Why 300 crores in London bank account interests India, Pakistan and Nizam's family

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Nitin B | The News Minute | March 20, 2015 | 8:45 a.m. IST

With the High Court of Justice in London ruling that Pakistan no longer has sovereign immunity over the State of Hyderabad’s wealth, this 67-year-old case between Indian, Pakistan and Hyderabad has taken a new turn.

In 1948, two days after the last Nizam of Hyderabad state, Mir Osman Ali Khan acceded to India, a little over one million pounds (£1,007,940 and 9 shillings) were transferred from the State of Hyderabad's bank account in National Westminster Bank in London, to another account in the same bank, which belonged to then Pakistan High Commissioner to the UK, Habib Ibrahim Rahimtoola.

This transfer took place on the instructions of the Nizam’s finance minister who may have been an authorised signatory to the account, but did not consent the Nizam’s government as the Nizam himself, later confirmed.

The finance minister of the Nizam’s government had no power to withdraw this money without the express sanction of the Nizam or the state government, making the instructions irregular.

"The Nizam’s subsequent instructions to retransfer the funds were not complied with either,” the government had said in a statement earlier.

In 1954, the matter reached the British courts after the erstwhile Nizam challenged the transfer saying it had been done without the ruler's consent. The matter was then taken to the House of Lords.

In 1957, Pakistan invoked its right to sovereign immunity from any court proceedings in Britain regarding the issue. As the legal route to recovering funds became blocked, India had to then deal with Pakistan bilaterally.

Now, according to the latest High Court of Justice ruling, Pakistan lost its sovereign immunity when it voluntarily decided to file a legal claim in 2013 against the National Westminster Bank seeking full recovery of the entire amount exclusively for itself - which involved submitting itself to the court's jurisdiction.

So as of now, Pakistan no longer benefits from its state immunity over the funds, which gives India the chance to seek recovery of the inheritance through the legal system.

"The latest ruling is only a technicality. This is not going to result in a drastic change. The account is frozen and the loss of sovereign immunity only means that India can take Pakistan to court instead of trying to hold bilateral talks," Muhammad Safiullah, cultural advisor to the Nizam Trust tells The News Minute.

The Indian government claims that the funds were not private coffers of the Nizam but money belonging to the State of Hyderabad, which was collected through taxes and other means. Now that the state is part of India, it claims that the money should be transferred to the

government's coffers.

"A suggestion was made to split the money into three equal parts between Pakistan, India and the Nizam's family. That seems the only amicable solution to me," Safiullah says. "The money is presently valued at around £35 million, (roughly Rs 322 crore) but the real value could be much more than that - almost between 350-400 crore."

In 2013 Pakistan changed tactics despite the knowledge that the claim might cost them immunity. So, in November 2013, a few days before the first hearing, Pakistan decided to discontinue all earlier proceedings.

One plea Pakistan made while seeking to abruptly discontinue proceedings was that it was under diplomatic pressure from India and

it was negotiating with other parties.

The court seems to have held Pakistan's actions unreasonable and ordered it to pay the legal costs incurred by the bank, India and the two grandsons who had opposed the Pakistani plea to discontinue proceedings.

"The case may not see an end soon if all the parties are going to want to lay claim on the entire amount. In fact, the only people who want to see the case end are probably the Nizam's family. 33% of the amount is not going to add so much to either of the country's coffers but it would really help the Nizam's family even after they work out an agreement among themselves." Safiullah adds.

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