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Ali was granted a pension of 20000 Rupies and removed to Benares. Government in Calcutta decided that he should be removed further from his former realm. Mr. Cherry, British resident, relayed this order to him on Feb. 14th during a breakfast invitation to which Ali had appeared with an armed guard. During the ensuing argument he struck Cherry a blow with his sabre, whereupon the guards killed the resident and two more Europeans. They then set out attack the house of Mr.Davis, another colonial officer. He defended himself on the staircase of his house until rescued by British troops.
Subsequently Ali assembled an rebellious army of svereal thousand men. A quickly assembled force commanded by Gen. Erskine moved into Benares and "restored order" by the 21st. Ali fled into Rajputana and was granted asylum by the Raja of Jeypore. On request of Arthur Wellesley, Earl of Mornington, the raja turned Ali over to the British on the condition that he neither be hanged nor be put in fetters.
The colonial government complied with this: Ali spent the rest of life - 17 years - in an iron cage in Ft. Williams of Calcutta. He was buried in the Muslim graveyard of Casia Baguan.