Reports of Yusuf Khan's brilliant victories now filled the Arcot Nawab with jealousy and alarm that he might depose him. Yusuf Khan by now instructed all the traders to render taxes directly to Yusuf Khan, while the Arcot Nawab wanted to have taxes routed through him. The British Governor (by now the British were good enough to have one) “Lord Pigot”,diplomatically advised Yusuf Khan to do as per Arcot Nawab’s order, also some British traders supported the same citing Yusuf Khan as Nawab’s employee. To make matters worse the Nawab’s brother Mahfuz Khan started planning to poison Yusuf Khan, with the whole hearted support of the Nawab.
In 1761, and again in 1762, he offered to lease Tinnevelly and Madura for four years more at seven lakhs per annum. His offer was refused, and whether he was enraged at this, or whether he thought himself powerful enough to defy his masters, he shortly afterwards threw off his allegiance and began to collect troops in an ambition to be the lord of Madurai.
Around this time some British traders reported (or rumored), to the Nawab and the Company, on Yusuf Khan” as encouraging people with anti-British sentiments, spending vast sums on his troops”.Nawab, in turn with the British sent Capt. Manson with orders to arrest Yusuf Khan.
Meanwhile Yusuf Khan sent a note to Sivaganga Zamindari reminding them on their pending Tax arrears.Sivaganga’s Minister and General came to meet Yusuf Khan in Madurai, and after not getting their expected respect, got a rude warning, citing annexure of certain territories for the failure of arrears. The enraged Sivaganga Zamindar, immediately ordered Yusuf Khan to be “captured and hanged as like a dog”. Meanwhile and Ramnad Zamin’s general Damodar Pillai and Thandavarayan Pillai met the Arcot Nawab in Trichy,complained on Yusuf Khan’s plunderings of Sivaganga villages, his cannon manufacturing plant in association with a certain French Marchaud, whom he a befriended earlier, with plans for a war against the Nawabs.
Arcot Nawab and the British quickly acted by amassing a huge army. For a start they aroused Travancore Raja against Yusuf Khan (As by now the Travancore state fell smoothly into British charms).In the ensuring battle the Travancore raja was defeated and the British flags in his domains were chopped and burnt, and joined hands with the French and also hoisted the French flag on the Madura Fort. When Governor Saunders in Madras(now Chennai) called Khan Sahib for a meeting, he refused evoking the wrath of the East India Company. By now Delhi’s shah and Nizam Ali of Hyderabad, the Arcot Nawab’s overlords proclaimed Yusuf Khan as the rightful legal governor of Madurai and Tirunelveliregions. While Arcot Nawab along with the British was hell bent on finding a reason to capture and kill Yusuf Khan.
