During this era, Peshwas belonging to the Bhat family controlled the Maratha Army and later became de facto rulers of the Maratha Empire till 1772. In due course of time, the Maratha Empire dominated most of the Indian subcontinent.
Shahuji was released from captivity following the death of Aurangazeb in 1707. He proceeded to challenge and defeat Tarabai in a series of battles to regain the Maratha throne. In this way, in 1707, Satara and Kolhapur came into being as two separate principalities. This was confirmed by the Treaty of Varna in 1731.
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The death of Aurangazeb had plunged the Mughal Empire into a state of civil war in which his many sons fought for the throne. Chhatrapati Shahuji supported one of these claimants, Farrukhsiyar. After appointing Balaji Vishwanath as the Peshwa (Prime Minister), the Marathas marched to Delhi and managed to depose the Emperor Bahadur Shah and put Farrukhsiyar on the throne. Grateful for Maratha support, the new sovereign issued a declaration which gave the Marathas the right to collect taxes in the Mughal territory under Maratha control while granting swarajya to the Maratha homeland. Peshwa Balaji Vishwanath also managed to secure the release of Shahuji’s mother from Mughal captivity.
Beginning with Balaji Vishwanath (appointed on November 16, 1713), the Peshwa’s began a policy of expansion that saw the Marathas reach its greatest extent. Balaji’s son Peshwa Baji Rao I further expanded the empire to include much of present-day central and south India. In the meantime, the Mughals were reduced to mere puppets under the protection of the Maratha Chhatrapati.
Under Peshwa Balaji Baji Rao, the son of Baji Rao I, the Maratha empire reached its greatest extent with a territory of over 250 million acres (1 million km²) or one-third of the Indian sub-continent by 1760.
The Maratha empire suffered a catastrophic setback when it faced defeat at the hands of the Afghan Durrani Empire in 1761. An entire generation of Maratha leaders lay dead on the battlefield and this caused the Maratha empire to fragment into different holdings under the control of individual Maratha clans. Eventually, the Maratha resurrection was started by Peshwa Madhavrao I and completed by Mahadaji Shinde. But the Maratha Empire would never again operate as a single autonomous unit from this point.