1911 Encyclopædia Britannica/East India Company
EAST INDIA COMPANY, an incorporated company for exploiting the trade with India and the Far East. In the 17th and 18th centuries East India companies were established by England, Holland, France, Denmark, Scotland, Spain, Austria and Sweden. By far the most important of these was the English East India Company, which became the dominant power in India, and only handed over its functions to the British Government in 1858 (see also Dutch East India Company, Ostend Company).
The English East India Company was founded at the end of the 16th century in order to compete with the Dutch merchants, who had obtained a practical monopoly of the trade with the Spice Islands, and had raised the price of English East India Co. pepper from 3s. to 8s. per ℔. Queen Elizabeth incorporated it by royal charter, dated December 31, 1600, under the title of “The Governor and Company of Merchants of London, trading into the East Indies.” This charter conferred the sole right of trading with the East Indies, i.e. with all countries lying beyond the Cape of Good Hope or the Straits of Magellan, upon the company for a term of 15 years. Unauthorized interlopers were liable to forfeiture of ships and cargo. There were 125 shareholders in the original East India Company, with a capital of £72,000: the first governor was Sir Thomas Smythe. The early voyages of the company, from 1601 to 1612, are distinguished as the “separate voyages,” because the subscribers individually bore the cost of each voyage and reaped the whole profits, which seldom fell below 100%. After 1612 the voyages were conducted on the joint stock system for the benefit of the company as a whole. These early voyages, whose own narratives may be read in Purchas, pushed as far as Japan, and established friendly relations at the court of the Great Mogul. In 1610-1611 Captain Hippon planted the first English factories on the mainland of India, at Masulipatam and at Pettapoli in the Bay of Bengal. The profitable nature of the company’s trade had induced James I. to grant subsidiary licences to private traders; but in 1609 he renewed the company’s charter “for ever,” though with a proviso that it might be revoked on three years’ notice if the trade should not prove profitable to the realm.
Meanwhile friction was arising between the English and Dutch East India Companies. The Dutch traders considered that they had prior rights in the Far East, and their ascendancy in the Indian Archipelago was indeed English and Dutch disputes. firmly established on the basis of territorial dominion and authority. In 1613 they made advances to the English company with a suggestion for co-operation, but the offer was declined, and the next few years were fertile in disputes between the armed traders of both nations. In 1619 was ratified a “treaty of defence” to prevent disputes between the English and Dutch companies. When it was proclaimed in the East, hostilities solemnly ceased for the space of an hour, while the Dutch and English fleets, dressed out in all their flags and with yards manned, saluted each other; but the treaty ended in the smoke of that stately salutation, and perpetual and fruitless contentions between the Dutch and English companies went on just as before. In 1623 these disputes culminated in the “massacre of Amboyna,” where the Dutch governor tortured and executed the English residents on a charge of conspiring to seize the fort. Great and lasting indignation was aroused in England, but it was not until the time of Cromwell that some pecuniary reparation was exacted for the heirs of the victims. The immediate result was that the English company tacitly admitted the Dutch claims to a monopoly of the trade in the Far East, and confined their operations to the mainland of India and the adjoining countries.
The necessity of good ships for the East Indian trade had led the company in 1609 to construct their dockyard at Deptford, from which, as Monson observes, dates “the increase of great ships in England.” Down to the middle of the The East Indiamen. 19th century, the famous “East Indiamen” held unquestioned pre-eminence among the merchant vessels of the world. Throughout the 17th century they had to be prepared at any moment to fight not merely Malay pirates, but the armed trading vessels of their Dutch, French and Portuguese rivals. Many such battles are recorded in the history of the East India Company, and usually with successful results.
It was not until it had been in existence for more than a century that the English East India Company obtained a practical monopoly of the Indian trade. In 1635, a year after the Great Mogul had granted it the liberty of trading The acquisition of territory. throughout Bengal, Charles I. issued a licence to Courten’s rival association, known as “the Assada Merchants,” on the ground that the company had neglected English interests. The piratical methods of their rivals disgraced the company with the Mogul officials, and a modus vivendi was only reached in 1649. In 1657 Cromwell renewed the charter of 1609, providing that the Indian trade should be in the hands of a single joint stock company. The new company thus formed bought up the factories, forts and privileges of the old one. It was further consolidated by the fostering care of Charles II., who granted it five important charters. From a simple trading company, it grew under his reign into a great chartered company—to use the modern term—with the right to acquire territory, coin money, command fortresses and troops, form alliances, make war and peace, and exercise both civil and criminal jurisdiction. It is accordingly in 1689, when the three presidencies of Bengal, Madras and Bombay had lately been established, that the ruling career of the East India Company begins, with the passing by its directors of the following resolution for the guidance of the local governments in India:—“The increase of our revenue is the subject of our care, as much as our trade; ’tis that must maintain our force when twenty accidents may interrupt our trade; ’tis that must make us a nation in India; without that we are but a great number of interlopers, united by His Majesty’s royal charter, fit only to trade where nobody of power thinks it their interest to prevent us; and upon this account it is that the wise Dutch, in all their general advices that we have seen, write ten paragraphs concerning their government, their civil and military policy, warfare, and the increase of their revenue, for one paragraph they write concerning trade.” From this moment the history of the transactions of the East India Company becomes the history of British India (see India: History). Here we shall only trace the later changes in the constitution and powers of the ruling body itself.
The great prosperity of the company under the Restoration, and the immense profits of the Indian trade, attracted a number of private traders, both outside merchants and dismissed or retired servants of the company, who came The interlopers. to be known as “interlopers.” In 1683 the case of Thomas Sandys, an interloper, raised the whole question of the royal prerogative to create a monopoly of the Indian trade. The case was tried by Judge Jeffreys, who upheld the royal prerogative; but in spite of his decision the custom of interloping continued and laid the foundation of many great fortunes. By 1691 the interlopers had formed themselves into a new society, meeting at Dowgate, and rivalling the old company; the case was carried before the House of Commons, which declared in 1694 that “all the subjects of England have equal right to trade to the East Indies unless prohibited by act of parliament.” This decision led up to the act of 1698, which created a new East India Company in consideration of a loan of two millions to the state. The old company subscribed £315,000 and became the dominant factor in the new body; while at the same time it retained its charter for three years, its factories, forts and assured position in India. The rivalry between the two companies continued both in England and in India, until they were finally amalgamated by a tripartite indenture between the companies and Queen Anne (1702), which was ratified under the Godolphin Award (1708). Under this award the company was to lend the nation £3,200,000, and its exclusive privileges were to cease at three years’ notice after this amount had been repaid. But by this time the need for permanence in the Indian establishment began to be felt, while parliament would not relinquish its privilege of “milking” the company from time to time. In 1712 an act was passed continuing the privileges of the company even after their fund should be redeemed; in 1730 the charter was prolonged until 1766, and in 1742 the term was extended until 1783 in return for the loan of a million. This million was required for the war with France, which extended to India and involved the English and French companies there in long-drawn hostilities, in which the names of Dupleix and Clive became prominent.
So long as the company’s chief business was that of trade, it was left to manage its own affairs. The original charter of Elizabeth had placed its control in the hands of a governor and a committee of twenty-four, and this The company and the crown. arrangement subsisted in essence down to the time of George III. The chairman and court of directors in London exercised unchecked control over their servants in India. But after Clive’s brilliant victory at Plassey (1757) had made the company a ruling power in India, it was felt to be necessary that the British government should have some control over the territories thus acquired. Lord North’s Regulating Act (1773) raised the governor of Bengal—Warren Hastings—to the rank of governor-general, and provided that his nomination, though made by a court of directors, should in future be subject to the approval of the crown; in conjunction with a council of four, he was entrusted with the power of peace and war; a supreme court of judicature was established, to which the judges were appointed by the crown; and legislative power was conferred on the governor-general and his council. Next followed Pitt’s India Bill (1784), which created the board of control, as a department of the English government, to exercise political, military and financial superintendence over the British possessions in India. This bill first authorized the historic phrase “governor-general in council.” From this date the direction of Indian policy passed definitely from the company to the governor-general in India and the ministry in London. In 1813 Lord Liverpool passed a bill which further gave the board of control authority over the company’s commercial transactions, and abolished its monopoly of Indian trade, whilst leaving it the monopoly of the valuable trade with China, chiefly in tea. Finally, under Earl Grey’s act of 1833, the company was deprived of this monopoly also. Its property was then secured on the Indian possessions, and its annual dividends of ten guineas per £100 stock were made a charge upon the Indian revenue. Henceforward the East India Company ceased to be a trading concern and exercised only administrative functions. Such a position could not, in the nature of things, be permanent, and the great cataclysm of the Indian Mutiny was followed by the entire transference of Indian administration from the company to the crown, on the 2nd of August 1858.