The CBI filed the case against Birla and former Coal Secretary P.C. Parakh last year in relation to a block allocated in 2005 to Hindalco Industries, part of the $40 billion Aditya Birla Group led by Kumar Mangalam Birla.

"The evidence collected during investigation did not substantiate the allegations leveled against the persons named in the FIR (first information report filed in the case)," the CBI said in a statement late on Friday.

India's federal auditor had alleged that the government's allocation of coal blocks may have cost the exchequer revenues of about $33 billion, although industry watchers and the previous government have cast doubts on the figure. Indian media has dubbed the scandal "coalgate".

Though the CBI has dropped the name of Birla, the Supreme Court of India this week ruled that allocations of coal blocks since 1993 were illegal. That would include blocks awarded to firms including Hindalco and Jindal Steel and Power Ltd.

The court will hold a further hearing on Monday, after which it will decide whether to cancel the allocations or impose some sort of penalty.

(Reporting by Krishna N Das; Editing by Simon Cameron-Moore)