The Treaty of Allahabad (August 1765) followed the Battle of Buxar. Through it, Mughal emperor Shah Alam II granted the East India Company the Diwani (right to collect revenue) of Bengal, Bihar and Orissa, and Shuja-ud-Daula of Awadh made peace with the Company. It marked the Company's change from a trading body into a territorial power.
After the Battle of Plassey (1757), the Company became the real power behind the Nawabs of Bengal. Mir Qasim, made Nawab in 1760, tried to assert independence, which led to war. He allied with Shuja-ud-Daula of Awadh and the Mughal emperor Shah Alam II, but their combined forces were defeated by the Company under Hector Munro at Buxar on 22 October 1764.
Clive returned to India in 1765 and chose not to annex Awadh, which would have stretched the Company's resources. Instead he restored it to Shuja-ud-Daula as a buffer state against the Marathas and Afghans. From the weakened emperor he obtained the legal right to collect revenue in the richest provinces of India, while the Nawab retained the Nizamat (police and judicial functions) under Company influence.
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