The story so far: One of the world’s longest-running legal battles ended on October 2, 2019, with a British judge ruling that the VII Nizam of Hyderabad’s descendants and India can collect £35 million from London’s National Westminster Bank. Justice Marcus Smith of the High Court of England and Wales ruled that the £1 million (now calculated at £35 million or about ₹306 crore) deposited in the London bank rightfully belonged to the Nizam’s family and India and threw out the claim made by Pakistan through its High Commissioner in London.
How did the Nizam’s wealth end up in a London account?
In the days leading up to India’s Independence, the VII Nizam of Hyderabad, Osman Ali Khan, refused to join the Indian Union. He was among the richest princes in India and hired the services of Sir Walter Monckton. Monckton negotiated a Standstill Agreement for the Nizam with the Government of India. As his lawyers moved between Hyderabad, Delhi and Karachi, the Nizam issued a farman (proclamation) for purchase of equipment abroad with funds parked in two bank accounts in London. By equipment, he meant weapons to safeguard the landlocked state. The money in the Imperial Bank of India was transferred to a Hyderabad Government account in other banks. One of these accounts had £1,007,940.45.
Who transferred the money?
The sum of £1,007,940.45 was controlled by the Nizam’s envoy and Foreign Minister, Moin Nawaz Jung. On September 16, 1948, Moin Nawaz called on the Pakistan High Commissioner at his Hampstead residence and asked him to accept the funds. Pakistan’s then Foreign Minister Muhammad Zafrullah Khan was present at the meeting. The transfer of the fund to then Pakistan High Commissioner Habib Ibrahim Rahimtoola’s account happened on September 20, 1948.
In this case, Pakistan relied on this meeting; and the judge leaned on the exchange of letters a day prior to the meeting. On September 15, 1948, Moin wrote to Rahimtoola: “In view of the situation that is now developing in Hyderabad and in order to safeguard the interests of the State, I would be very grateful if you would kindly agree to permit the transfer into your account of just over one million pounds sterling that is now lying at the credit of the Nizam’s Government in the Westminster Bank, London. This amount may kindly be kept by you in trust.”
Rahimtoola responded on the same date: “Your letter of date. In the circumstances, I agree to your suggestion to keep the amount mentioned by you in my name in trust.”
How did the Nizam become so wealthy?
The Nizam’s Dominion encompassed parts of Karnataka, Maharashtra and Andhra Pradesh besides the core area of present-day Telangana. Out of the whole area, nearly 10,000 square miles of land was classified as Sarf-e-Khas or crown lands. The revenue from these vast land-holdings was for the personal use of the Nizam. It was this source of revenue that led Time magazine to designate Mir Osman Ali Khan as the richest man in the world (for its 1937 cover), with a fortune estimated at nearly $2 billion. During the Second World War, the Nizam donated nearly £6 million to finance the war effort.
According to one account, the Nizam spent nearly £20 million in cash to equip his army to fight the Indian Army using the services of Australian gun runner Sidney Cotton.
Why did the case drag on for over 70 years?
On September 17, 1948, the Nizam’s army surrendered to India ending a 105-hour war. The transfer of money took place on September 20. On September 27, the Nizam wired the Governor-General of India and the Deputy Prime Minister of India seeking transfer of the money back to his account. The bank refused. ( See chronology )
Seven decades, ₹360 crore
- 1950: Government of India made the first claim on the money.
- 1953: Pakistan High Commissioner Rahimtoola asked the Westminster Bank to transfer the money to Pakistan High commissioner M.A.H. Ispahani.
- 1954: GOI sues then Pak Foreign Minister Moin Nawaz, Rahimtoola and the bank for recovery of money.
- 1956: Chancery Division judge Justice Upjohn ruled: “The present transaction was an intergovernmental transaction: let it be solved by inter-governmental negotiations.” Pakistan claims sovereign immunity.
- 1956: In the Court of Appeals, three judges rule in favour of the Nizam i.e. India. “That the transfer was effected in breach of the duty of Mir and Moin to the Nizam and without any authority from the Nizam.”
- 1957: Five judges of House of Lords reverse the Court of Appeals decision. The judgment gave Pakistan sovereign immunity so that it could not be sued in England. The money remained locked up in the bank.
- 1960: Prime Minister of India Jawaharlal Nehru and Pakistan President Ayub Khan agree to split the money in 60:40 ratio on the sidelines of diplomatic negotiations on Indus Water Treaty mediated by the World Bank.
- 1963: Nizam executes a settlement in which Bank of Nova Scotia Company (Bahamas) is appointed the trustee of the fund for his two grandsons and family. The Nova Scotia Bank files papers and became the third party (India, as a successor state, and Pakistan are the two other parties).
- 1965: The Nizam assigned to the President of India his claim to the Fund.
- 1983: India and Pakistan submit a joint letter to the National Westminster Bank. The arrangement was not acceptable to Nova Scotia Bank.
- 2013: Pakistan discarded its claim of sovereign immunity and made an absolute claim on the fund setting up the present case. Pakistan made the arms for money argument. It also made the safeguarding the money argument. Both of which didn’t cut much ice with the judge.
- October, 2019: U.K. court rules the money must go to the descendants of the Nizam.
Who will get the money?
Najaf Ali Khan, a grandson of the Nizam has said: “We are delighted with the verdict. But we have to watch what Pakistan does as it has four weeks time to go in for an appeal. Only if Pakistan doesn’t appeal at this stage the money will come to us.” The Nizam had 18 sons and 16 daughters. In the present case, the titular Nizam VIII, Mukarram Jah, who lives in Turkey transferred his interest in the fund to Hillview Assets Holdings Limited (Hillview). His brother, Prince Muffakam Jah, who shuttles between India and the U.K., was vital to the case and gave evidence which was relied on by the judge to reach his verdict. The judge also referred to an agreement between the Government of India and the princes about how the monies will be divided. The details of the agreement are not available. While much of the royal relics of the Asaf Jahis who ruled between 1724 till 1948 have disappeared in Hyderabad, it is Mukarram Jah’s former wife, Princess Esra Jah, who has salvaged two palaces (in Hyderabad) that have become show-stoppers. The Falaknuma Palace with its faux Gothic and Roman elements has been restored to allow the well-heeled to have a peek at the expansive lifestyle of kings. The palace includes one of the longest dining tables that can seat 101 persons and a breathtaking view of the old city. The Chowmahalla Palace, where the Nizam VIII was crowned, is open to tourists for a small fee. Mukarram Jah has led a reclusive life spending some years in the Australian outback and later in Turkey indulging in his fancy for machines that range from sleek cars to earthmovers. A few earthmovers can still be seen in the palace at the rear of KBR Park in the western part of Hyderabad. Princess Esra’s dream remains putting on show the Nizam’s Jewels on a permanent basis in Hyderabad. “The gems belong to the city. They should be showcased here,” she had told this reporter, a few months earlier. The gems, worth billions, were showcased at the National Museum in Delhi early this year.