To achieve his political aims Wellesley relied on three methods: the system of "subsidiary Alliance", outright war and the assumption of the territories of previously subordinated rulers. The Subsidiary Alliance system was used by Wellesley to bring Indian states within the orbit of British power.
The system served the double purpose of asserting British supremacy in India and at the same time of saving India from the menace of Napoleon. The system played a very important part in the expansion of the company's dominions and many new territories were added to the company's possession.
Wellesley did not invent the subsidiary system. The system existed long before him and was of an evolutionary growth. Duplex, the French general, was perhaps the first who had lent European troops to Indian princess at the expense of the latter.
Ever since the Governor generalship of Clive the system had been applied with more or less insight by almost every Governor and Governor-General of India. The special contribution of Wellesley was that he greatly developed and elaborates system and applied it to sub-ordinate the Indian states to the paramount authority of the company.
Under his Subsidiary Alliance system, the ruler of the allying Indian State was compelled to accept the permanent stationing of a British force within his territory and to pay a subsidy for its maintenance. All this was done allegedly for his protection but was, in fact, a form through which the Indian ruler paid tribute to the company. Sometimes the ruler added the part of his territory instead of paying annual subsidy.
The "Subsidiary Treaty" usually also provided that the Indian ruler would agree to the posting at his court of a British resident, that he would not employ any European in his service without the approval of the British and that he would not negotiate with any other Indian ruler without the knowledge and consent of the British Government. In return, the British undertook to defend the ruler from his enemies. They also promised non-interference in the internal affairs of the allied states, but this was a promise they seldom kept.
In reality, by signing a Subsidiary Alliance, an Indian state virtually signed away its independence. It lost the right of self defenses, of maintaining diplomatic relations, of employing foreign experts, and of setting its disputes with its neighbors. In fact the Indian ruler lost all vestiges of sovereignty in external matters and became increasingly subservient to the British Resident who interfered in the day-to-day administration of the state. In addition, the system tended to bring about the internal decay of the protected state.
The cost of the subsidy force provided by the British was very high and, in fact, much beyond the paying capacity of the state. The payment of arbitrarily-fixed and artificially-bloated subsidy invariably disrupted the economy of the state and improvised its people.
The system of Subsidiary Alliances also led to the disbandment of the armies of the protected states. Lakhs of soldiers and officers were deprived of their livelihood, which led misery and degradation in the country. Moreover, the rulers of the protected state tended to neglect the interests of their people and to oppress them as they no longer feared them. They had no incentive to be good rulers as they were fully protected by the British from domestic and foreign enemies.
The Subsidiary Alliance system was, on the other hand, extremely advantageous to the British. It was the Trojan-horse-tactics in Empire building. It disarmed the Indian states and threw British protectorate over them. The Governor-General was present by proxy in every Indian state that accepted the Subsidiary Alliance. Thus, it deprived the Indian princes of forming any confederacy against the British. It enabled the company to maintain a large army at the cost of Indian states.
This enabled them to fight wars far away from their own territories since any war would occur in the territories either of the British ally or of the British enemy. They controlled the defense and foreign relations of the protected ally and had a powerful force stationed at the heart of his lands, and could, therefore, at the time of their choosing, overthrow him and annex his territory by declaring him to Bengal "inefficient".
The Subsidiary system helped the company to effectively counteract any possible French move in India. As far as the English were concerned, the system of Subsidiary Alliance was "a system of flattening allies as we fatten oxen, till they were worthy of being devoured".
Among the states that accept the Subsidiary Alliance were the Nizam of Hyderabad (September 1798 and October 1800), the ruler of Mysore (1799), the Raja of Tanjore (October 1799), the Nawab of Oudh (November 1801), the Peshwa (December 1801), the Bhonsle Raja of Berar (December 1803), the Sindhia (February 1804) and the Rajput states of Jodhpur, Jaipur, Macheri, Bundi and the ruler of Bharatpur.
By the treaty of October 12, 1800, the Nizam of Hyderabad surrendered to the company all the territories acquired by him from Mysore in 1792. The Nawab of Oudh after signing subsidiary treaty on 1801 surrendered to the British nearly half of his kingdom, consisting of Rohilakhand and the territory lying between Ganga and Jamuna.
War with Mysore:
Wellesley dealt with Mysore more sternly. Tipu of Mysore would never agree to Subsidiary Treaty.
On the contrary, he never reconciled himself to the loss of half of his territory in 1792. He worked incessantly to strengthen his forces for the inevitable struggle with the British. He entered into negotiations for an alliance with Revolutionary France. He sent missions to Afghanistan, Arabia and Turkey to forge an anti-British alliance.
The war between Tipu and British which broke out in 1799 was the Fourth Anglo Mysore war. It was of very short duration, but quite decisive and fierce. Tipu was defeated at Sedaseer, Melvelly and finally at his capital city of Seringapatam on 4 May 1799 and met a hero's end. Thus fell a leading Indian power and one of the most powerful foes of the English.
Nearly half of Tipu's dominions were divided between the English and their ally, the Nizam. The reduced kingdom of Mysore was restored to a descendant of the old Hindu reigning dynasty. A special treaty of Subsidiary Alliance was imposed on the new Raja by which the Governor-General was authorized to take over the administration of the state in case of necessity.
In 1801 Lord Wellesley forced a new treaty upon the puppet Nawab of Carnatic compelling him to add his kingdom to the company in return for a pension. Similarly, the territories of the rulers of Tanjore and Surat were taken over and their rulers pensioned off.
War with Marathas:
The Marathas were the only power left outside the sphere of the British control. Wellesley turned his attention towards them and began aggressive interference in their internal affairs. The Maratha Empire at this time consisted of a confederacy of five big chiefs, namely, the Peshwa at Poona, the Gaekward at Baroda, the Sindhia at Gwalior, the Holkar at Indore and the Bhonsle at Nagpur, the Peshwa being the nominal head of the confederacy. But all of them were engaged in bitter fratricidal strife, blind to the real danger from the rapidly advancing foreigner.
Wellesley had repeatedly offered a Subsidiary Alliance to the Peshwa and Sindhia. But, the far-sighted Nana Fadnavis, the chief minister of the Peshwa and refused to fall into the trap and preserved in some form of solidarity of the Maratha confederacy.
His death on 13 March 1800 marked the end of all wisdom and moderation in the Maratha Government. Both Daulat Rao Sindhia and Jaswant Rao Holkar entered into a fierce struggle with each other for supremacy over Poona. However, when on 23 October 1802, Holkar defeated the combined armies of the Peshwa and Sindhia; the cowardly Peshwa Baji Rao II rushed into the arms of the English and on fateful day of 31 December 1802 signed the Subsidiary Treaty at Bassein. Thus, he sacrificed his independence as the price of protection. A British force under Arthur Wellesley conducted the Peshwa to the capital and restored him to his former position on 13 May 1803.
The treaty of Bassein was an important landmark in the history of British Supremacy in India. It was without question a step which changed the footing on which the British stood in Western India. It brought the company into definite relations with the formal head of the Maratha Confederacy and henceforth it had either to control the greatest Indian power or was committed to hostilities with it. The Treaty of Bassein was, as Arthur Wellesley aptly remarked, "a treaty with a cipher". It wounded the feelings of the other Maratha leader who saw it an absolute surrender of national independence.
By sinking their mutual jealousies for the time being they tried to present a united front to the British. The Peshwa, repentant of his action, sent them secret messages of encouragement. Daulat Rao Sindhia and Raghuji Bhonsole II of Berar at once combined and tried to win over Jaswant Rao Holkar to their side. But even at this moment of grave national peril they would not unite against their common enemy. When Sindhia and Bhonsole fought the British, Holkar stood on the sidelines and Gaekward gave help to the British. When Holkar took up arms, Bhonsle and Sindhia nursed their wounds.
Hostilities commenced early in the month of August 1803. In the south, the British armies, led by Arthur Wellesley defeated the combined armies of Sindhia and Bhonsle at Assaye in September 1803.
The Bhonsle Raja's forces were completely defeated at Argaon in November 1803. In the north, Lord Lake routed Sindhia's army at Leswari in November and occupied Aligarh, Delhi and Agra. The British gained further successes in Gujarat, Bundelkhand and Orissa. Thus, in the course of five months, Sindhia and Bhonsle had to own severe defeats.
The Maratha allies had to sue for peace. Both Sindhia and Bhonsle concluded two separate treaties with the English. By the Treaty of Deogaon, concluded on 17 December 1803, the Bhonsele Raja ceded to the English the province of Cuttack, including Balasore and the whole of his territory west of the river Warda. Sindhia concluded the Treaty of Surji-Arjangaon on 30 December 1803 by which he gave to the victor all his territories between the Ganga and the Jamuna. Both of them admitted British Residents to their courts and promised not to employ any European without British approval. The Pehswa became a designated puppet in their hand. Thus, as a result of the second Anglo-Maratha war, the English secured important advantages in various ways.
Wellesley then turned his attention to Holkar, but Jaswant Rao Holkar proved more than a match for the British and brought British armies to a standstill position. Holkar' this ally, the Raja of Bharatpur inflicted heavy losses on Lake who unsuccessfully attempted to storm his fort early in 1805.
The authorities in England for some time past had been dissatisfied with the aggressive policy of Wellesley. His conquests, though brilliant and of far-reaching consequences, were becoming too large for profitable management and raised the company's debts. Wellesley was, recalled from India in 1805 and the company made peace with Holkar in January 1806 by the treaty of Raighat, giving back to Holkar the greater part of his territories. The expansionist policy had been checked near the end. All the same, it had resulted in the East India Company becoming paramount power in India.