After the defeat of the confederate army of the Bengal Nawab, Nawab of Oudh and the Mughal Emperor the English East India Company was surely in an advantageous position.
Robert Clive came to an understanding with the Mughal Emperor and agreed to return Kara and Allahabad to him.
In return for this Shah Alam the II granted the diwani rights of Bengal, Bihar and Orissa to the English East India Company on an annual payment of 26-lakhs of rupees.
Robert Clive, on behalf of the English East India Company received the grant of diwani from Shah Alam the II.
The importance of the grant of diwani lies, firstly, in the fact that prior to this there was no legal recognition of the authority of the East India Company over the Nawab of Bengal.
The Company had been enjoying the political and economic rights forcibly.
But with the grant of diwani the Company’s rights were now established on a legal basis.
Secondly, since the English now came to control the finance of Bengal they no longer had to depend on the supply of money from England for trade in India.
Thirdly, the partial takeover of the diwani functions by the East India Company resulted in immense suffering to the people of Bengal.