India's national investigation agency on Friday dropped all terror-related charges against a female Hindu activist jailed in connection with a bomb explosion in a Muslim neighborhood in 2008.

The National Investigation Agency recommended that all charges be dropped against Pragya Singh - a self-styled Hindu holy woman - and three others because of lack of evidence.

The move overturns earlier police findings and closes a chapter in one of the most contentious terrorism cases in the past decade in India.

Singh and three others were arrested for being behind a September 2008 motorcycle bomb explosion in the town of Malegaon in the western state of Maharashtra.

The blast, which occurred during the Islamic holy month of Ramadan, killed six people and injured more than 100.

Singh's arrest was controversial because it was the first time that Hindus had been named in a terror case in India. It fueled a sharp political debate and angered many Hindus who accused the previous Congress Party-led coalition government of tarnishing the image of their community.

"The National Investigation Agency has said that there is no evidence to prosecute the four accused, including Pragya Singh," her lawyer Sanjeev Punalekar told reporters in Mumbai. "There had been grave injustice done to them all these years."

The agency also dropped the organized crime charge against one of the other prominent figures in the case, a Hindu army colonel, Srikant Purohit, who remains behind bars on charges he provided the explosives and training to the bombers.

Indian media at that time had called Singh and Purohit "the face of 'Hindu terror,' " a phrase that many Hindus objected to.

"Those who called it 'Hindu terror' committed a great sin," said Indresh Kumar, a member of India's largest and most strident Hindu nationalist organization, the Rashtriya Swayamsevak Sangh. The group is closely affiliated with the political party of Prime Minister Narendra Modi.

Randeep Singh Surjewala, the spokesman for the Congress Party, which was in power at the time of Singh's arrest, said the overturning of the charges "has shocked the collective conscience of the nation" and accused the Modi government of "blatant disregard and misuse" of the investigation agency.

Investigators, however, denied charges of political interference.

"We have completed the investigation. Whatever evidence and questions came up in that process, we have presented today," said Sharad Kumar, the director general of the National Investigation Agency.

In response to reporters' questions, he denied he was undermining the earlier police investigation.

Police in 2008 had focused on Singh after forensic analysis revealed that the motorcycle used in the bombing had belonged to her. But her lawyer had argued that she had given it away many years ago.

In June last year, the case's special public prosecutor, Rohini Salian, said that she was "under pressure" from the investigation agency to go easy in the case.

On Friday, senior Congress Party leader Digvijaya Singh said "it was a matter of shame" that Modi's government was "trying to protect those who were clearly involved in terror related activities."