A court in India has barred a village council from deciding the fate of Coca-Cola's controversial plant in the south of the country. The High Court in Kerala state said yesterday that it will decide next week whether the Perumatty village council has the legal powers to cancel the plant's licence.

A spokesperson for Coca-Cola told Associated Press that the company is "extremely happy with the court verdict." Coke will continue its operations at the factory while the court decides.

The village council in Perumatty controls Plachimada village, where the Coke factory was opened in 1998. The council alleges that Coke's use of groundwater in the area has led to nearby farmlands drying up. Representatives of the soft-drinks giant testified before the village council last month denying the claims.

In the high court ruling, Judges Cyriac Joseph and K. Padmanathan Nair instructed the state government to conduct a detailed study of the council's allegations. No deadline was set for the order.