In order to keep  the English at bay and  to enlist their support against the Mughals, the Marathas made friends with the Portuguese and signed with them a treaty in 1779. According to this historic treaty of friendship, the Maratha Peshwa agreed that the Portuguese will be allowed to collect revenues from Dadra & Nagar Haveli which consisted of 72 villages, then known as parganas. These territories were earlier ruled by the Koli chiefs who were defeated by the Hindu kings of Jawahar and Ramnagar. The Marathas conquered and annexed these territories to their kingdom.

By and large, this treaty was signed only to the extent that the Portuguese will only collect the revenue in compensation for their loss of a warship called ‘Santana’ which had earlier been captured by the Marathas but not surrendered to the Portuguese in spite of their many entreaties.

The area of Dadra & Nagar Haveli spread over 491.00 sq.km. land locked between Gujarat in North and Maharashtra in South was liberated from Portuguese rule by people themselves on 2nd August 1954. The people of the Union Territory established free administration of Dadra & Nagar Haveli which was finally merged into the Union of India in the year 1961.