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£35 million Hyderabad Funds case (Relevant for GS Prelims & Mains Paper II; IOBR)

The ruling on a dispute over a sum of £35 million in a NatWest Bank account in London, known as the Hyderabad Funds Case, removes one contentious issue from the long list of India-Pakistan problems, but one that was only a minor headache in a bilateral relationship with painful migraines.

On Wednesday, the British High Court ruled in favour of India and the heirs of the seventh Nizam of Hyderabad in the dispute over the sum, belonging to the Nizam at the time of Partition.

How the funds reached bank
On the orders of the Finance Minister of Nizam Osman Ali Khan, a sum of £1,007,490 and nine shillings was transferred to the account of Pakistan’s High Commissioner Habib Ibrahim Rahimtoola on September 20, 1948, a day after the Nizam’s forces surrendered to Indian troops. The troops had been sent in to bring to an end the long standoff over the princely state’s accession to India. In 1954, India sued for the return of the money (and the Nizam himself wanted the money back) but the case went up to the House of Lords, which stayed the case against the bank and granted Pakistan sovereign immunity, which meant that legal proceedings could not be brought against it. The bank said it would keep the funds until an agreement was reached among all three parties — the Nizam, the government of India and the government of Pakistan — on who the money belonged to.

What was the importance of the issue?
“For Pakistan, the issue is of Hyderabad’s forced accession following a military intervention when its ruling Muslim prince wanted independence and a closer relationship with Pakistan. The fund thus represents that symbolic relationship… For India, equally, the issue is of principle — what possible claim can Pakistan have to the funds of the erstwhile Hyderabad state?”

Source: The Indian Express



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