In a major embarrassment to Australian government, a Brisbane court on Tuesday quashed its controversial decision to cancel the work visa of Indian doctor Mohamed Haneef, who was cleared of terror charges over the botched UK car bomb plot, on character grounds.

Immigration Minister Kevin Andrews “fell into jurisdictional error” by applying the wrong test, when determining whether to cancel the visa of the 27-year-old medico from Bangalore, federal court judge Jeff Spender said.

However, Haneef’s return would be delayed as Justice Spender granted a 21-day stay on his decision to allow the Minister to appeal against the ruling.

Issuing an injunction restraining Andrews from acting upon the cancellation of the work visa, the judge ordered the government to pay Haneef’s legal expenses.

“The Minister cancelled the visa by adopting a wrong criterion. He fell into jurisdictional error by applying the wrong test,” Justice Spender said.

The judge said that had the Minister relied upon information that Haneef was considered a person of interest by UK counter-terrorism police and had been formally charged with providing resources to a terrorist organisation, the Minister would have been justified in cancelling his visa.

“These matters would have permitted the Minister to conclude that the association between Haneef and the Ahmed brothers went beyond a purely familial, social and ‘innocent’ relationship,” Justice Spender said.

However, he said Andrews may no longer be able to use those grounds to cancel Haneef’s visa as the circumstances had changed and the charge against the doctor had been dropped.

Outside the court, Haneef’s solicitor Peter Russo called on Andrews to abide by the decision of the court and let Haneef get on with his life.

“I will hope the minister will accept the court’s decision with good grace and clear the way for Haneef to return to Australia and complete his studies,” Russo said.

Haneef, who worked as a junior doctor at the Gold Coast Hospital, was arrested on July two at the airport with a one-way ticket to India. He was charged with “recklessly” providing support to a terrorist organisation on July 14, following 12 days in detention under anti-terror laws.

A Brisbane magistrate granted him bail on July 16. But his detention continued as Australian Immigration Minister Kevin Andrews Andrews cancelled his work visa saying he had a reasonable suspicion that Haneef had “associated” with terrorists, specifically his second cousins Kafeel and Sabeel Ahmed, both allegedly involved in failed car bomb plot in London and Glasgow in June.

Andrews, whose decision triggered a political storm and drew flak from lawyers’ group and rights bodies, said earlier on Tuesday that he expected more court challenges over Haneef’s visa.

“I don’t think today (Tuesday) will be the end of the matter, I think whatever the result in the court today that’ll probably end up on appeal and who knows even in the high court one day,” he said.

There is likely to be a challenge, regardless of Tuesday’s ruling, he said.

The terror charge against Haneef was dropped after Commonwealth Director of Public Prosecutions Damian Bugg found there was no reasonable prospect of a conviction against the Indian.