Out-of-court deal to unlock Nizam's millions

By Krittivas Mukherjee

NEW DELHI (Reuters) - It is a riveting tale of royal intrigue, greed and international politics: a million pounds locked away in a British bank, sparking a row between two countries and the descendants of an eccentric Indian royal.

The story goes back almost 60 years, to around the time India, then a collection of princely states and British-run territory, and Pakistan became independent.

The Nizam of Hyderabad, a maharajah of fabled wealth, deposited a million pounds with the National Westminster Bank in London as he dithered over which of the two new nations to join.

As the Muslim ruler of an Indian territory the size of England and Scotland, he was attracted by the idea of joining the new state of Pakistan. But with landlocked Hyderabad hundreds of miles away from the Islamic state that posed problems.

While he procrastinated, his finance minister signed over the money in 1948 to an account at the same bank controlled by the Pakistan high commissioner to London.

Appalled, and under pressure from India, the Nizam cabled the bank to freeze the transaction. Soon afterwards, in September 1948, Indian troops annexed Hyderabad.

The story would be just a footnote in the tragic and traumatic history of the partition of British India were it not for the fact that the money remains locked in the London bank.

But on Friday, hopes were raised that the fortune -- now expected to have grown to about 30 million pounds -- may be retrieved, after India said it would negotiate an out-of-court settlement with Pakistan and the descendants of the Nizam.