KOLKATA, India — An Indian court ruled Friday in favour of Tata Motors in its fight to hold on to land it bought for an aborted factory in West Bengal state where it planned to build its low-cost Nano car.

Overturning a lower court ruling, the Calcutta High Court said legislation enacted by the state government to reclaim the land was "unconstitutional and illegal".

"The state government cannot take back the land in Singur from the Tata Motors by this Act," the bench said.

Tata Motors had pumped $350 million into the factory at Singur, near Kolkata, which was to have produced the world's cheapest car.

But it pulled out in October 2008 -- even though the plant was 90 percent complete -- after protests by farmers, who said they were poorly compensated, and the local opposition party which is now in power in West Bengal.

The new state government passed a "land rehabilitation" bill last year specifically aimed at returning the land acquired by Tata Motors -- India's leading vehicle maker -- to the farmers.

Friday's ruling was a major blow to Chief Minister Mamata Banerjee who had made the land return a key election pledge when she ended more than three-decades of Communist Party rule in West Bengal in 2011 state polls.

The clash between industrial expansion and small landowners has become a key test of how India deals with the massive economic development transforming the country in recent years.

The state government was given two months to appeal Friday's High Court decision.