The event which transformed the Maratha Kingdom into a Maratha Empire was the cession of Malwa by the Mughals in 1738. Through the gap thus created between Delhi and Hyderabad they steadily moved on eastward to the sea at Orissa and Bengal. Towards the north they attacked Rajputana and took on the brave and tradition bound Rajputs. By 1750 they were ready to move further on towards Delhi, incase it collapsed.
Delhi did collapse but the reason was, again the Afghans. Throughout the main Mughal period Afghanistan was divided into two sections, one was the Afghanistan controlled by the Mughals and another was that controlled by the Persians. Persia had Herat, Mughals had Kabul and Kandahar was disputed. The tribesmen then as later were nuisance. In the early eighteenth century an Afghan revolt overthrew the Persian monarchy. It resulted in an independent Afghan power. This independent power found a leader in Ahmed Shah Abdali. Undeterred by his repulse in 1748 at Sirhind he gradually secured Punjab and then sacked Delhi in 1756-57. The Mughals then called in the Marathas.
The Marathas saw the control of the empire opening before them. The Peshwas accepted the challenge, drove back the Afghans, and talked of 'leaping over the walls of Attock'. When the Afghans rallied with Indian support Peshwa sent his cousin, the Bhao Sahib, with a formidable armament. He was, however, outmaneuvered by Ahmad Shah and brought to decisive battle at Panipat in unfavourable conditions. On 13 January 1761 he and the Peshwa's heir were killed and his army destroyed so completely that the Marathas did not re-enter the north for another decade.
For once the Marathas had gained control over almost all of India. The Maratha empire's borders touched Mysore in the south, Bengal in East, had complete control over whole of the west (few Rajputs fiefdoms had accepted the Maratha supremacy by paying Chauth) and in the north had reached till Attock (now in Pakistan). The size was as big as that of Akbar's empire. Even the Mughals had accepted there supremacy. Although they had only Delhi left with them which was also plundered twice by Nadir Shah and Ahmad Shah. But the battle of Panipat changed all, lack of support from the Generals in the north as well as complacent attitude on the part of Marathas resulted in their defeat. They have been winning for too long, they were thought to be invincible but there invincibility caused their doom. Jolted they may be but soon they reorganized to regain control over north again.
The empire seemed to lie within the grasp of Ahmad Shah. But at this moment his followers mutinied for their two-years arrears of pay and compelled him to retire to Afghanistan. Further Ahmad Shah after the gruesome battle of Panipat was not ready to move forward. Slowly he lost control over Punjab and remained confined to Kabul and Kandahar. The Peshwa-controlled confederacy now dissolved into five virtually independent states, and it was these, and not the old confederacy, with whom the British had to deal.
The Peshwa's government in Poona was distracted with internal dissensions while the other four spent their time alternately enlarging their borders and contending for supremacy. The two northern chiefs, Schindia and Holkar, were the most prominent and of these Madhu Rao Schindia showed signs of genius. But after gaining control of Delhi, defeating the Rajputs and his rival Holkar, and seizing power at Poona, he died in 1794 just when it seemed that he might be the destined empire-builder. Delhi and the region around passed to the nominal deputy of Ahmad Shah who ruled on behalf of the wandering emperor Shah Alam. From this arose the kingdom of Delhi, a kind of sunset reflection of Mughal power. Its independence ended when Shah Alam called in Schindia in 1785. After he was blinded by a mad Afghan chief in 1788 he became a pensionary of the Schindia's.
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