Answer:
After the Battle of Buxar (1764), the Company appointed Residents in Indian states. They were political or commercial agents and their job was to serve and further the interests of the Company. Through the Residents, the Company officials began interfering in the internal affairs of Indian states. By and by the Company began to force the states into a "subsidiary alliance". According to the terms of his alliance, Indian rulers were not allowed to have their independent armed forces. They were to be protected by the Company, but had to pay for the "Subsidiary forces" that the Company was supposed to maintain for the purpose of this protection. If the Indian rulers failed to make the payment, then part of their territory was taken away as penalty. For example, when Richard Wellesley was Governor General (1798-1805), the Nawab of Awadh was forced to give over half of his territory to the Company in 1801, as he failed to pay for the "subsidiary forces". Hyderabad was also forced to cede territories on similar grounds.
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