It was the world’s worst airborne terror strike prior to the attacks of September 11, 2001 and is Canada’s worst case of mass murder.
A third man in the case, the alleged bomb-maker, pleaded guilty in February to manslaughter and was sentenced to five years in jail.
Gasps filled the courtroom in the western Canadian city of Vancouver when Justice Ian Bruce Josephson acquitted Ajaib Singh Bagri and Ripudaman Singh Malik of downing the jet.
He ruled the prosecution, which alleged the men were seeking to punish India for its crackdown on Sikhs, had failed to prove its case.
The pair were arrested in 2000 and charged with a list of offences including murder.
The men, who were both born in India, denied any involvement in the crime.
The judge delivered his ruling after identifying factual errors and credibility problems with key prosecution witnesses.
Delivering his verdict, he said while Bagri had a clear motive to commit the bombing, the witnesses against him weren’t credible.
Significantly, some evidence was lost or destroyed by Canadian police and two other potential witnesses murdered.
Judge Josephson described the bombing, the planning for which he said had originated in Vancouver, was an act of fanaticism at its basest and most inhumane.
The prosecution had accused the men of helping to plant the bomb on Air India flight 182.
The Indian-bound flight was destroyed in mid air off the Irish coast in 1985.
A second bomb, in luggage to be loaded onto another Air India flight, exploded on the same day at Tokyo’s Narita airport, killing two baggage handlers.
Relatives and friends of those killed expressed their anger and frustration at the judgement.
“They should not have brought the case to court. We were suffering but now we are suffering more,” said Rattan Singh Kalsi, who lost his daughter in the tragedy.
Martine Donahue, a reservations agent when the jet left Canada on its fateful flight to London, and onward journey to India, was also despairing.
“How can you fight the law, they have so many tricks in their bag. It was an almost impossible trial, it was just people talking against people.”