In Uttar Pradesh politics he was known as a "Rafian", that is, an associate of Rafi Ahmed Kidwai, the famous Indian nationalist Muslim. Tyagi, who was active in the Kisan (peasant) movement, remained a life-long member of the Indian National Congress. He was imprisoned by the British several times. In 1921 he was tried at Bulandshahr in Uttar Pradesh. Mahatma Gandhi wrote four articles on the trial in the journal Young India. Mahavir Tyagi was close to, and had been a jail companion of, the leading Indian nationalist, Motilal Nehru, Jawaharlal Nehru's father. In the 1920s Tyagi helped resolve, with the help of Maulana Mohammad Ali, a misunderstanding that had arisen between Motilal Nehru and Jawaharlal Nehru. Tyagi became a legislator in the United Provinces (later known as Uttar Pradesh) before Indian independence. In this capacity, he was a member of a committee which heralded social and land reform in the tribal area of Jaunsar Bawar in Dehradun district of Uttar Pradesh (an area now forming part of Uttaranchal state). While he himself adhered to Gandhian non-violence, he had close contacts even among the "revolutionaries", that is those who were not opposed to using violent means to overthrow the imperial state. These included Sachindra Nath Sanyal, Prem Kishan Khanna and Vishnu Sharan Dublish. When riots broke out in the Indian subcontinent after its partition in 1947, Tyagi, taking inspiration from Gandhi, staked his own life to help save Muslims in his home state and to bring peace. Mahavir Tyagi was a member of the Constituent Assembly of India. In this capacity he is known especially for his strong stand against unsafeguarded Preventive Detention laws and against suspension of fundamental rights in emergency situations.On India's becoming a Republic in 1950, Tyagi remained a member of the Provisional Parliament (1950-52),and the Lower House of the Indian Parliament, that is, the First, Second and Third Lok Sabha (1952-67). Tyagi was Minister for Revenue & Expenditure in the Nehru Council of Ministers (1951-53). In this capacity he introduced the First Voluntary Disclosure Scheme, known as the Tyagi Scheme, primarily, as he put it, to bring into the open incomes which had not been revealed to the alien government prior to independence. While in the Ministry of Finance, Tyagi earned a reputation as a strict economiser. Later Mahavir Tyagi became Minister for Defence Organisation (1953-57). General B M Kaul records in his "The Untold Story" that as Minister of Defence Organisation, Tyagi opposed policy proposals involving draconian measures in the tribal areas of India's North-East. Tyagi also gave instructions for recruitment of Muslims in large numbers in the Indian Army. The proportion of Muslims in the Army had fallen after Partition of India in 1947. Known for his independence, Tyagi opposed, even while he was a minister, the reorganisation of Indian states in 1956. He also opposed the decision to dismiss the Communist government led by E M S Namboodirapad in Kerala state at the end of the fifties, saying that this would establish a wrong precedent. Tyagi was Chairman of the Direct Taxes Administration Enquiry Committee (1958-59) and in that capacity paved the way, along with the Law Commission, for the Income Tax Act, 1961.
Tyagi famously criticized Nehru's statement in the Indian Parliament in the prelude to the Sino-Indian War: Nehru commented that "Not a blade of grass grows in Aksai Chin", attempting to explain that Aksai Chin was a barren, inhospitable land and the nation had lost little by its occupation by China. Tyagi retorted, pointing to his bald head: "Nothing grows here ..should it be cut off or given away to somebody else?". A tense situation that had been developing in the House on the subject of the border conflict was averted as the House dissolved in laughter in which Nehru also joined. Tyagi continued to enjoy an affectionate relationship with Jawaharlal Nehru. He served as Chairman of the Public Accounts Committee of Parliament (1962-64). In April 1964, a month before Nehru's death, Tyagi rejoined the Government as Cabinet Minister in charge of Rehabilitation. In the General Elections of 1967 which saw a popular backlash against the Congress Party, Tyagi lost to an independent candidate backed by an anti-Congress combination of parties. In 1968 he became the Chairman of the Fifth Finance Commission.After the split in the Congress in 1969, Tyagi stayed with the Congress(O), the organisational wing of the party. In 1970 he was elected to the Upper House of Parliament, the Rajya Sabha, from Uttar Pradesh and led the Congress(O) in the House till he retired in 1976. Tyagi's being in the Congress(O) did not prevent him from being critical of the movement led by Jaya Prakash Narayan in 1974-75. He was equally critical of the Emergency imposed by Prime Minister Indira Gandhi in 1975. Mahavir Tyagi passed away in New Delhi on May 22, 1980. A popular figure, he had friends across political parties and was widely admired for his integrity, outspokenness, ready wit and sense of humour.
Prior to independence, Mahavir Tyagi had written a booklet on proportional representation. His memoirs in Hindustani were published in the 1960s in two volumes : (i) Ve Kranti Ke Din and (ii) Meri Kaun Sunega. These volumes have now been combined in one and, along with some other unpublished articles by Tyagi, have been published under the title Azadi Ka Andolan: Hanste Huye Aansu (Kitab Ghar, 24 Ansari Road, Daryaganj, Delhi).
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