Cehl Meeah, the leader of the Hizb Allah party, was arrested in December 2000 after being accused of instructing supporters to gun down rival party members during the 1996 general elections.
The charges were based on the testimony of a single witness who was part of a rogue Hizb Allah unit that carried out the murders.
But the testimony of Hateem Oozeer, a lifelong criminal who turned state witness in return for immunity from prosecution, has been deemed unreliable.
Meeah, who was tortured when initially detained, will nevertheless remain in custody until a hearing next week into charges against him for conspiracy to assassinate the former prime minister Navinchandra Ramgoolam.
Osama Daneshyar, Meeah's barrister, said on Friday that the collapse vindicated those who argued the charges were politically-motivated.
He said: "The evidence against Meeah was ridiculous. The government paid Hateem Oozeer $20,000 in return for his surrender and false evidence. These facts are all in the public domain.
"The evidence against Meeah was ridiculous. The government paid Hateem Oozeer $20,000 in return for his surrender and false evidence. These facts are all in the public domain"
Cehl Meeah's lawyer
"Meeah has since been kept in solitary confinement and was tortured - he was left with broken ribs and taken to hospital."
He added: "The inspector in his case, an Inspector Radhoa, admitted to me he had to extract evidence from people otherwise he couldn’t proceed with the case. He was never investigated and has in fact been promoted to chief inspector."
And Daneshyar, who was representing the London-based Islamic Human Rights Commission, said there is growing discrimination against Muslims in Mauritius.
"The BJP Hindufication mevement in India has spilled over into Mauritius. There is a Hindu majority in the country but Muslims make up nearly 20% of the population. This means they have a very important swing vote and can make and break governments.
"Cehl Meeah was the leader of a party that could call in a lot of Muslim votes. But he refused to work with Prime Minister Paul Berenger’s government because they had done nothing for Muslims. So they had to find a way of assassinating him politically."
Cehl Meeah has been a thorn in the side of Mauritian politicians ever since he returned to the Indian Ocean island after seven years in Mecca.
One of his first moves was to set up the Hizb Allah party to represent the interests of Mauritius's 250,000 Muslims, many of whom live in destitution.
"Cehl Meeah was the leader of a party that could call in a lot of Muslim votes. But he refused to work with Prime Minister Paul Berenger’s government because they had done nothing for Muslims. So they had to find a way of assassinating him politically"
Cehl Meeah's barrister
'War on terorism'Soon after the September 11 attacks on the US, officials in Washington identified Mauritius, which is near the American military base of Diego Garcia, as being a haven for Islamist "extremists" and a money laundering centre for al-Qaida.
No money has been found nor has any al-Qaida operative been seized, but the effect has been to intensify a wave of repression against the island's Muslim population.
Meanwhile, Hizb Allah itself has been severely damaged, perhaps irreparably.
With no natural replacement for the charismatic Meeah, party activity has subsided since a spate of mass arrests in 2000 that affected 120 people.