Europeans in India Part 8 The English East India Company Section II: Coalescing as an Entity

Canberra, 5 March 2023

From its very inception, the East India Company was driven by three focused guiding principles: one, the preservation of its monopoly rights and privileges within England, regarding the trade with the East; two, the continuous planning and execution of actions to oust rival mercantile interests from the Indian Ocean region; and three, securing special and exclusive privileges for itself from the kings and rulers of the East, the Oriental potentates, to ensure least expenditure for the Company to maximise profits.

Dealing with Domestic Competition

The Company started with a royal charter, the favour of the crown and with the Queen herself a shareholder. This was also the time in England that the general public was starting to become restive about royal privileges and the tide of opinion was starting to swing in favour of the Parliament. Opinions were becoming stronger against the grant of sweeping monopolies by the crown. The ‘have-nots’, smaller traders and merchants excluded from the privileged ranks of more affluent and larger merchants and their associations, by now had come into direct confrontation with the monopolising groups.

The East India Company was one of the main targets for the have-nots in this struggle, especially since the profits of the Company were enormous. Between 1603–13, the Company had sent out eight voyages to the Indian Ocean—other than the one in 1607 in which all vessels were lost, the other seven created astounding profits. These seven voyages were so prosperous that in each one of them the clear profits were more than 100 percent, with few returning more than 200 per cent profit. Although no confirmed proof has been provided, contemporary reports hint at piracy, not merely honest trade, being at the heart of such massive profit margins. It can safely be assumed that at least in the first lot of voyages of the Company, piracy played a distinct and critical role in ensuring gigantic profits. It is also indicated that over the subsequent years, the role of piracy diminished because of the increasing contest for trade between the European countries engaged in the Indian Ocean and the growing resistance from local rulers towards such wanton vandalism.

At the home front, while resistance to the Company continued to rise and was becoming vociferous, it pushed back. The Company endeavoured to maintain its privileged position by proclaiming how it was serving the interests of the nation in faraway lands under trying circumstances. Although the have-nots, minor traders, were unhappy that no action was being initiated to level the playing field, the monarchy was solidly behind the East India Company and very little could be done to change the situation.

The situation improved for the have-nots with the ascension of James I to the throne. The Company was alarmed when the king granted a charter to another association of merchants in 1604, to trade with Cathay, China, Japan and Korea. However, this ‘travesty’ was put right in 1609 when the Company prevailed upon the king to renew their charter, not for 15 more years as was envisaged in the original charter, but in perpetuity. James I was also persuaded to remove some of the restrictions that Queen Elizabeth I had imposed on the Company in the original charter. Further, in 1624, the East India Company applied to the crown to grant them the authority to question and punish the King’s officials abroad, by martial and municipal laws. The King granted this authority to the Company, as being applicable to all English citizens abroad, without even going through the formality of parliamentary approval.

‘It appears not that any difficulty was experienced in obtaining their request; or that any parliamentary proceeding for transferring unlimited power over the lives and fortunes of the citizens, was deemed even a necessary ceremony. This ought to be regarded as an era in the history of the Company.’

—James Mill,

The History of British India, Volume I, p. 41.  

In a Similar fashion to his predecessor, in 1635 Charles I also granted a rival company the same privileges being enjoyed by the East India Company. The incentive for this action was obviously the fact that the new company promised the monarch an undisclosed part of their profits. However, once again the Company managed to have the order rescinded in 1639, paying out and distributing more than 70,000 pounds in bribes and gifts. The large trading bodies continued to shelter behind royalty and their prerogatives to grant royal charters, even though the balance of power was inexorably shifting from the crown to the parliament. Gradually, the parliament was initiating rules and regulations to dissolve all royal monopolies.

Parliament had started to institute action early in the 17th century. In 1604, a Bill had been introduced in Parliament to abolish all privileges granted by the Crown to entities involved in foreign trade. However, this Bill did not gain much traction and languished with no endorsement.  The same Bill, with some changes, was re-introduced in 1624 as an anti-monopoly Act but it once again remained indecisive. The Navigation Act of 1651, which prescribed that only English owned ships that were manned at least 50 per cent by Englishmen could import goods to England, provided a powerful stimulus to English commerce and shipping.

‘This was the first step in establishing a parliamentary code in suppression of the royal prerogative and its regulations.’

—James A. Williamson,

A Short History of British Expansion: The Old Colonial Empire, p. 246

Even so, the East India Company threatened to liquidate all its assets in India and therefore, its charter was renewed in 1657. Nevertheless by the 1660s, the have-nots, independent traders, were flourishing and the renewal of the Company charter was a compromise. By this time, politically, the royal prerogatives were almost non-existent. Real control of trade, finance, judiciary and the military rested firmly with the Parliament. By the Act of 1688, trade was thrown open to all and all former monopolistic rights abolished. The immediate effect was that foreign trade expanded to all ports of England and was never again the exclusive preserve of the London merchants and their association.  

The East India Company continued to weather the storm through insidious bribery on a large scale. They now obtained permission to maintain fortifications in India and, more importantly, to raise their own troops to protect and defend these establishments. With the grant of this privilege, the Company was now uniquely equipped with both political and military powers, permission to control the King’s officers and other Englishmen abroad having been granted earlier. They had become the most powerful ‘legal’ entity outside of the soil of England with sweeping powers over all Englishmen. However, the smaller merchants continued to trade with Asia and make reasonable profit. These freebooters called themselves ‘Free Merchants’, while the Company dubbed them the ‘Interlopers’, in a derogatory manner.

Free Merchants

With their increasing political clout in England, the Free Merchants became bold enough to apply for charters from the king. Limited permissions were given, as mentioned earlier, which were very quickly stamped out by the financial and political clout of the East India Company. The first to gain permission to trade as an individual was Sir Edward Michaelbourne, who defied all previous charters and obtained royal consent from James I in 1604 to undertake an independent voyage to the Indian Ocean. He reached the region and cruised the Eastern Archipelago robbing all ships that came in his way, irrespective of their nationality and origin. He carried out no trade at all, relying solely on piracy to make a profit. While the English had not been reluctant to indulge in piracy in somewhat surreptitious manners, Michaelbourne’s blatant acts of piracy and open theft did incalculable damage to an already questionable reputation of the English in the region.

Of course, the reputation of the Company was itself not something to be sung about and praised. They were not above dubious actions and used the meanest tricks possible to maintain and further spread their influence in the Indian Ocean region. With the ability of the king to grant royal prerogatives in decline and the diminishing influence of the crown in matters of trade and national finance in the Home country, the Free Merchants did not always wait for royal permission to engage in trade with the East. This trend became openly visible from the reign of Charles II—the Free Merchants were just that, free traders, who could engage in commerce wherever and whenever they wanted. The East India Company was forced to open their ports in the East to the independent traders.

The entire lot Englishmen in the East had one thing in common. All the ‘merchants’—the Company, its officials, Free Merchants and pirates—were guided by one common principle; the lust for loot from the East, obtained by any and all means possible. To achieve profit the English stooped to activities that were at the very bottom of lowdown sanctity. Scruples, integrity and honour were carefully set aside for display and use when necessary. Exclusive profit hunting was the sole activity of the Englishmen in the East. This remained so, becoming entrenched in the DNA of the British, for the next three centuries of their presence in the Indian sub-continent.

The Concept of Internal Trade

The Company’s fundamental trade was the purchase of cotton goods in India for cash or, in some small ways, in exchange for English manufactured goods. However, a subsidiary trade existed, called country trade, which comprised of exchanging commodities between the various countries of Asia. The East India Company was not directly involved or interested in this trade, although they permitted their employees to indulge in country trade for private profit. The salaries paid to the Company employees were far too meagre to induce them to travel to the East and endure the hardships of the voyage as well as the tenure in faraway and hostile lands. The lure to find sufficiently qualified officers was the concept of making personal profits and fortunes that mostly came by way of the country trade.

The Company therefore turned a blind eye to the private trade of their employees and when it suited them even connived with them to make the dealings profitable. In turn, the employees partnered with the Free Merchants who indulged in country trade to the maximise their own profits—a sort of ‘understanding’ existing between the Company, through its employees, and the Free Merchants. The Company needed this trade to ensure that they had a cadre of at least average officers on their rolls. Therefore, a sort of ‘give and take’ existed between them and the Free Merchants at the operational level of the commerce in the Indian Ocean, although the two were at loggerheads in London. This de facto arrangement suited both the parties.

On their part, the Free Merchants made no attempt to compete in the basic London market or to enter into agreements with the local rulers in the East, all their activities were subtle and not broadcast for public information. To use a modern term, the Free Merchants, as far as possible, flew under the radar, intent only on making a profit.

As mentioned earlier, the fundamental desire of the Free Merchants, the Company, its executives and employees—clubbed together as a social category of Englishmen—was to amass wealth by hook or by crook. At least in the first half of the 17th century, local politics did not interest the majority of these people—they did not have a sufficient enough dose of ‘patriotism’ in them to be concerned with the increasing competition between the English and the other European powers who were also engaged in the Indian Ocean region. It did not materially matter to them whether the English or the French, or for that matter someone else, became the dominant power in the Indian Ocean region, as long as their own profits and personal loot were assured.

‘All of them belonged to the same category of decadent merchant bourgeoisie which had already spent its force, and their actions were motivated mainly, or only, by self-interest.’

—Ramkrishna Mukherjee,

The Rise and Fall of the East India Company, p. 81.

Reconstitution of the Company

The Revolution of 1688–89 in England that saw James II who had fled the realm, replaced by William as King, was a precursor to more lasting changes. The Bill of Rights, under which William and Mary came to the throne, made the Parliament the deciding factor in all matters of national importance—royal prerogatives had practically come to an end.

In 1690, a small association of Free Merchants petitioned the Parliament to throw open the trade with India. The Company, as usual fought back, spending 90,000 pounds in one year to bribe the royalty and the ‘great men’ of the realm to maintain their exclusive rights to the Eastern trade. However, the House of Commons of the Parliament ordered the books of the Company to be examined and audited—the practice of bribing ‘great men’ to achieve their ends was finally exposed. The upshot was an agitation against the Company monopoly that culminated in a resolution in the House of Commons in 1694, which proclaimed that, ‘it was the right of all Englishmen to trade to the East Indies, or any part of the world, unless prohibited by act of parliament’. (As quoted in James Mill, The History of British India, p. 92) With this proclamation, the rule of Parliament over that of the Crown was firmly established.

The association of Free Merchants who had catalysed the change formed a rival company to the Old Company. The New Company outdid the Old one in bribing the ‘great men’ to ensure that they did not stand in objection to the new situation. In 1698, the Free Merchant group obtained an Act of Parliament recognising the new association as the New or English East India Company, as opposed to the Old or London Corporation. This recognition or grant of a charter was contingent on the New Company making available to the government a sum of 2,000,000 pounds at an interest of eight per cent per annum. At the same time, the Old Company was given three years official notice informing them of the termination of all their monopolistic and other privileges.

While the New Company was definitely ascendant in England, the Old Company was firmly entrenched in the East. They had almost a century of experience in trading with India and other countries in the East, owned many factories across the expanse of the Indian Ocean region, and perhaps most importantly, possessed an established staff, grown rich on internal trade, as well as semi-legal and sometimes outright illegal operations. The directors of the Old Company in London were also past masters at manipulating the system to suit their immediate and long-term requirements. Through clever manoeuvrings and exploitations of weak regulations, the Old Company made great inroads into the New Company itself. When the New Company floated a subscription for the two million pounds that had to be paid to the government, the Old Company managed to buy one-sixth of the subscription. With this one master stroke, the Old Company stood to gain more than they had lost through the cancellation of their exclusive privileges.

After shoring up their precarious position in London, the Old Company geared up to take on the newcomers in the land where the actual trading was to take place, India, where they held the upper hand by a large margin. The New Company realised the enormity of the challenges facing them when actual operations had to be undertaken in the East and proposed a fusion with the Old Company. However, the initial proposal was received coldly by the directors of the Old Company. Tensions started to rise between the two entities at ruinous cost to both the Companies and not serving the interest of any of the merchant bourgeoisie, irrespective of their loyalties.

Both the Companies realised the futility of in-fighting and the advantages to be gained by amalgamating the two entities, which was obviously the best way forward. However, agreement of the terms and conditions for the unification became the next challenge to be overcome. The general elections of 1700–01 became a contest between the two Companies to obtain parliamentary influence. Contemporary reports suggest that bribes flowed like water throughout the election period and that the 18th century system of borough-mongering started and took shape during this election. Finally in 1702, the merger issue was resolved by the Instrument of Union brought about after extensive negotiations.

According to the merger agreement, the Old Company was given seven years to wind up its affairs after which the two would combine to form ‘The United Company of Merchants of England trading in the East Indies’. The tensions between the two companies gradually subsided and came to an end to the satisfaction of all concerned. The newly organised ‘East India Company’ more broadly represented the interests of the English (British) merchant capital.

‘The true commencement of the East India Company cannot be dated from a more remote epoch than the year 1702, when the different societies, claiming the monopoly of the East India Trade, united together in one single company. … This epoch in the history of England bears [testimony to] … the old landed aristocracy having been defeated, and the bourgeoisie not being able to take its place except under the banner of moneyocracy … The East India Company excluded them [the aristocracy] from parliamentary representation. In this as well as other instances, we find the first decisive victory of the bourgeoisie over the feudal aristocracy, …

—Karl Marx,

‘The East India Company’, in the New York Daily Tribune, 11 June 1853.

The British East India Company was born in the first year of the 17th century, when merchant capital in England had passed a critical point. It came into its own through the merger of its old and new variants at the start of the 18th century. According to Karl Marx the emergence of the new entity coincided with, ‘the most pronounced reaction against the people’, a characteristic that became imprinted upon the East India Company from the very beginning of its inception.

© [Sanu Kainikara] [2023]
All Rights Reserved
No part of this website/Blog or any of its contents may be reproduced, copied, modified or adapted, without the prior written consent of the author. You may quote extracts from the website or forward the link to the website with attribution to For any other mode of sharing, please contact the author @ (

About Sanu Kainikara

Sainik School Kazhakuttam (Kerala), National Defence Academy 39/A, 108 Pilot's Course IAF, fighter pilot, QFI, FCL, psc, HACC, Voluntary Retirement as Wing Commander. Canberra-based Political and Defence Analyst specialising in military strategy, national security, and international politics. PhD in International Politics from University of Adelaide Executive Masters in Public Adminsitration (ANZSOG) Adjunct Professor, University of New South Wales, Distinguished Fellow Institute For Regional Security (IFRS) Distinguished Fellow Centre for Air Power Studies (CAPS)

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: