The leader of a banned Muslim charity India accuses of masterminding last year's Mumbai terror attack has been released by a Pakistani court.  The decision is seen as a setback for the investigation into the terror attack, as well as relations between the two nuclear-armed neighbors and long-time rivals.

India is expressing disappointment after the Lahore High Court set free the founder of Jamaat-ud-Dawa, regarded as a front for the terrorist organization Lashkhar-e-Taiba.

The Pakistani court says the government produced insufficient evidence to continue holding Hafiz Muhammad Saeed.

'Regrettable' release

The Indian External Affairs Ministry calls Saeed's release "regrettable."  Spokesman Vishnu Prakash - reading a terse statement - terms the action counter to Pakistan's international obligations to fight terrorism.

"Hafiz Saeed, the Laskhar-e-Taiba and the Jamaat-ud-Dawa have a long and well-established background of planning and launching terrorist acts against India," he said.

Not a setback

However, Indian Home Minister Palaniappan Chidambaram says the suspect's release is not a setback for the criminal investigation of the assault on Mumbai, which left nearly 170 people dead.

"It's a commentary on the commitment of Pakistan to investigate the perpetrators of the crime," he said. "We're unhappy that Pakistan does not show the degree of seriousness and commitment that it should to bring to justice the perpetrators of the Mumbai terror attack."

India claims the 10 terrorists who carried out last November's assault on luxury hotels, a rail station, a Jewish center and a popular café all came from Pakistan.

Not cooperative enough

Pakistani officials have said India is not being sufficiently cooperative in giving Islamabad requested information for the investigation.  Indian officials say they will be carefully watching to see if Pakistan appeals the Lahore High Court decision.

While the court was ordering the release, Pakistan's president was addressing a meeting in Islamabad.

Blaming India

Yousuf Raza Gilani blames India for putting "a pause" on the diplomatic dialog following last November's terror attack on Mumbai.

"We hope that the peace process would resume soon and become result oriented?in addressing all outstanding issues, including the issue of Jammu and Kashmir," Gilani said.

Mr. Gilani reiterated the long-standing Pakistani stance that resolving the Kashmir territorial dispute "holds the key to durable peace in the region."

That prompted consternation across the border, with Indian commentators immediately taking to the airwaves accusing the Pakistani leader of diverting the focus from the urgent threat terrorism is posing to both countries.