The East India Company set up the first English factory on the banks of the river Hugh in the year 1651. This became the base from which the Company’s traders, known at that time as ‘factors’, operated. The factory had a warehouse where goods for export were stored and it had offices where Company officials set. As trade expanded, the Company persuaded merchants and traders to come and settle near the factory.

By 1696 the Company began to build a fort around the settlement. Two years later it bribed Mughal officials into giving the Company zamindari rights over three villages. One of these was Kalikata which later developed into a city, known as Calcutta. The Company also persuaded the Mughal emperor Aurangzeb to issue a firman granting the Company the right to trade duty-free. The Company tried continuously to press for more concessions and manipulate existing privileges. For instance, Aurangzeb’s Farman had granted only the Company the right to trade duty-free. But Company officials who were carrying on private trade on the side were expected to pay duty. But they refused to pay. This caused huge loss of revenue for Bengal.