By 1736, the Nizam and Peshwa had become rivals for power. Peshwa Baji Rao invaded Bhopal with a significant force in November 1736. Defeated in the war, Yar Mohammad Khan was forced to pay an annual grant of five lakh rupees to the Marhattas. These gains by Marhattas led to reconciliation between the Moghul court and the Nizam in Delhi. The Nizam was dispatched with a vast force, which converged on Bhopal where battle was to be engaged. The Nizam occupied Raisen fort and waited for Moghul reinforcements to arrive while the Peshwa mounted his famous guerilla tactics, aimed at starving out the Nizam’s unwieldy force. Several weeks later, the Nizam’s forces were desperate, the Nizam’s Rajput and Jat allies deserted him, and eventually the Nizam’s forces emerged from Raisen but were roundly defeated. On 6 January 1738 the Nizam, signed a peace treaty with the Peswa Baji Rao at Dorah-Serai, near Bhopal, in which he ceded Malwa, acknowledged sovereignty over the territory between the Narbada and Chambal rivers. The Nizam was then allowed safe passage to Hyderabad.
The Marhatta confederacy was bristling with power and ready to embark on its ultimate ambition of controlling the northern heartland of India. Suddenly in 1739, India faced the invasion from Persia of Nadir Shah. He defeated Emperor Mohammad Shah and sacked Delhi, killing 20,000 citizens in a day. Fearing an attack towards south, the Marhattas dug across the Narmada River but the dreaded confrontation never took place. Nadir Shah returned to Persia with the Kohinoor and the peacock throne. Marhattas, confused by the sudden attack, were further left to internal turmoil with the death of Peshwa Baji Rao in 1740. His son Balaji Rao II was not a military strategist like his father, but was a wily politician and diplomat. In this space, Rajputs, under the charismatic leadership of Jai Singh, again became players in the power game. Jai Singh also wanted to control Malwa, but never realized his dream. The Marhattas were eventually back, under the leadership of Shahuji’s nephew, Raghunath Rao, and his cousin, the brilliant general Sudashiv Bhau.
Thus, Yar Mohammad Khan’s 14-year reign saw Bhopal genuflect deeper towards the Marhattas with peace being achieved at the cost of territory and finances. Yar Mohammad Khan died of an illness in 1742 at the relatively young age of 32. He was buried at Islamnagar.
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