Social Scientist

Governance, Corporate Interest and Colonialism: The Case of the East India Company
Author(s): Amar Farooqui
Source: Social Scientist, Vol. 35, No. 9/10 (Sep. - Oct., 2007), pp. 44-51
Published by: Social Scientist
Stable URL: http://www.jstor.org/stable/27644239
Accessed: 22-09-2016 04:14 UTC

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Governance, Corporate Interest and
Colonialism: The Case of the East India Company

'5
cr
O
O
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<r In the historiography on India's colonial encounter down to Octo

<< 1858 when, following the Great Revolt, the British crown directl
took over the administration of the Indian empire, the process
whereby the East India Company metamorphosed itself into a state
have not received adequate attention. In other words, Company rul
and British rule' have, in an undifferentiated way, been regarded
synonymous expressions. However, the reinvention of a gian
commercial corporation as an instrument of colonial governance ha
its own historical specificity, both in relation to the inner mechani
of the Company as well as in the manner in which it presented itself
those who were subject to its control. This paper attempts to look
one aspect of this reinvention, namely the improvisation that the E
India Company had to resort to in order to project itself as a state
as to legitimise its governance.
Given its intrinsic foreignness, the Company-as-state could not
have sought legitimacy merely by referring to the metropolit
constitutional framework to which it owed its existence a
commercial and political entity. Foreignness is a dilemma tha
confronts every colonial state, but is even more of an inconvenien
when a business corporation assumes the role of a state. As is w
known the East India Company derived its privileges from a crown
charter that had to be renewed from time to time. The chart
essentially defined the Company's status in relation to crown a
parliament in the metropolis. At the same time the Company after
1757 had to establish its position as lawful authority in relation to i
subjects in the Indian subcontinent. This required it to adapt itself t
and manipulate, precolonial arrangements whereby governance was
legitimised. The pre-1858 colonial state was hegemonic to the exten
that it was successful in incorporating traditional ideological a
cultural devices to suit its purposes, though of course its pow
ultimately rested on brute and superior force.
In focussing on the Company's political and military activit
from the eighteenth century onwards we frequently tend to lose sig
of the fact that the East India Company was after all a private busin
concern. This determined its structure and objectives. The Compan
44 existed primarily to earn profits for its shareholders. The sharehold

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 The Case of the East India Company

earned dividends right till the end of the Company's rule and even beyond. It ^
may be mentioned that the East India Company was finally dissolved in 1874 &
with no loss to the shareholders. The Company's continuing profitability was -p,
reflected in its share prices between 1833 and 1858. Throughout this period ^
shares were quoted at prices ranging from ?200 to ?300, well above the O
nominal price of ?100. This was the period after the Company had lost its 9.
exclusive right to import tea from China?the final commercial privilege that
it had to surrender. But even this surrender represented a gain. It cost the
Indian people an increase from 10 to 10.5 percent in the guaranteed dividend
payable to the shareholders (the dividend had been guaranteed by the British
state in lieu of the flow of tribute from India). Commenting on the
guaranteed dividend Marx had observed in 1858:1
It is generally known that the commercial existence of the East India
Company was terminated in 1834, when its principal remaining source
of commercial profits, the monopoly of the China trade, was cut off.
Consequently, the holders of East India stock having derived their
dividends, nominally, at least, from the trade-profits of the Company, a
new financial arrangement with regard to them had become necessary.
The payment of the dividends, till then chargeable upon the commercial
revenue of the Company, was transferred to its political revenue. The
proprietors of East India stocks were to be paid out of the revenues
enjoyed by the East India Company in its governmental capacity...
We need to bear in mind that despite all the changes that had taken place
in the structure of governance at the level of the metropolis, i.e., in the mode
by which the Indian empire was governed from London, several features
which had their origin in the Company's internal organization as a business
enterprise, survived till the mid-nineteenth century. Thus, for instance, the
shareholders, of whom over a thousand had the right to vote in the early
nineteenth century, were a fairly powerful body whose resolutions were
'supposed to be respectfully attended to by the Directors, and even by the
Legislature'.2 The shareholders comprising the Court of Proprietors elected
the all-powerful Court of Directors and declared the dividend. Actual
governance and the execution (and usually initiation) of policy was in the
hands of the elected Court of Directors comprising twenty-four directors?
reduced to eighteen after 1853?, all with executive functions. Finally, the
Court of Directors retained the important privilege of appointing
administrative personnel in India.3 Whereas the Board of Control supervised,
on behalf of parliament, the Company's political and military functions, the
Company's own establishment was vital for the entire decision-making
process. John Dickinson had noted in the mid-nineteenth century that the
sheer volume of paper work made the Company's vast clerical establishment, 45

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 Social Scientist

o with
o
its access
A
to information and matters of detail, indispensable to colonial
rs govern
cv When a dis
o the Examin
O confer with
? the tenor of a reply, and transmit a draught of this reply to the Indian
-P Minister, in what is technically called P.C., i.e. previous
?> communication. [...] The Chairs, [...] in this preliminary state of P.C.
v depend mainly on the clerks. [...] Such is this dependence that even in a
o discussion in the Court of Proprietors, after previous notice, it is
o^ pitiable [...] to see the chairman referring to a secretary who sits by his
o side, and keeps on whispering and prompting and chaffing him as if he
5 were a mere puppet, and [...] the Minister at the other end of the system
co is in the same predicament. [...] In this stage of P.C., if there is a
~o difference of opinion on the draught it is discussed, and almost
invariably settled in friendly communication between the Minister and
the Chair; finally the draught is returned by the Minister, either adopted
or altered; and then it is submitted to the Committee of Directors
superintending the department to which it belongs, with all papers
bearing on the case, to be considered and discussed, and adopted or
altered, and afterward it is exposed to the same process in the aggregate
Court, and then goes, for the first time, as an official communication to
the Minister, after which it undergoes the same process in the opposite
direction.
Marx, writing in 1853, the year in which the Company's charter came up
for renewal, perceptively remarked that, 'When the East India Company was
only a commercial association, they, of course, requested a most detailed
report on every item from the managers of their Indian factories, as is done by
every trading concern. When the factories grew into an Empire, the
commercial items into ship loads of correspondence and documents, the ...
[Company's] clerks went on in their system, which made the [Court of
Directors] and the Board [of Control] their dependents; and they succeeded
in transforming the Indian Government into one immense writing-machine'.5
Within India the Company's servants, whatever high positions they
might hold in the bureaucracy, were located in the firm's rigid managerial
hierarchy of 'writer', Tactor', 'junior merchant' and 'senior merchant'. The
Company also engaged in extensive commercial activity till the beginning of
the nineteenth century so that a large number of its employees were actually
involved in buying and selling and/or import-export of commodities.
For the vast majority of Indians the East India Company represented the
4? totality of their experience of colonial presence. The Company was the state

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 The Case of the East India Company

and civil and military officials whom subjects of the Indian empire ^
encountered were servants of the Company. In this context Company rule &
could be made acceptable on a long-term basis if the Company was perceived -n
as lawful ruler rather than as a commercial enterprise. This problem was ^
solved by making use of the traditional structure of feudal governance and O
loyalty that had evolved by the eighteenth century. The Mughal emperor E.
occupied a central place in this structure. He was regarded ac the legitimate
sovereign of the bulk of the territories in the subcontinent that had
constituted the Mughal empire. Yet rulers of regional kingdoms were
completely independent by the second quarter of the eighteenth century: the
legal fiction was that they were supposed to have been delegated authority by
the emperor, an arrangement usually formalized through a Mughal farman.
There was a highly evolved ritual that made visible and announced this
overlord-vassal relationship in symbolic terms. As the Company's empire
extended to what had been the core areas of the Mughal empire, it became
necessary for the Company to fit itself into the existing framework and
thereby legitimize its rule. The Company reluctantly recognized the de jure
authority of the Mughals and strictly adhered to the rituals of the Mughal
darbar. On the other hand it always maintained an ambiguous position on the
question of sovereignty.
One might recapitulate here some of the significant developments of the
late eighteenth and early nineteenth centuries which have a bearing on this
question. It was during the last three decades of the eighteenth century that
the Mughal emperor eventually ceased to have any real power. The defeat of
the combined forces of emperor Shah Alam (r. 1759-1806) and the nawab of
Awadh by the Company at Baksar in 1764, and the blinding of the emperor in
1788 by the Rohilla chieftain Ghulam Qadir, were two events that did much
to shatter the prestige of the Mughals. From 1785 onwards Shah Alam was
under the protection of Mahadji Sindia, who was entrusted with the
administration of the Delhi region.
In 1803 the East India Company's forces led by Lord Lake captured Delhi
after defeating the Daulat Rao Sindia's troops (Daulat Rao was the successor
of Mahadji) at the battle of Patparganj. Percival Spear points out that Shah
Alam Vas the nominal suzerain of both the contending parties, for the British
held Bengal by the grant of the Diwani in 1765, and Sindia was his Vakil-i
Mutlaq or imperial Regent. One of the declared objectives of Lord Wellesley
[the governor-general] was to seize Delhi and the Jumna Doab, and "the
possession of the nominal authority of the Mughul".... Officially, of course he
[Shah Alam] sided with his Regent and treated the Company as a rebellious
vassal'.6
Following Lake's victory, the administration of Delhi and its adjoining 47

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 Social Scientist

o areas was taken over and Shah Alam was placed under the protection and
rsi control of the Company. He was assured of an income, amounting to about
<d twelve lakh rupees per year at this stage (technically this was a portion of the
P tribute promised to the emperor in return for the grant of diwani; this tribute
O had been withheld for a long time).
? The emperor's authority was now confined to the Red Fort and to
-? members of the royal family (several hundred members of the royal family
$ resided in the Fort). Actual administrative control over Delhi and the
$ surrounding areas was in the hands of the British resident. The resident also
o exercised some indirect control over what went on inside the Fort.
os One would like to underline that full respect was outwardly shown for the
o emperor's majesty right up to 1857. British officials strictiy adhered to court
^ etiquette. They had to dismount at some distance from the Diwan-i-Am and
co approach on foot; only high officials (mainly the resident) had access to the
^5 emperor; entry to the Diwan-i-Khas was a special privilege and was strictly by
invitation; there were appropriate forms of greeting when approaching the
emperor; one had to always face the emperor when withdrawing from his
presence; and letters had to be written in the appropriate formal style. When
one of the residents, Francis Hawkins (1829-30), was discourteous to the
emperor he was prompdy recalled.
Besides, token tribute or nazr was presented to the emperor on important
occasions. The presentation of nazr signified that the Company's officials
were theoretically vassals of the Mughal emperor. Nazr on behalf of the
governor-general was presented seven times a year (the governor-general's
nazr amounted to 101 gold mohurs on each occasion). This practice was
discontinued under Lord Hastings (1813-1823). Nevertheless, other officials,
including the resident, continued to present nazr down to 1844. When the
Company's officials in India decided to stop the nazr in 1844, the decision
was over-ruled by the Court of Directors in London though this was never
conveyed to the emperor. He was merely compensated by being paid the
monetary equivalent of the nazr as part of his income. One might also
mention that till 1835 coins were struck in the name of the emperor.
Following the death of Shah Alam in 1806, his son Akbar Shah (Akbar II)
assumed the throne. Throughout the period that Akbar Shah was on the
throne (1806-1837) there was a prolonged conflict with the Company over
the income or peshkash due to the emperor (the Company referred to the
amount as stipend). The dispute involved questions of international law,
sovereignty, and the position of the Company vis-?-vis the emperor. Ever
since the British occupation of Delhi in 1803 the question of the amount of
peshkash to be paid to the emperor had remained unsettled.
4g For the Mughal darbar this was not just a financial matter, but involved

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 The Case of the East India Company

defining the status of the emperor. From the point of view of the Mughals, the ?>
Company was governing the empire on their behalf. The Company too &
acknowledged this position as is evident from its relationship with the -n
emperor, and therefore had to take the claims of the Mughal darbar seriously. ^
It is an indication of the importance that the Company attached to the O
nominal overlordship of the emperor that when Akbar Shah died in October E.
1837 orders were issued for an 82-gun salute, 'eighty-two being the number of
years of the deceased'.7 The salute was to be 'fired from the Ramparts of Fort
William and at all the principal stations of the army as a mark of respect for
the memory of His deceased Majesty'.
This high honour was not seen as something unusual. The Company's
officials treated it as a routine matter, requiring no comment, even though
Akbar Shah had been embroiled in a long constitutional conflict with the
Company. An important step taken by Akbar Shah had been to appoint Raja
Rammohun Roy as his envoy to the British king (William IV), in order to
draw the attention of the British government in London to the violations of
the East India Company of its treaty obligations with regard to the Mughal
emperor. In 1829 Rammohun Roy accepted this assignment 'in obedience to
the orders of His Majesty, having attentively perused the Treaty between the
Hon'ble Company and his late father [Shah Alam]'. He agreed that the
agreement had certainly been violated. Rammohun Roy received the title of
'raja' from Akbar Shah, and proceeded to England in 1830 (where he passed
away in 1833).8
Unfortunately the Mughal darbar assumed that the colonial state in India
was distinct from the British state. By the 1830s the colonial state represented
the interests of the British ruling class as a whole, rather than just of the
shareholders of the East India Company. Since it was necessary for the
stability of the colonial state that the nominal position of the emperor be
respected, it was realized that the claims put forward in the address should
receive due consideration. Whereas there was no major change in the
symbolic status of the emperor, the issue of a raise in the peshkash remained
unresolved right upto 1857.
One significant outcome of the Revolt of 1857 was that it resolved the
question of sovereignty. Following the recapture of Delhi in mid-September
1857, the British carried out a mock trial of Bahadur Shah. This sham show
was conducted by a military commission. It lasted from 27 January to 9
March 1858. At the end of the trial Bahadur Shah was convicted for treason
and for having allegedly abetted the killing of Europeans. Neither of these
charges had any legal substance. In October 1858 Bahadur Shah, along with
some of the members of his immediate family, was transported to Rangoon,
where he died in 1862. aq

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 Social Scientist

o The mock trial and the charge of treason against the emperor served the
csi purpose of demonstrating that the Company was the real sovereign power
cu against which Bahadur Shah had committed high treason. This was an absurd
o position. F.W. Buckler in his well-known essay 'The Political Theory of the
O Indian Mutiny', published in 1922, argued forcefully that it was the Company
O) that was the rebel, and that the sipahis were duty-bound to support the
2 emperor. The Company's government had no independent constitutional
$ basis. Its authority derived from the various farmans issued by the Mughals.
cl> The trial and exile of Bahadur Shah was one step in the direction of
o asserting the exclusive sovereignty of the British. The next step was the
o^ assumption of the government of India directly by the British crown,
o followed by Victoria's proclamation of November 1858 by which all
2J inhabitants of the British Indian empire were declared to be her subjects.
co Rulers of princely states were now vassals of the British monarch.
~5 Nevertheless the colonial state still felt the need to invoke symbols of royalty
derived from India's past so as to claim legitimacy for itself. In 1877, Lord
Lytton held a grand 'darbar' in Delhi?not Calcutta?incorporating many
rituals of the Mughal darbar. This 'darbar' was held to announce Victoria's
new tide, Kaisar-i-Hind ('the Indian Caesar'). Lord Curzon held another
'darbar' in 1903, in Delhi, to commemorate the coronation of Victoria's
successor, Edward VII. The last British 'darbar' was held in 1911, again in
Delhi. The British monarch, George V (successor of Edward VII), was
personally present at this 'darbar' to lend additional prestige to it. It was at
this 'darbar' that the decision to transfer the capital of the British Indian
empire to Delhi was announced. Most historians agree that the transfer of the
capital, as well as the tradition of organizing British 'darbars' at Delhi, must
be seen as attempts to emphasize that the British empire was the legitimate
successor of the Mughal empire.
The post-1857 colonial state found it useful to incorporate several
features of governance that had evolved under the Company in response to its
corporate character. In borrowing some of the ideological trappings of the
Company's state, the post-1857 colonial state could stress on continuity,
which in turn tended to make it socially reactionary. Hence its excessive
reliance on conservative feudal/landed elites in the second half of the
nineteenth century.
In his recent work The Corporation that Changed the World, Nick Robins
has examined the practices adopted by the Company to sustain itself as a
successful profit-making venture, highlighting the predatory nature of its
commerce. A better understanding of the history of the East India Company
as a corporate entity has much contemporary relevance. To quote Robins, 'It
5Q remains an oddity that although companies are among the most powerful

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 The Case of the East India Company

institutions of the modern age, our histories still focus on actions of states and >
3
(U
individuals, on politics and culture, rather than on corporations, their
executives and their impacts. If we are to fully understand our corporate
present, then we must understand our corporate past?and this means 3
o
grappling with the legacy of John Company'.9 In a globalised world this is a jo
c
legacy that links governance to corporate interest and predatory capitalism.

Amar Farooqui is at the Department of History, University of Delhi, Delhi.

Notes:
1 Karl Marx, 'The Approaching Indian Loan', New-York Daily Tribune, 9 February
1858
2 J.C. Platt, 'The East India House', in Charles Knight (ed.), London, Vol. V,
London, 1851, pp.57.
3 Cf. Platt, 'East India House', pp.56-58.
4 John Dickinson, India, Its Government under a Bureaucracy, London, 1853.

5 Karl Marx, 'The Government of India', New-York Daily Tribune, 20 July 1853.

6 Percival Spear, Twilight of the Mughuls, 1951, (reprinted in The Delhi Omnibus,
New Delhi, 2002), p.32.
7 National Archives of India, Foreign Department (Political).

8 For details see Sabyasachi Bhattacharya, General President' Address, Indian

History Congress, 2004, pp. 15-17.

9 Nick Robins, The Corporation that Changed the World: How the East India
Company Shaped the Modern Multinational, Hyderabad, 2006, p. 18.

51

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