"In our country, various types of injustice happen at different levels. Nambi Narayanan, falsely implicated in the case, is a living example of one such injustice," he said at a meeting to felicitate Narayanan.
The case pertains to charges of transfer of some secret documents on India's space programme to foreign countries by two scientists and four others, including two Maldivian women.
It was first investigated by state police and then handed over to CBI, which found no espionage as alleged had taken place.
Kerala High court had last month ordered the state government to pay Rs 10 lakh interim compensation to Nambi Narayanan for falsely implicating him in the case.
Nair alleged efforts were made to put hurdles in ISRO's way whenever it achieved milestones in space technology.
He said developed countries had imposed a technology embargo on India when the country launched Satellite Launch Vehicle in 1980. "The ISRO spy case came after ISRO successfully launched PSLV flights," he said.
Nair said if the spy case had not been handed over to CBI, which later found it to be false, more than 100 ISRO scientists would have been trapped in it, leading to the destruction of the organisation.
The Antrix-Devas deal episode had surfaced when ISRO started its Chandrayan Mission, Nair, who was barred from holding any government posts for his alleged role in the controversial deal, said.
He said if Narayanan, "one of the few experts in rocket technology", had headed the cryogenic rocket engine technology team in 1994, the country could have achieved self-reliance in it by 2006 or 2007. The country was yet to master that technology, he said.