The Maldives has decided to terminate the $511 million contract given to India’s GMR Group based on “legal, technical and economic issues regarding the agreement”, the island nation’s government said in a statement.

GMR has been given seven days to leave the nation.

The termination, which drew a sharp reaction from India, was decided after an “exhaustive meeting” of the cabinet, Masood Imad, President Mohammed Waheed’s spokesman, said in a note emailed to journalists late on Tuesday. “Following exhaustive discussions...the cabinet decided to terminate this agreement on grounds that there were many legal, technical and economic issues regarding the agreement, and that it was legally invalid, and impossible to further continue,” Imad said.

The Bangalore-based firm was given the pact to build Male International Airport in 2010 in tie-up with Malaysia Airports Holdings Bhd. The project has been in the eye of a storm after former president Mohamed Nasheed quit in February. The project has been facing opposition, mainly from political parties such as the Adhaalath Party, which is part of Waheed’s coalition government.

Last week, Ibrahim Zaki, Nasheed’s envoy, who was in New Delhi to meet top Indian officials, warned India against the rise of fundamentalists in his country who were also targeting Indian interests. Coinciding with that was a private trip to India by Maldives foreign minister Abdul Samad Abdulla, three people close to the developments said.

GMR, in a note on Tuesday, said Maldives’ decision was “unilateral and completely irrational move” as legal arbitration over the deal was on in the Singapore high court.

India slammed the Maldives government action saying it will send “a very negative signal to foreign investors and the international community”, even as Waheed on Wednesday hoped the move will not affect ties with India.

“We have always maintained this is a commercial contract that was signed by Mr Nasheed’s government under dubious conditions,” Waheed said. “We remain confident India-Maldives ties will not be affected by the cancellation.”

Maldives Attorney General Azima Shukoor said although the agreement had stated that GMR should be given a 30-day notice of termination, the government believed it need not be followed since the contract was void. “The government has given a seven-day notice to GMR to leave the airport,” said Shukoor.

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