A division bench of the Lahore High Court headed by Justice Rauf Ahmad Sheikh yesterday said the prosecution had no concrete evidence against the accused and court could not issue any order on the basis of allegations.
During the hearing, the bench was told that one of the accused released on bail had again been detained by intelligence agencies.
The bench observed that the "disappearances" of citizens at the hands of intelligence agencies should be stopped now.
Expressing concern at the deteriorating law and order situation in the country, the bench remarked Pakistan was on the verge of a collapse and decomposed bodies of "missing persons" were being found in Balochistan.
The defence counsel said in his argument that police had no evidence against the accused and, therefore, the government's application should be dismissed. Police had informed the court at previous hearings that one of the accused involved in the attack had died in Afghanistan and another was missing.
An anti-terrorism court had granted bail to Ubaidur Rehman, Javed Anwar, Mohsin Rasheed, Ibrahim Khalil and Qari Ashfaq, who were linked to the attack on the Sri Lankan team.
The government, in its application, had contended that the accused were identified during an identification parade and had confessed to their crime during the investigation.
A cache of weapons and suicide jackets was recovered from them but the accused had stopped appearing in the anti-terrorism court after getting bail, officials said.