meanwhile, British influence continued to expand; in 1845 the Danish colony of Tranquebar was sold to Great Britain. The company had at various stages extended its influence to China, the Philippines, and Java. It had solved its critical lack of the cash needed to buy tea by exporting Indian-grown opium to China. China's efforts to end the trade led to the First Opium War with Britain.
This act provided that British India would remain under the administration of the company in trust for the Crown until Parliament should decide otherwise.
The efforts of the company in administering India emerged as a model for the civil service system in Britain, especially during the nineteenth century. Deprived of its trade monopoly in 1813, the company wound up as a trading enterprise. In 1858 the company lost its administrative functions to the British government following the 1857 uprising by the company's Indian soldiers, usually called the Sepoy Mutiny. One cause of this was the company's policy of annexing Princely States with which they enjoyed a treaty relationship when they decided that the ruler was corrupt, or because they did not recognize the heir to the throne (such as an adopted son, who could succeed under Hindu law but not British law). There was also a rumor that Britain intended to flood India with Christian missionaries and that pork and beef grease was being used to oil the new Enfield rifle that had been issued to the Indian troops. Technically, the company was always subject to the Moghul Emperor but because the last Emperor lent his name as leader of the revolt, he was deposed and exiled. Indians point out that this was actually a mutiny, rather than an Indian revolt against the British, since the Emperor could hardly “mutiny” against himself. India then became a formal Crown Colony.
In the early 1860s all of the company's Indian possessions were appropriated by the Crown. The company was still managing the tea trade on behalf of the British government and supplying Saint Helena. When the East India Stock Dividend Redemption Act came into effect, the company was dissolved on January 1, 1874. The Times reported, "It accomplished a work such as in the whole history of the human race no other company ever attempted and as such is ever likely to attempt in the years to come." The Utilitarian philosopher, John Stuart Mill, who worked at the London headquarters of the company, argued in favor of its continued governance of India. He thought the company had the knowledge and experience necessary and could provide a buffer between India and the British government. Too much interference in the affairs of the 13 North American colonies had resulted in their rebellion. A minister in London would change every year or so, and would never acquire expertise. He wrote, “India has hitherto been administered, under the general control of parliament, by a body, who holding aloof from the party conflicts of English politics, devoted their whole time and energy to Indian affairs.” At both ends of its operation, the company attracted men of high intellectual caliber, such as John Stuart Mill and Thomas Babbington Macauley, while many of its colonial officers devoted themselves to scholarly writing, achieving eminence in their field, including the Muir brothers, Sir William Muir (1819–1905) Lt. Governor of the North-West Provinces and later Principal of Edinburgh University where his brother John Muir (1810–1882), had endowed the Cahir in Sanskrit. John was Collector of Azimgarh, among other posts, then Principal of Victoria College, Varanasi. The basic administrative system of the company remained in force until the end of British rule, and continues to form the basis of Pakistani, Indian, and Bangladeshi administrative system. The senior officer under the company was the district collector (or district officer) whose original function was to collect taxes. He was later joined by the district magistrate. These men had great power and governed territories larger than several English counties. They were assisted by district medial officers, military commanders, and police officers. Each subdivision had its own junior staff, whose responsibilities mirrored the above. From 1805 to 1858, the company ran its own training academy, Haileybury College, where the curriculum included Asian languages, law, and general politics. Graduates were instilled with a sense of duty. Charles Grant, one of the architects of the curriculum, saw them as first and foremost Christian gentlemen, “men who would be not just capable civil servants but also bearers of a moral and religious tradition from a superior to an inferior society.”
In 1987 coffee merchants Tony Wild and David Hutton created a public limited company called "The East India Company" and in 1990 registered versions of the company's coat of arms as a trademark, although the Patent Office noted “Registration of this mark shall give no right to the exclusive use of the words 'The East India Company'.” As of December 1996 this company has a working website. The company sells St. Helena coffee branded with the company name and also produced a book on the history of the company. This company has no legal continuity with the original company, although they claim to have been founded in 1600 C.E.
On the eve of the demise of the East India Company, the East India Club in London was formed for current and former employees of the East India Company. The club still exists today and its club house is situated at 16 St. James's Square, London.
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