Australia will transfer 157 Tamil asylum seekers it has been holding at sea for nearly a month to a mainland detention centre, the immigration minister said, in an apparent setback for the government's policies.
Australia has provided little information about the asylum seekers, detained by customs in June after setting sail from India.
Their case was due to be heard by the High Court next month.
Immigration Minister Scott Morrison on Friday refused to answer questions about the condition of the asylum seekers, or the potential impact the move could have ongovernment's policy.
He insisted, however, that the government was not backing down from a regime that he said prevented the thousands of boat arrivals per month the country experienced during much of 2013, and the resultant increase in deaths at sea.
"They will not be resettled in Australia. That is the policy of the Australian government and there is no change to our policy on any front and more importantly there is no change to our resolve," he said.
Australia uses offshore detention centres in Papua New Guinea and the South Pacific island nation of Nauru to process would-be refugees trying to reach the country, often in unsafe boats after paying people smugglers in Indonesia.
A government source said that this group of asylum seekers would be transferred to the remote Curtin Detention Centre in outback Western Australia.
Under a tough policy brought in by former prime minister Kevin Rudd of the Labor Party, no one attempting to arrive in Australia by boat to claim asylum can ever be settled in the country, regardless of the final status they get.
Two boats of Sri Lankans were intercepted by Australia's border patrol in the Indian Ocean in late June. Australia handed over the passengers from the first boat to the Sri Lankan government after their refugee claims were assessed at sea and rejected, sparking protests in Australia by human rights advocates who said the migrants could face persecution back home.
Some of the 157 asylum seekers on board the second boat, which departed from India, launched a legal challenge in the High Court to prevent their return to Sri Lanka.
Their lawyers argued that the group could face persecution in the island nation, which emerged in 2009 from a brutal civil war between government troops and the now-defeated separatist Tamil Tiger ebels. Tamils say they are still suffering violence at the hands of the military.
The asylum seekers will be held in Australia where Indian consular officials will interview them about their possible return to India, Morrison said.
India has agreed to take back any of its citizens that might be on board, and will consider taking back Indian residents who may be Sri Lankan citizens, he said.
Amnesty International said it was "completely unacceptable" that no one would have a claim for asylum assessed and Indian residents would be sent back.
"This doesn't remove the risk of the asylum seekers being returned to Sri Lanka, where they may face a risk of persecution or even death," spokesman Graeme McGregor said in a statement.