'She was as patriotic and loved the country as much as you and we do,' said an impassioned Nusrat, Ishrat's younger sister.

'We are happy that finally the blot on our family has been erased and she has been proved innocent,' the 22-year-old said, adding that the family knew right from the beginning that her killing was a 'conspiracy'.

Her mother Shamima Jahan added tearfully that Ishrat's killing had branded their entire lives and affected the job and educational prospects of her six other children.

With the terrorist slur finally being removed, 'our lives can come back on track', she said.

Ishrat, a resident of Mumbra suburb in Thane district, was a second year B.Sc student at Mumbai's Guru Nanak Khalsa College. Having lost her father two years before her death, she embroidered clothes and gave tuitions to help support her family of eight -- including her mother and six brothers and sisters.

Political parties, with the exception of the Bharatiya Janata Party (BJP), reacted with outrage to the magistrate's report nailing the state government's lie and demanded Modi's resignation.

The Congress said there was a 'a man eating government in Gujarat'.

Congress spokesperson Manish Tewari also appealed to the Supreme Court and Gujarat High Court to 'take suo motu cognizance of all the encounter killings between 2001 and 2009 where there are allegations of fake killings'.

'This is inhuman, if a proper investigation is done then many more skeletons will come out,' Law Minister M. Veerappa Moily told IANS.

'Given the spate of illegal encounter killings which took place under the encouragement of the state government, Narendra Modi should take moral responsibility and quit office,' the CPI-M politburo said in a statement.

BJP spokesperson Ravi Shankar Prasad, however, said that the central government had accepted that Ishrat was a terrorist.

'The Gujarat government has also said it was a correct, legally required encounter,' he said.