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KUALA LUMPUR (Reuters) Juky 4 - Malaysia's de facto opposition leader, Anwar Ibrahim, lost his bid on Wednesday for a legal showdown with his old enemy, former premier Mahathir Mohamad, whom he tried to sue for defamation.

The decision was a setback for the former deputy premier in his quest to get even. Mahathir sacked Anwar from government in September 1998 in a chain of events that landed him in jail.

Anwar criticized the ruling, saying it was a "gross injustice" to him and his family.

"I am compelled to say that this decision is utterly devoid of any legal merit," he said in a statement. He said he would appeal the decision.

His lawyer, Sankara Nair, called the decision "most disappointing, most puzzling and unexpected."

In his suit, the 60-year-old Anwar said that his former mentor, speaking at a September 2005 news conference in Kuala Lumpur, had described him as a gay man who could be a threat to people if he became prime minister.

Mahathir's lawyer said his client had a defense of justification and qualified privilege in describing his deeds as prime minister. He had asked for the case to be dropped.

"The application is accordingly allowed," High Court judge Tengku Maimun Tuan Mat said in a verbal judgment.

The suit follows a string of unsuccessful attempts by Anwar to bring Mahathir, 82, to court since being sacked as deputy premier and finance minister and serving six years in jail on what he has said were trumped up charges.

Anwar was freed in 2004 after the courts quashed a sodomy case against him. However, a conviction for corruption bars him from holding political office until April 2008.

Malaysians watched Wednesday's hearing keenly, since the country's judiciary has sided with Anwar in previous rulings.

In August 2005, Anwar won a judgment of $1.2 million against author Khalid Jafri over a book that accused him of fathering a child out of wedlock, among other things. DNA tests showed the child was not his.

The same month he won an apology from a former police chief for beating him in custody in 1998 and giving him a black eye.

Labels: anwar, Mahathir, Malaysia