The officials of state Archeology Department and the Museum and Zoo here received an official communication in this regard recently.
The sword had been on display at the National Museum for some decades before it was brought to the state in 2010 on a temporary basis following pressure from the state government and historians.
The 41-inch-sword, weighing five kg, has been the centre of attention of archeology enthusiasts and tourists besides historians at the Napier Museum here for the last five years.
"Based on a communication from the National Museum, the state Archeology Department has asked us to return the sword to them," he told PTI on condition of anonymity.
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"But we have not taken a final decision as historians and history enthusiasts want the sword to be kept here as it is part of our glorious history," he said.
According to historians, the Kilimanoor Royal family here, which had been preserving the silver-handed sword for centuries, had gifted it to former President, late Rajendra Prasad when he came here for a function in 1957.
Following demand from historians, the then LDF government had made an agreement with the National Museum management and brought the sword here in 2010.
It was received by the then state cultural minister M A Baby at a grand function at the senate hall here on June 20, 2010.
As per the agreement, the state government had to renew insurance for the legendary sword annually and it should be returned to the National Museum after keeping it for five years in the state.
Velu Thampi (1765-1809) is best known for being one of the earliest individuals to rebel against the British East India Company's supremacy in India. When the British defeated him, he committed suicide rather than surrendering to them.