Sovereign Bonds (And A Million Pound Question)

by Gautam Pemmaraju

Two weeks ago, India and Pakistan commemorated their 64th year of independence, and two weeks from now, 13th September will mark Operation Polo – the 1948 military action against independent Hyderabad by Indian armed forces deposing the defiant princely ruler, The Nizam, who had refused to accede to the newly formed Union of India.

37 I am reminded here of a most curious tale, the core of which remains a tripartite dispute that persists till date.

As Indian troops advanced on Hyderabad, the beleaguered independent militia of the Razakars put up a futile and foolhardy resistance while the Hyderabad State Force under the command of Major General Syed Ahmed El Edroos fell back. At the very same time, a delegation of the embattled state’s representatives, including the then finance and foreign minister Moin Nawaz Jung, were in Paris, desperately petitioning the UN Security Council in the hope of a cease-fire resolution. It was during this period, as the House of Asaf Jah, the dynasty that had ruled for seven generations, was about to fall, that Mir Nawaz Jung, the Agent General of Hyderabad stationed in London met Habib Ibramim Rahimtoola in the presence of Pakistan’s foreign minister Sir Mohammed Zafarullah Khan, at the latter’s house in Hampstead. The Hyderabad representative requested the Pakistani High Commissioner to accept a bank transfer of over a million pounds from an account in National Westminster Bank in his name.

As Mir Laik Ali, the last Dewan or Prime Minister of independent Hyderabad, writes in his account The Tragedy of Hyderabad (Karachi, 1962), the Security Council was to meet formally on the 20th of September 1948, but Sir Alexander Cadogan had agreed on “an urgent meeting” given the “rapidly deteriorating situation in Hyderabad”. In an archival film clip, Cadogan is seen opening the meeting by speaking of the two items on the agenda before the council: “one, the adoption of the agenda and two, communications from the government of Hyderabad to the security council”.

What the representatives, Mir Laik Ali, and Mir Osman Ali Khan Asaf Jah VII, the Nizam of Hyderabad, collectively desired, was a timely intervention in their hope to assert and maintain the claim of sovereignty and independence. Unfortunately for them, it was already too late. Hyderabad had fallen to Indian forces. Commander-in-Chief El-Edroos had ceremonially surrendered his army to General JN Chaudhari, stoically understating to camera that “the men under my command were called upon to perform a superhuman task”, while Mir Laik Ali and the Nizam, had both separately addressed the state on its radio station – Deccan Radio. The princely ruler’s broadcast on 17th September 1948, drafted by KM Munshi, India’s Agent General in Hyderabad, announced the state’s capitulation, welcomed the ‘police action’ and informed the people of the withdrawal of Hyderabad’s representation before the security council. Laik Ali also mentions that Munshi broadcast his own message as well: “Both the broadcasts purported to the effect that all wrongs had been committed by the previous Governments and particularly the last Government…” Op_Polo_Surrender

Former civil servant and independent scholar VK Bawa, in his book The Last Nizam (Hyderabad, 2010, 2nd ed), also mentions Laik Ali’s broadcast where he made an appeal for communal harmony and adds: “But the Indian version ascribes to him a sentiment that he did not mention. It said he pinned his support on the United Nations, and hoped to keep the flag of Hyderabad flying”.

On 20th September in Paris, the UN Security council met in a “confused manner” and as Laik Ali writes, “the cease-fire resolution or the merits of the case slipped into the background and attention was focused on the issue whether the request of the Nizam for the withdrawal of the application of Hyderabad from the United Nations was genuine or made under duress”.

It was on this very day, 20th September, that Mir Nawaz Jung, the Agent General of Hyderabad in London, as the late Omar Khalidi wrote, “presented a letter from his boss – Moin Nawaz Jung (d.1993), Hyderabad Finance and Foreign Minister – to the National Westminster Bank seeking transfer of funds. The bank accepted and notified the parties concerned. The amount was of British £ 1,007,940 and 9 shillings.”

On 11th April 2008, press reports here in India mentioned that the Union Cabinet had approved an out-of-court settlement with Pakistan and the heirs of the Nizam with regard to the 60 year-old dispute. The reports also mentioned that the cabinet had also approved the ‘negotiating strategy’. This dispute had for long been on the agenda of outstanding issues, amongst, need one say, countless and more egregious others.

Immediately after the fall of the state and his broadcast to that effect, the Nizam of Hyderabad had issued a firman (order) asking all the members of this government, his officials, to return immediately to Hyderabad. He also wrote to the London bank requesting no withdrawals from the account. Mir Osman Ali Khan contended that the money transfer had been done without his consent, while Moin Nawaz Jung’s motive, still in Paris then, as Khalidi writes, “was to deny funds to India, who he believed were usurping his master’s kingdom”.

What was this money? Why was it sitting in a London Bank? And why was it transferred to the Pakistani High Commissioner?

9a5bc79ac4a7d8d6_large Further questions arise here, which Khalidi poses:

Did the account in the bank belong to the Nizam personally or to the Hyderabad State? Before the absorption of princely states, the two were not always clear. Deeming it state funds, India, as the successor state, claimed the funds and asked its transfer in 1950, while Rahimtoola, now made his country’s ambassador to France, asked the money to be transferred to his London successor M.A.H. Ispahani.

The bank refused both Rahimtoola’s and the Indian government’s claim; the Indian government filed a suit to recover this money in 1956 and Judge Gerald Upjohn ruled that the Nizam held legal title over the money while Pakistan “had no equitable title”. This dispute got further complicated on appeal since Pakistan had to involve itself in a matter that involved its High Commissioner. It then became entangled with doctrinal issues of sovereign immunity as the matter went before the House of Lords in 1957 and famously became Rahimtoola vs Nizam of Hyderabad 1958, AC 379.

Viscount Simonds, disagreeing with the appeals court in refusing to stay proceedings brought against Rahimtoola by the Nizam, offered the initial arguments before the House by examining in what capacity the appellant accepted the transfer of said funds. Referring to ‘the three possible views’ here, he says:

The first is that he was acting as a private individual. This view is so clearly untenable that I will not say more about it. The other alternatives were stated thus by Romer L.J.1: (1) that he was acting as “agent” for Pakistan, and (2) that he was acting as the “organ” or “alter ego” of Pakistan, and that the learned Lord Justice came to the clear conclusion that he accepted the transfer in his official capacity as servant or agent of Pakistan.

The legal point in question became then one of ‘impleading a foreign sovereign’ – the courts of a country (in this case Great Britain) do not make him a party to legal proceedings ‘against his will’, whether the proceedings are ‘against his person’ or ‘seeking to recover from him specific damages or property’.

It is suffice to say here that the opinion of the House, by extending the idea of immunity to commercial transactions in this case, eventually entailed wider implications (in international & human rights law as well – read here, and here), particularly with regard to the doctrine of sovereignty, state immunity, comity, and the extra-legal idea of ‘dignity of a sovereign’. The famous Lord Denning, ‘a judicial gang of one’, ‘a maverick in legal garb’ (see book review by Hutchinson here) is often quoted with regard to the limitations of judicial immunity:

Sovereign immunity should not depend on whether a foreign government is impleaded, directly or indirectly, but rather on the nature of the dispute…Is it properly cognizable by our courts or not? If the dispute brings into question, for instance, the legislative or international transactions of a foreign government, or the policy of its executive, the court should grant immunity if asked to do so, because it does offend the dignity of a foreign sovereign…but if the dispute concerns, for instance, the commercial transactions of a foreign government…there is no grounds for granting immunity.

The other judges differed with this opinion and the outcome was that Pakistan had ‘legal title’ over the funds, but the ‘beneficial interest’ or ‘equitable title’ was that of the Nizam of Hyderabad. This again, underscored the complexity of the dispute and presented, what was in effect, an impasse. The money remained frozen in account and it was only in April 2008, following what seemed to be a diplomatic settlement, that some progress was made. The way out, as the courts and the House foresaw and sagely ruled, was ‘intergovernmental’.

The decision to seek an out-of-court settlement was not without its litigious detractors. A former legal adviser to the current title-holder and grandson of the last ruling Nizam, Mir Barkat Ali Khan Mukarram Jah Bahadur, argued that the money was the personal wealth of the family and that no other party had any claim over it. The money, now over 30 millions pounds, Begum Scheherazade Javeri was reported to have said, should be apportioned amongst the legal heirs – 8 main claimants who are direct descendants of the Nizam, and 300 others. Mukarram Jah (see John Zubrzycki’s excellent book The Last Nizam), the son of the late Princess of Berar Durrushevar, daughter of Sultan Abdul Mejid II, the exiled last Ottoman Caliph and Prince Azam Jah, the older son of the last Nizam, lives modestly in the Turkish town of Antalya. Ghani22

So what was a million pounds of the Nizam’s money doing sitting in National Westminster Bank in 1948?

It was widely believed and reported that the Nizam of Hyderabad, at that point, was the wealthiest man in the world. So a million pounds in a foreign bank sounds like one of very many small stashes. This bank account though, maintained and operated by the Agent General of Hyderabad in London, was a special contingency fund.

El-Edroos, in his intriguing account Hyderabad of the Seven Loaves, writes that during the tenure of the Nawab of Chattari, the Prime Minister of Hyderabad who had preceded the hapless Mir Laik Ali, he was instructed to proceed ‘abroad’ to explore procuring ‘arms and equipment’ for the Hyderabad armed forces. A third of the states’ forces had served in the 2nd World War and had relinquished their weapons and ordnance on return to India, Edroos informs us. The government of India was to rearm the depleted force at its cost, but failed to do so due to a combination of several intervening circumstances, as I have written before here. This was critically, of course, also linked to the deteriorating relations between Hyderabad and India. El Edroos writes that the then finance minister Nawab Liaquat Jung transferred 35 million rupees to ‘a leading bank’ in England during the war period. Travelling incognito in early August 1947, El Edroos’ first stop is Karachi, where he checks in to the Palace Hotel and thereafter meets Colonel Iskander Mirza, Defense Secretary of the Pakistan government. He meets also Ghulam Mohammad the Finance Minister, who had held the same portfolio in Hyderabad, and who was to later become the Governor General of Pakistan after Jinnah’s death. Upon arrival in London El Edroos was received by Mir Nawaz Jung, the Agent General, who had arranged his stay at the Dorchester. Fascinatingly, El Edroos writes:

I was in the first instance introduced to a man called Dennis Conan Doyle, the son of the famous author Conan Doyle. Conan Doyle was in the Intelligence Department of the Government of France and was married to Princess Midwani who was a white Russian.

El Edroos returned to Hyderabad unsuccessful. He could find no way to import weapons legally since it was not recognized as an independent nation.

Hyd 1000 It was only later that the government of Hyderabad, through Mir Nawaz Jung, engaged the services of the Australian ‘adventurer’ Sidney Cotton, who via his fleet of planes ferried essential commodities, arms and ammunition, and people surreptitiously.

Hyderabad and the Union of India had signed a ‘Standstill Agreement’ in November 1947, after the Nizam had refused to accede to India a few months earlier. The negotiations of the draft were difficult and beset with many problems. One of the contentious issues during the period of drafting of the final agreement was a loan of securities worth 200 million rupees by the Nizam’s government to Pakistan.

A recent monograph, A State In Periodic Crises (2010) published by CESS, Hyderabad, authored by former civil servant BPR Vithal reveals the minutes of meetings in early 1948 between members of the Hyderabad government and those of India, based on documents left behind by LN Gupta who was Secretary, Finance Department, in the Nizam’s government. Mountbatten was also in attendance as he played a key role in convincing Indian princely rulers to accede to the newly formed union.

On 30th of January 1948, the same day MK Gandhi was assassinated by the right wing Hindu nationalist Nathuram Godse, a meeting of officials of Hyderabad, led by Moin Nawaz Jung (mentioned earlier), met VP Menon and other representatives of the Government of India in Delhi. During the course of discussions, Menon asserted the fact that India had always openly pressed for accession and viewed the Standstill Agreement as part of the process. Hyderabad, of course, did not see things in the same way. Vithal cites the aforementioned documents, pointing to Moin Nawaz Jung describing the deterioration of relations between Hyderabad and India as being linked to three primary issues: the currency ordnance (Hyderabad had its own currency), the restrictions on export of metals, and the 200 million rupee loan to Pakistan, aside from the ‘minor matter’ of the appointment of a publicity officer to Karachi. As Lucien Benichou also points out in his book From Autocracy to Integration (Hyderabad, 2000), this loan was considered by India as a breach of the Standstill Agreement. Hyderabad, however, contended that it had occurred before the signing and its arduous drafting, and besides, it was purely an economic matter – ‘an investment devoid of political significance’. In Vithal’s monograph:

Mr. Menon said that, “The Government of India is a popular Government and must represent the popular will. Popular opinion was that the Hyderabad loan was given deliberately to Pakistan. It must be remembered that the Kashmir issue had become serious and naturally the man in the street thought that Hyderabad had helped Pakistan to attack India. .. It was true that the arrangement was entered into some time ago; there could be no good reason for withholding the information from the Government when in November the Standstill Agreement was entered into. 34

I will conclude this curious, tangled account here with two thoughts. Firstly, the complexity and criticality of Hyderabad’s position, its claim of sovereignty, the events leading up to the military action, the rise of the Majlis Ittehadul Muslimeen, the role of its leaders from Bahadur Yar Jang to Qasim Razvi, the political identity of regional Muslims, the Telangana peasant uprising and the Communist movement, the roles of the Andhra Mahasabha, the Arya Samaj, the Hyderabad State Congress, the various intrigues and politics leading to Hyderabad’s fall, its subsequent integration, and the many other associated events and ideas that critically contribute to the idea of the post-colonial nation-state, are under articulated and generally overwhelmed by nationalist viewpoints and dogma. Secondly, the nuanced role of El Edroos, a man of intriguing character and pragmatism to my mind, who claimed to have issued secret instructions to all his sector commanders to fall back and not offer resistance to the invading Indian army, is similarly lost in the larger politics of the nation and the popular narrative of the defiance/betrayal of Hyderabad. The 4-day war, its subsequent aftermath, and the effects on the people at large are still evident. On all sides.

As for the small matter of the disputed 1 million pounds (30 million now)…what indeed does that mean in today’s world?