According to sources, British Home Secretary Theresa May signed the order lifting the ban on International Sikh Youth Federation (ISYF).
The ISYF, established in the 1980s in militancy-wracked Punjab, was involved in "assassinations, bombings and kidnappings, mainly directed against Indian officials and interests", the British Parliament heard this week.
However, the debate entitled 'Prevention and Suppression of Terrorism' on Tuesday night concluded that "there is not sufficient evidence to support a reasonable belief" that the ISYF is currently concerned with terrorism.
The ban on the ISYF in the UK came in force in March 2001, which led to the organisation being banned in India in December that year and in Canada in July 2003, where it is still banned.
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The Sikh Federation (UK) had applied for the ban to be lifted last year, followed by a legal challenge against UK home secretary Theresa May for refusing to lift the ban.
Sikh Federation chair Bhai Amrik Singh said: "The Home Secretary has shown courage in making this decision despite the inevitable pressure from the Indian authorities and so close after the attacks in Paris (last November). However, this also shows there was no case against the ISYF that would stand up to legal scrutiny".