The Freedom of Information (FOI) documents obtained by the ABC found startling disclosures about the case, which saw the couple return to Australia with a baby girl while leaving her healthy twin-brother behind, with the full knowledge of Australian government officials.
The documents found that the couple were warned repeatedly that the baby boy could be left stateless.
"The documents show Department of Foreign Affairs and Trade (DFAT) staff, as well as the Australian High Commission in India, knew the couple was from New South Wales, where it is illegal to engage in international surrogacy arrangements," the ABC report said.
They travelled to India in late 2012 to seek citizenship for a baby girl but told consular staff they would be leaving her twin brother behind because they could not afford him, it said.
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The couple said they already had a son at home and wanted to "complete their family" with a girl.
According to the documents, the Australian man then misled consular staff when he told them he would be giving the boy to some friends in India "who were unable to conceive a child".
The couple was repeatedly informed that "abandoning the boy could leave him stateless because India did not recognise surrogate children as citizens."
FOI materials also showed that the High Commission sought "urgent" advice from three separate government departments in Canberra, and also raised the issue with the office of the then prime minister Julia Gillard.
But three days later, consular staff were seemingly given the green light to allow the Australians to return home with just the baby girl.
"They expressed to me that in fact money had changed hands, and if that's true, then that's basically trafficking children," she said.
However, the documents do not reveal whether a financial transaction took place.
FOI documents also contained correspondence from an Indian Supreme Court advocate, who advised Australia High Commission to "ensure that the adoption has been made in compliance of the conditions contained in sections 5 to 11 of the Hindu Adoption Act.