UK COURT TURNS DOWN PAKISTAN CLAIM TO £35 MN NIZAM FUND

LONDON: The high court of England and Wales on Wednesday upheld the claim of India and two grandsons of the late 7th Nizam of Hyderabad to £35 million held in a London bank account while rejecting Pakistan’s assertion the funds should be handed over to it.

The historic case has gone through several twists, with India and the Nizam’s descendants (Mukarram Jah and Muffakham Jah) on the same side against Pakistan, which claimed the funds on the ground that it was payment for supplying arms to Hyderabad state during India’s annexation in 1948.

The Nizam had sent £1 million to a London bank in 1948, and the funds now held by the National Westminster (NatWest) Bank are estimated to be worth at least £35 million.

The Nizam transferred the £1 million to the then Pakistani envoy in London, Habib Ibrahim Rahimtoola, in September 1948 for safe-keeping, and he agreed “to keep the amount mentioned by you in my name in trust”, according to letters between the then Pakistan high commissioner and the Nizam’s representative in Hyderabad.

The 166-page judgment by Justice Marcus Smith set out the history of the dispute, from India’s “Operation Polo” to annex Hyderabad, and subsequent developments, that include the Nizam assigning the claim to the money in London to the Indian president in 1965.

The judge said: “Although the Government of Hyderabad was

involved in the purchase of weapons in order to resist what Nizam VII saw as attempts by India forcibly to annex Hyderabad...I do not consider that the transfer (of £1 million) had anything to do with the purchase of weapons or the compensation of Pakistan (in any way) for the purchase of weapons.”

The ruling added that it “is appropriate to record that the Nizam’s successor in title can be no-one other than the Princes or India…I have seen no hint of the possibility of any further claimant to the Fund, beyond the Princes and India”.

“In these circumstances, 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. I will leave it to the parties to frame an appropriate form of order for my approval.”

The court rejected Pakistan’s claims of illegality on India’s part. Pakistan alleged that India’s annexation of Hyderabad was unlawful, and it followed that India and the Nizam’s kin should be barred from any claim to the fund. India argued the issue of whether its annexation of Hyderabad was lawful was irrelevant to the ownership of the fund.

The judge concluded India’s submission was well-founded, and even if there was illegality of the nature alleged by Pakistan, any such illegality would be irrelevant to the claim.

Pakistan’s Foreign Office said the country was examining all aspects of the judgment and “will take further action in light of legal advice”. It said the ruling didn’t take into account “the historical context of the transfer” and that the issue remained on the agenda of the UN Security Council, where it was raised by the Nizam.

Paul Hewitt, partner in the law firm Withers LLP, which acted for the Nizam since Pakistan started the proceedings in 2013, said: “We are delighted that today’s judgment recognises…the VIII Nizam’s rights to funds which have been in dispute since 1948. Mr 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...were always held in trust for our client’s grandfather, the VII Nizam.”

“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.” The funds were the subject of earlier proceedings in the 1950s, when the UK House of Lords set aside proceedings brought by the Nizam to claim the money after Pakistan invoked state immunity.

In 2013, Pakistan began fresh proceedings by itself, thereby waiving state immunity. A subsequent attempt by Pakistan to discontinue proceedings was rejected as an abuse of process by the UK court. The UK court’s judgment embraced the “law of constructive and resulting trusts, unjust enrichment, foreign act of state, illegality and limitation of actions”, the external affairs ministry said. It rejected Pakistan’s arguments that the dispute was “non-justiciable, either in whole or in part” or that “the claims of other parties were time barred”.

Senior lawyer Harish Salve, who has been involved in the case, said at India House after the ruling: “The money will now be distributed between India and the Nizam’s heirs, according to an agreement we have”.

“The court will determine which side gets how much. Another hearing is likely in November. We are also looking at recovering sizeable legal costs from Pakistan”, he added.

It will be of interest to historians that Pakistan openly admitted during the case that it supplied arms in a foreign country through arms drops, Salve said.