"For want of sanction, the charges against the accused P C Pande are dropped," special CBI court judge M B Gosavi said.
The court had last month discharged BJP president Amit Shah in the Sohrabhddin Sheikh and Prajapati cases after holding there existed "no case" against him and that he had been implicated for "political reasons".
According to CBI, Pande, a former Director General of Police of Gujarat, was involved in the conspiracy to bump off Prajapati, an eyewitness to the killing of Sohrabuddin in a staged encounter in 2005.
Pande had not been charge sheeted in the Sohrabuddin Sheikh case.
"We argued that Pande was only discharging his official duty and to prosecute him mandatory sanction from the government must be obtained," Pande's advocate Sachin Pawar said.
Sohrabuddin, a gangster who the Gujarat Police claimed had links with Pakistan-based terror outfit Lashkar-e-Taiba, and his wife Kausarbi, were allegedly abducted by state's Anti-Terror Squad when they were on way from Hyderabad to Sangli in Maharashtra.
Tulsiram, an aide of the gangster and an eyewitness to the encounter, was allegedly killed by police at Chapri village in Banaskantha district in Gujarat in December 2006.
The Sohrabuddin killing case was transferred to Mumbai in September 2012 at CBI's request for fair trial.
In 2013, the Supreme Court had clubbed Tulsiram Prajapati's encounter killing case with that of Sohrabuddin.
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