Australia is preparing to return two centuries-old statues to India, officials have said, following allegations they were stolen from ancient sites and sold as part of an audacious art fraud.

The National Gallery of Australia's bronze sculpture of a dancing Shiva, purchased in 2008 from New York art and antiquities dealer Subhash Kapoor, was pulled from display in Canberra on Monday.

A lesser work also linked to Kapoor, the Ardhanariswara idol held by the Art Gallery of New South Wales in Sydney, has also been removed, the Australian attorney-general's department said in a statement on Thursday.

India had requested the works' return last week and Australia, as a signatory to a UNESCO convention on the illicit import, export and transfer of ownership of cultural property, would implement its obligations under its Protection of Movable Cultural Heritage Act, it said.

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"The Indian government's request is being actioned in accordance with that Act," the statement said.

The request from India follows a decision by the National Gallery of Australia to sue Kapoor, his firm Art of the Past, and former manager Aaron Freedman in New York's Supreme Court over the purchase.

The NGA has claimed that Kapoor and his company "fraudulently induced" the Canberra-based gallery to buy the statue for $5 million through forged certifications about its provenance and history.

Kapoor, who is in prison in India where he also faces charges, claimed the statue had been sold to him by the wife of a diplomat, the gallery said. He has pleaded not guilty to the charges against him.

In a statement published on its website this week, the NGA said it researched the work for a year before acquiring it and followed measures consistent with international best practice for museums.

"If the allegations regarding Mr Kapoor are proven to be true, then our gallery, along with leading museums around the world, will have been the victim of a most audacious act of fraud," it said.

The gallery said the Shiva was a superb example of Indian Chola-period bronze casting which originated in the Tamil Nadu region of south India and is dated to the 11th-12th century.

Source: AFP