An Indian doctor linked to Britain’s bungled terrorist bombings has been released from custody after Australia’s chief prosecutor said the charge against him had been a mistake.

Australia’s chief prosecutor today said he is personally reviewing all evidence against an Indian terror suspect charged in connection with the recent failed bombings in London and Glasgow.

A state leader accused Australia's government today of incompetence in its handling of the case of Indian terror suspect Mohamed Haneef.

Terror suspect Mohamed Haneef told Australian police he knew nothing about the plot to launch attacks in London and Glasgow, and freely admitted he knew two suspects being detained in Britain, according to leaked interview documents.

The Australian government has come under fire from civil libertarians and supporters of an Indian doctor accused of links to the failed car bomb attacks on London and Glasgow.