District judge Nicholad Evans at the Westminster Magistrates Court in London said today that Mr Shankaran had been presented with no evidence to prove there wasn't a "case to answer".
UK Home Secretary, Theresa May, will now decide on ordering Mr Shankaran's extradition to India.
Mr Shankaran, 46, is a retired naval commander and relative of former navy chief Admiral Arun Prakash. He is a key accused in the case of leaking of over 7,000 pages of classified information from the war room to arms dealers.
Mr Shankaran has been absconding since the case was registered by the Central Bureau of Investigation or CBI in March 2006.
The CBI revoked his passport in May 2006 and secured a red corner notice against him after filing a chargesheet. An extradition request was sent to the UK in 2007. Mr Shankaran was arrested by British authorities in April 2010 on the basis of a non-bailable arrest warrant issued by a court in Delhi.