Hyderabad fund case: UK court rules on legal battle between India, Pakistan

LONDON: A United Kingdom high court has ruled in favour of the descendants of the Indian royal Nizam of Hyderabad and said that the £35 million held in a London bank account must go to them and not to Pakistan.

Handing out the judgement at the Rolls Building of London High Court, Justice Marcus Smith ruled that Pakistan lacked evidence to prove its claim to the money.

The dispute started in 1948 when the last Nizam of Hyderabad Mir Osman Ali Khan deposited £1m in a London bank account, held by the then Pakistan high commissioner, for safe-keeping.

He had deposited the money as he didn’t trust India and requested Pakistan to keep money for him. The seventh Nizam of Hyderabad had refused to join either India or Pakistan.

Hyderabad in 1947-48 was a princely state and was annexed by India in 1948 in a military operation. The nizam had transferred money to London shortly before the annexation.

The money was transferred into an account in the name of the then Pakistan high commissioner, Habib Ibrahim Rahimtoola. After adding the interest in the initial amount, the sum is now valued at £35m.

The descendants of Nizam (Mukarram Jah — the titular eighth Nizam of Hyderabad — and his younger brother Muffakham Jah) had joined hands with the Indian government in the legal battle against Pakistan.

The seventh Nizam had sought the return of the funds in the 1950s, claiming that the transfer had been made without his authority. The bank took the stance that it was unwilling to return the fund without the agreement of Pakistan, which had legal title to the fund.

The case had also reached the House of Lords, which questioned the ownership of the fund, but the issue could not be resolved as Pakistan had claimed sovereign immunity.

In 2013 Pakistan waived her sovereign immunity by issuing a claim for the fund that opened the way for the current case to proceed.

The court issued notice to the seventh nizam’s sons informing them about Pakistan’s claim. Former High Commissioner Wajid Shamsual Hasan confirmed that the high commission then requested to withdraw the case but the court refused to grant permission.

The National Westminster Bank, in which the money had been deposited, refused to release the funds to either party until the case was resolved by the courts.

Pakistan had presented evidence that it had been given the money by nizam in order to procure arms, but the court determined it had the right to rule in the case.

The court said the money had been deposited in a British bank account and the heirs had a case. The sons of the nizam argued that Pakistan only held the money as a trustee and it actually belonged to them as they were the legal beneficiaries.

"Nizam VII (Mir Osman Ali Khan) was beneficially entitled to the fund and those claiming in right of Nizam VII — the Princes and India — are entitled to have the sum paid out to their order," ruled Justice Marcus Smith, of the Royal Courts of Justice.

"Pakistan's contentions of non-justiciability by reason of the foreign act of state doctrine and non-enforceability on grounds of illegality both fail," the order further read.

Pakistan claimed that the fund belongs to its government as the money was transferred to compensate for the weapons it provided to the nizam before Hyderabad's annexation in 1948. It had also said that the fund was sent to keep it out of India's possession.

The judge said there was no evidence that suggests the money in the NatWest bank was given for the purchase of the arms.

The court dismissed Pakistan's argument that Hyderabad was illegally annexed, saying any such alleged illegality would, in any case, be irrelevant to the claim.

Counsel for the eighth nizam Paul Hewitt, said: “We are delighted that today's judgment recognises His Exalted Highness the VIII Nizam's rights to funds which have been in dispute since 1948.

Hewitt added that Justice Smith's judgment covers a complex historical and legal set of issues, interpreting facts and events that occurred 70 years ago.

He added “The judgment also makes important findings on justiciability (only a week after the Supreme Court decision in Miller v the Prime Minister), and whether a nation-state can be a trustee. Our client was still a child when the dispute first arose and is now in his 80s. It is a great relief to see this dispute finally resolved in his lifetime.”

Foreign Office’s reaction

Commenting on the ruling, the Foreign Office (FO) in Islamabad said it would take further action after examining the detailed judgment.

The FO said the judgment rejects the longstanding claims of the two major parties and upholds the claims of the heirs of Nizam of Hyderabad.

A statement, issued by the FO said, "The ruling does not take into account the historical context of the transfer when India illegally annexed Hyderabad in violation of international law and all civilised norms, leading the Nizam of Hyderabad to make desperate efforts to defend his people and the state from Indian invasion."

The FO added that the nizam also raised the matter with the UN Security Council where the issue remains on the agenda to date. The Nizam as a sovereign approached Pakistan for assistance which the government provided.

The statement added, “Pakistan is closely examining all aspects of the detailed judgment and will take further action in light of legal advice received.”