The wars of Lord Hastings opened a new epoch in the relations of the East India Company with the Indian states. The imperial idea grew and the theory of paramountcy began to develop. In due course the Indian states surrendered all forms of external sovereignty to the East India Company. The state`s however retained the full sovereignty in internal administration.

In the following years after the retirement of Lord Hastings, there was rapid increase of the company`s influence in the internal administration of the states. The British Residents were usually the instruments of communication between the government of India and the rulers of the Indian states. Gradually their powers and status increased. With the continuous assertion of company`s supremacy and the adoption of subordinate cooperation, the commercial body, East India Company became the executive power in India. Thus the British Residents posted in each state carried on the whole administrative and the military function of the Indian states. By the charter Act of 1833, the company was asked to accentuate its commercial business. With the act a radical change of the company`s attitude towards the Indian states was noticed.

The policy of annexation and of states whenever and wherever possible way laid the court of directors in 1834. The policy was restated with emphasis in 1841 with the issue of a directive to the Governor general. The governor-generals of this period were true annexationists. Annexation of the territories was the chief instrument for the extension of the territories by the British. However the annexations were made to acquire a new revenue territory or on the ground of misgovernment due to the failure of the natural heir of the Indian states. Even after the establishment of the undisputed supremacy by the east India Company in 1818, the relation between the Indian states and the Company was chaotic, indefinite and contradictory.