India's Poor Little Rich Prince

BY CLARISSA TAN
Dec 30, 2008
*Special to asia!

The waxing and waning of the Nizam of Hyderabad reflects the waves of change that have swept the sub-continent since India's independence.

As the seventh Nizam, whose name was Mir Osman Ali Khan, considered whether to throw in Hyderabad’s lot with India or Pakistan, or indeed to fight for an independent state, he quite obviously also fretted about the fate of his money. In 1948, in what has turned out to be one of the world’s most still-born flights of capital, he transferred £1 million to the Westminster Bank in Britain. This was an extraordinarily large sum of cash for that time.

Then, as the sun set on the Empire That Never Sets, the Nizam dithered some more.

Next, something rather strange happened, something still being discussed by historians, scholars, legal experts and general-interest gossip mongers. The Nizam’s finance minister signed over the money to an account, in the same bank, which was controlled by the Pakistan high commissioner to London.

It is argued that the Nizam never intended for this to happen, and one evidence of this is that he almost immediately cabled the bank to freeze the transaction. In September 1948, Indian troops annexed Hyderabad. The money was stuck.

After several bouts of litigation between the Nizam and the Pakistani government, the British House of Lords ruled in 1957 that the account could only be unfrozen with the agreement of all parties. It also stipulated that only "intergovernmental" talks could resolve the issue.

Today, the stash is still sitting there and its value has ballooned to about £30 million. The money was initially invested in war bonds, then shifted in the 1960s to a fixed-rate deposit account, the Guardian reported some years ago.

In April this year, the Indian government announced that it would begin out-of-court negotiations with Pakistan and the descendants of the Nizam. The government would try to come to a settlement within 18 months, it said. Both nations appear anxious to resolve the long-festering issue. As Jeremy Page of The Times of London pointed out: "The dispute is one of many between India and Pakistan, which have fought three wars since Partition and almost went to a fourth in 2002, when both had acquired nuclear weapons."

Even if India and Pakistan can put aside their differences, Page continued, "there is no guarantee that the Nizam’s heirs can do the same." Sure enough, in May, one of the Nizam’s grandsons, Najaf Ali Khan, stepped up claims for his share of the fortune. He was also representing 96 of his cousins, he said.

clarissa tanClarissa is a journalist who focuses on travel and the arts. As a desperately hopeful author, she writes short stories and is working on a novel. Clarissa won the Spectator’s final Shiva Naipaul Memorial Prize for travel writing.

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