Jagdev Singh was booked on the charge of killing N S Gill, a former MLA and father of ex Punjab DGP P S Gill.
District and Sessions Judge Karamjit Singh Kang held that the prosecution "completely failed" to establish its case and the defence satisfied the court that the accused was falsely implicated.
Jagdev had surrendered before court following his return from Canada in 2009, after finding that a criminal case was pending against him in this connection.
The defence pleaded that the police filed a chargesheet against Jagdev despite the fact that he was not in India when the murder had taken place.