The Supreme Court on Tuesday struck down the Illegal Migrants (determination by tribunals) Act, 1983.
The move is seen to be detrimental to the interests of millions of Bangladeshis in the country.
The northeastern states, suffering for decades from a steady influx of Bangladeshis, have been demanding that the Act be scrapped and the illegal immigrants be deported under the Foreigners' Act 1946.
The Illegal Immigrants Act is seen to be against the interest of northeastern states, especially Assam.
The Act provides that anybody who settled in Assam before 25 March 1971 is a legal citizen of India whereas the cut-off date for the rest of India is 19 July 1948.
The apex court directed that all tribunals functioning under the IMDT, which has been declared unconstitutional, would seize functioning with immediate effect.
The court, allowing the petition filed by Asom Gana Parishad leader Sarbanand Sonawal, said all pending matters before the IMDT Tribunal would stand transfer to tribunals under the Foreigners Act.
Taking note of the huge influx of Bangladeshi migrants into Assam, the court directed the state government to constitute sufficient number of tribunals under the Foreigners Act to deal with the situation effectively.
The previous AGP government had initiated the process for repeal of the IMDT Act, 1983, but the Tarun Gogoi government had overturned the policy decision and supported its continuance.
The previous National Democratic Alliance government had also supported the repeal of the Act.