The International Sikh Youth Federation (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.
It therefore approved the draft Terrorism Act 2000 (Proscribed Organisations) (Amendment) Order 2016, which was laid before the House of Commons on February 22 and will be formally passed tomorrow.
He was questioned by Labour's shadow home secretary Andy Burnham whether the ban had been maintained since 2001 "because of pressure from the Indian government", something Hayes denied "without equivocation, hesitation or obfuscation".
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Labour's longest serving Indian-origin MP Keith Vaz welcomed the government's decision, saying, "At every meeting that I have attended to do with the Sikh community, members of the community ask about the issue and feel that they have been discriminated against.
He also called for a review of the ban in place against the Liberation Tigers of Tamil Eelam (LTTE).
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.
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".
Britain's decision to lift the ban will be formally notified to the UN and the European Council once agreed in Parliament at the end of the week.