After the battle of Buxar 1764, the East India Company acquired the Diwani of Rights (The right to collect revenue) over Bengal, Bihar and Orissa.
Initially, the company attempted to continue the old system of revenue collection . Warren Hastings auctioned the right to collect revenue to the highest bidder. However this system was not successful and hence the idea to look into different revenue models was started by the East India Company.
1. At the backdrop of permanent settlement, the Company felt that fixing the revenue permanently in perpetuity is not a wise move and hence they came up with Zamindari System.
2. The Zamindari System was introduced in Central India and Awadh.
3. The Zamindars were intermediaries who had to pay periodic revenue to the Company.
4. However the revenue paid by the Zamindars was not fixed but was revised periodically.