The Nizam's heirs want the foreign ministers of both India and Pakistan to initiate a dialogue to resolve the issue at their meeting scheduled in September in Islamabad.
In a letter to Pakistan President Asif Ali Zardari, the members of the erstwhile royal family urged him to reciprocate to India's offer of an out-of-court settlement.
Nawab Najaf Ali Khan, grandson of the seventh Nizam, Mir Osman Ali Khan, told IANS that he met Pakistani High Commissioner Salman Basheer in New Delhi last week and sent a letter to Zardari through the high commission.
"We sought President Zardari's intervention to find an early settlement to the case to help the members of Nizam family who are financially distressed," said Najaf, president, Nizam Family Welfare Association.
The family hopes that the governments of both countries would also involve them in the talks and hand them over the money, which is now estimated to be 30 million pounds (Rs.3 billion).
After partition and before the merger of the then Hyderabad state with India, Nizam Mir Osman Ali Khan's finance minister Moin Nawaz Jung had transferred 10,07,940 pounds sterling and nine shillings in the name of then Pakistan high commissioner in London HI Rahimtoola in the National Westminster Bank, which is now called the Royal Bank of Scotland.
India raised an objection to the transfer, saying the Nizam was not an independent ruler and prevailed upon the bank to freeze the account. Since then the matter is hanging fire.
The Indian government in 2008 decided to pursue an out-of-court settlement with Pakistan and the heirs of the Nizam.
The cabinet took the decision after Nizam's descendants met Prime Minister Manmohan Singh and then foreign minister Pranab Mukherjee
The Nizam's heirs are now planning a visit to Pakistan next month to take up the issue with the authorities and to request them to initiate a dialogue with the Indian government.
The family does not anticipate any legal hurdles. "Both the governments can claim the money but considering the present financial condition of the family, we request them to give up their claim if they have any such thing in mind and permit us to take the money."
Muhammad Safiullah, cultural adviser to the Nizam's Trust, had estimated in 2008 that Nizam's heirs may get 20 percent of the money while the lion's share will go to India.
Of the Nizam's 34 children, two sons and three daughters are still alive while there are a total of 104 grandchildren.
Najaf plans to set aside a part of the money to set up an educational institution to take care of the educational needs of the new generation of family members.
He pointed out that the family always had good relations with the Indian government after the Nizam's surrender in 1948. Referring to their relations with Pakistan, he said Nizam was the first person to give money to Pakistan for its first budget.
Since the Britain's House of Lords had ruled that the account could only be unfrozen with the agreement of all the parties, Najaf says, no progress is possible unless India and Pakistan arrive at some understanding.
Osman Ali Khan, who was the world's richest man of his time, died in 1967. The efforts to solve the dispute during his lifetime failed as Pakistan never came forward to help unlock the funds.
The Nizam had refused to accede to India after the country's independence on August 15, 1947. He wanted to remain an independent state or join Pakistan. The princely state finally merged with the Indian Union in September, 1948 after an operation by Indian security forces.