Diwani provincial revenue administration system under the Mughals and an early mechanism of the establishment of Company rule in Bengal. The Mughal provincial administration had two main branches - nizamat and diwani. Broadly speaking, nizamat meant civil administration and diwani, revenue administration. The provincial subahdar was in charge of nizamat (he was also called nazim) and the diwan was in charge of revenue administration. To ensure checks and balances in the Suba administration, the Mughal emperor used to appoint these two key officers directly. They were normally appointed by, and responsible to, the emperor. The diwan had the power and responsibility to send revenue to the central government without consulting or taking any cognition of the nazim. The outcome of the conflict between Subahdar azim-us-shan and Diwan murshid quli khan over the issue of remitting revenue to the centre directly by the diwan demonstrates the autonomy of the institution of diwani during the times of the great Mughals.
But the separation of power between the nazim and the diwan for the sake of checks and balances disappeared during the nawabi period when the autonomous nawabs ruled the Subah without any power sharing with the diwan, who was now reduced to a nawabi officer only. He was appointed by, and responsible to, the nawab. This was a violation of the imperial rule, which the weak and impoverished emperors at the centre could never correct by sending an imperial diwan to share power with the nawab.
As an active trader in Bengal, the English east india company had witnessed the autonomous power of the centrally appointed diwans whom they then gave, to earn their favour, peshkash on their appointment. They also knew that the autonomous nawabs could make the institution obsolete because of the weakness of the centre. robert clive, who came in 1765 for the second time to lead the affairs of the Company in Bengal, took advantage of the situation and met the homeless emperor, Shah Alam, at Allahabad. The needy emperor was persuaded that appointing the East India Company the diwan of Bengal, Bihar and Orissa could revive the post of the centrally controlled diwan. The Company, as diwan, would be pleased to remit him a fixed amount of tribute as regularly as it was done in the good old days.
The proposal sounded very attractive to the emperor, who was not receiving any tribute from Bengal for a long time, and thus he agreed to the proposal of Clive. Accordingly a treaty was signed. The emperor issued a farman (12 August 1765) appointing the Company Diwan of Bengal, Bihar and Orissa with the condition that the Company would remit an annual tribute of twenty-six lakhs of rupees to the emperor. Another agreement (30 September 1765) was signed with the minor nawab of the Suba Bangla, nazmuddaula, under which the Company agreed to pay an annual sum of fifty-three lakhs of rupees to the nawab to defray the costs of nizamat administration and the nawab's household. All these dues would be paid from the revenues collected from the subah and the surpluses after payment of all stipulated dues would be considered as the profit of the Company.
Clive did not choose to make the Company rulers of the country straightaway. Many practical considerations led him to run the diwani administration through native agencies. He appointed Syed Muhammad reza khan naib diwan and naib nazim. As naib nazim he was to represent the nawab and as naib diwan he was to represent the Company. The system that Clive evolved was called Double Government. The Double Government under Reza Khan worked well as long as Clive was there to support him as the governor at fort william. With Clive's final departure in 1767, Reza Khan's influence declined. The Company officials began plundering the country in the name of private trade. The consequence was the collapse of the economy, leading to the great famine of 1769-70. To save the new kingdom from ruin and also to save the Company from complete collapse through recurring losses, the court of directors resolved in 1772 to stand forth as diwan and advised warren hastings, the governor, to abolish the Clive's Double Government system. Hastings sacked Reza Khan and assumed the diwani administration directly in his hand and with that began the second phase of the establishment of the British colonial state in India. [Sirajul Islam]