On 5th May 1633, the Nawab of Bengal granted trading rights to the British East India Company. In consequence, the Company immediately established factories at Balasore and Hariharpur.

In Bengal, during the months of 1650, the Company initiated factories at Hooghly. It also opened factories in 1669 at Dacca and then later at Kasimbazar. By 1686, other factories had been established at Patna and Malda. The local availability of fine cotton textiles and saltpetre filled a serious supply need of the Company. Following negotiations with the Nawab of Bengal, the Company obtained an exemption from transit duties and customs in exchange for an annual payment of rupees 3000.

In 1657, Bengal took on the status of Agency and thus became independent of Madras`s governance. During the years of 1681-84, the Company designated Bengal as a presidency separate from that of Madras. In 1682, Calcutta became the new presidency`s main headquarters. The process of division and reunion with the Madras administration was to be repeated twice more.

In the year of 1686, in London, the East India Company`s Court of Directors decided on a policy of proclaiming war against the Mughals with the intent of suppressing the trade of Interlopers at Surat. A naval and troop force sent under Captain William Heath was meant to blockade the Mughals on the West Coast and to seize Chittagong (presently in Bangladesh) on Bengal`s east coast.

Hostilities erupted between the forces of the Nawab of Bengal and those of the Company at Hooghly on 28th October, linked with the conflict with the Mughals. The reason behind such hostility was the disruption in the key saltpetre trade. Job Charnock (c. 1631 -1699) evacuated Hooghly and moved down stream twenty miles to a locale which eventually became Calcutta. Following another move to the Island of Hijili, on May 28 1687, another battle was fought between the adversaries. Four days later the annual fleet from England arrived offering military relief and a return up the Hooghly.

With Sir John Child`s rash actions, the Mughal Emperor took control of Surat and most of the Bombay Presidency. The Mughals captured the Company factories at Masulipatam and Vishakhapatnam on the Coromandel Coast.

During the extensive period of 1688-1689, under the orders of the Company`s Captain William Heath, Bengal was evacuated for the speculative attempt to found a factory at Chittagong. There in the face of Mughal troops, Heath sailed off to Madras. Thus after forty years, the Company was forced out of Bengal. In the meantime, in 1690, the Company authorities in Bombay settled matters with the Mughals which allowed Charnock to return to Sutanati in Bengal.

On 24th August 1690, Job Charnock established an East India Company factory in Calcutta. In January 1697, in the face of Afghan incursions into Bengal and the capture of Kasimbazar and Malda, the Nawab of Bengal granted the Company permission to erect Fort William in Calcutta.

On 9th November 1698, the British East India Company purchased from the Nawab of Bengal three villages comprising Sutanati, Gobindapur and Calcutta. With their purchase the Company gained the exercise of zamindari rights and permission to collect taxes.

On December 1699, the Company declared Bengal as a separate Presidency from that of Madras and named Sir Charles Eyre as its first president. In 1707, the East India Company again separated the governance of Bengal from Madras and named it as a Presidency. In 1717, the Company purchased the right of collecting revenue from an additional thirty- eight villages in the region of Calcutta.

Company relations with Mughal officials became unsettled in 1742, with the invasion of Maratha cavalry into Bengal and Orissa. The Nawab of Bengal, Alivardi Khan, eventually came to separate terms with the Marathas. The British responded to Maratha threat by constructing a three-mile ditch around Calcutta as a defensive measure.