Seventh Nizam of Hyderabad (Photo: HT)
Seventh Nizam of Hyderabad (Photo: HT)

Pak claim on Hyderabad Nizam's 35 mn pound fund rejected by UK High Court

  • Court rules in favour of India in a 70-year-old legal dispute over funds that belonged to the seventh Nizam of Hyderabad during the state's accession to India
  • Pak Foreign Office says, 'The ruling does not take into account the historical context of the transfer'

New Delhi: In what can be seen as a major setback for Pakistan, high court of England and Wales on Wednesday ruled in favour of India and two descendants of the late seventh Nizam of Hyderabad in a case relating to funds deposited in a London bank. Pakistan said on Wednesday that it is closely examining all aspects of the judgment.

The dispute revolves around one million pounds transferred in 1948 from the then Nizam of Hyderabad to the high commissioner in Britain of the newly formed state of Pakistan. The money was transferred to Habib Ibrahim Rahimtoola, for safe-keeping. Rahimtoola agreed “to keep the amount mentioned by you in my name in trust". The Nizam, Osman Ali Khan, who later chose to stay with India had demanded that the funds be returned but NatWest bank held onto the money till the rightful owner was established.

The case was filed by the Nizam's descendants, Mukarram Jah – the titular eighth Nizam of Hyderabad – and his younger brother Muffakham Jah , who joined hands with the Indian government in the legal battle against the Pakistan government over the money that now totals around 35 million pounds.

In his judgment handed down at the Royal Courts of Justice in London, Justice Marcus Smith ruled that the "Nizam VII 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."

"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 verdict available on the court’s website said.

A PTI report from London quoted Paul Hewitt, partner in Withers LLP, who acted for the VIII Nizam since Pakistan issued proceedings in 2013, ad welcoming the verdict.

"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. 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," said Hewitt said.

"Justice Smith's judgment covers a complex historical and legal set of issues, interpreting facts and events that occurred 70 years ago to establish that the funds, which now amount to 35 million, were always held in trust for our client's grandfather, the VII Nizam. The judgment also makes important findings on justiciability… and whether a nation state can be a trustee," he said.

In 2013, Pakistan had waived sovereign immunity by issuing a claim for the fund that opened the way for the current case to proceed. The Pakistan government’s legal team had claimed the fund on two alternative bases, the PTI report said.

One, referred to as the “Arms for Money Argument", claimed that funds were transferred to compensate or reimburse or indemnify Pakistan for assistance provided in procuring or facilitating the supply and or transportation of weapons. The second argument made by Pakistan was that the funds were transferred in order to keep them out of the hands of India, referred to by the judge as the “Safeguarding Argument," it said.

Pakistan had made two further arguments – that the facts of this case were such as to render it non-justiciable because the original transfer was governmental in nature and that India's annexation of Hyderabad in 1948 was an unlawful act, which tainted India and the eighth Nizam’s claim.

Reacting to the ruling, the Pakistan Foreign Office in Islamabad said it would take further action after examining the detailed judgment.

"Pakistan is closely examining all aspects of the detailed judgment and will take further action in light of legal advice received," the foreign ministry said.

The ruling failed to take into account the historical context of the transfer when "India illegally annexed Hyderabad..." it said though it did not specify what action Pakistan was contemplating against the decisions.