Original: Because Hyderabad did not participate in the first war of Indian Independence of 1857 against the British, its Royal Family had been accorded by British Royalty special honors and the Nizam was given the official status of Faithful Ally.
Simplified: Hyderabad did not join the first war of Indian Independence of 1857 against the British. Therefore its Royal Family had special, official status of Faithful Ally with Britain.