According to the Independence Act, 1947, the British paramountcy over the Indian States (Princely States) had ceased. This meant that the rulers of these Princely States were free to choose their future course independently. However, they were advised to accede either to the Indian Union or to Pakistan.

In these circumstances, through the mindful diplomacy of Sardar Vallabhbhai Patel, ably assisted by V.P. Menon, the Secretary of Home Affairs, some enlightened rulers like the Maharaja of Patiala, who was the Secretary of the Chamber of Princes, realized the necessity of merging their states with the Indian Union.

In other cases, a combination of firmness, ruthlessness, and Patel’s diplomacy succeeded in bringing the five hundred and odd Princely States into the Indian Union.

But the merger of Hyderabad State into the Indian Union proved more difficult. The Nizam wanted to preserve a special status for Hyderabad and desired direct links with Britain.

Lord Mountbatten made it clear to the Nizam that Hyderabad could not join as a Dominion in the British Commonwealth of Nations. The Nizam, however, delayed integration into the Indian Union.

Eventually, the Governor-General of India, Mountbatten, in a speech to the Constituent Assembly on 15th August 1947, stated:

“The only State of the first importance that has not yet acceded is the premier State, Hyderabad. It occupies a unique position in view of its size, population and resources, and it has its problems. The Nizam, while he does not propose to accede to the Dominion of Pakistan, has not yet felt able to accede to the Dominion of India. His Exalted Highness has assured me of his wish to cooperate in three essential subjects — External Affairs, Defence, and Communications — with the Dominion whose territories surround his State. With the assent of the Government, negotiations will be continued with the Nizam, and I am hopeful of reaching a solution satisfactory to all.”

As such, in pursuance of this policy, letters and telegrams were exchanged between the Nizam and the Governor-General.

After Indian Independence, political pressures began mounting on the Nizam for a settlement. The Nizam, in a letter to the Governor-General, dated 18th September 1947, offered to enter into a treaty with India and highlighted the important features with regard to Defence, External Affairs, and Communications.