NEW DELHI: The riveting, 67-year-old India-Pak Hyderabad Funds saga has taken another turn with High Court of Justice in London ruling that Pakistan no longer has sovereign immunity over the State of Hyderabad's wealth. All these years, India has been forced to deal with Pakistan bilaterally to recover the funds because in 1957 Pakistan invoked its right to sovereign immunity from any court proceedings in Britain on this issue, thereby blocking any possibility of recovering these funds through the legal route.

Hyderabad Funds refers to the 1,007,940 Pound Sterling and 9 Shillings transferred from the erstwhile State of Hyderabad's bank account in National Westminster Bank in London to an account in the same bank, of the then Pakistan high commissioner to UK on September 20 1948, just 2 days after the Nizam decided to accede to India. The money is currently valued around 35 million Pound Sterling and has 3 claimants - Pakistan, India and Nizam's family.

As the successor state to the Nizam's State of Hyderabad, India has all along maintained its claim over the money. Faced with no prospect of recovering the money through the Courts, ever since the 1960s the Indian cabinet has been approving efforts aimed at pursuing an out-of-court settlement with Pakistan and Nizam's heirs to recover what in the past has often been referred to as the sacred inheritance of the people of India.

With Pakistan no longer longer enjoying its state immunity over the funds, India has once again got the chance to seek a recovery of this inheritance through the legal route. According to the Indian government officials, the Funds were not private monies of the Nizam but monies that are referred to as State monies. The transfer to the account of the Pakistan High Commissioner took place on the instructions of the Nizam's finance minister who may have been an authorized signatory to the account, but he did it without the consent of the Nizam's Government as the Nizam himself later confirmed. ``These instructions were irregular in as much as the Finance Minister of the Nizam's Government had no power to withdraw this money without the express sanction of the Nizam or the State Government. The Nizam's subsequent instructions to retransfer the funds were not complied with,'' the government had said in a statement earlier.

The recent ruling of the British High Court of Justice in the case of the High Commissioner of Pakistan in UK vs National Westminister Bank & others means that the dispute over the ownership of funds can now once again be decided through the legal route, without Islamabad being able to block such proceedings. The matter had reached British courts in 1954 after the Nizam and the State of Hyderabad (then part of the Indian Union) challenged the transfer saying it had been effected by the Nizam's agent in London without the Nizam's or the Nizam Government's consent. At the time the matter went right up to the House of Lords who in 1957 recognized Pakistan's right to invoke sovereign immunity but also noted that its ruling meant that any legal proceedings to determine the true ownership of the Funds would now be blocked forever.

According to the recent High Court of Justice ruling Pakistan lost its sovereign immunity when it voluntarily decided to file a legal claim in 2013, against the National Westminster Bank seeking full recovery of all monies exclusively for itself. Midway through the proceedings Pakistan's seems to have realized that its claim could not possibly succeed without a loss of its state immunity over the funds. In fact it learnt that initiating proceedings itself amounted to voluntarily giving up its right to immunity and submitting to the Court's jurisdiction. And so in November 2013, just days before the first hearing on its case, Pakistan decided to discontinue the proceedings it had itself initiated.

Faced with Pakistan's attempt to recover the Hyderabad Funds through a suo motu legal effort, India had no choice but to ask to be 'impleaded' or joined in the proceedings. One of the pleas made by Pakistan while seeking to abruptly discontinue the proceedings was that it was under diplomatic pressure from India and that it was negotiating with other parties. In its ruling on January this year, the Court set aside Pakistan's plea to discontinue the proceedings, and formally joined all the interested parties which included India, the grandsons of the Nizam. The Court also asked Pakistan to pay the legal costs incurred by the Bank, India and the two grandsons who had opposed the Pakistani plea to abruptly discontinue the proceedings.

A leading UK legal firm BrownRudnick interpreted the decision as emphasizing that sovereign states must take great care not to take steps which can constitute a waiver of their sovereign immunity from jurisdiction.