The ruling comes after an order won on Monday by GMR that had suspended the government's decision to cancel the contract, although the Maldives had still been pressing ahead with plans to take over the airport.
"The Maldives government has the power to do what it wants, including expropriating the airport," Sundaresh Menon, the Chief Justice of Singapore, said in court.
Shares in GMR Infrastructure, which had fallen as much as 4.5 per cent post the court's ruling, ended 1.25 per cent lower at Rs 19.80 on the BSE. The BSE Sensex closed 0.5 per cent higher at 19,487.
"We will take over. We will enroll all those people from GMR who wish to join. Those who don't can go home. By Friday midnight we will take over," Imad Masood, the Maldives president's media spokesman, told Reuters, adding that the Maldives would pay compensation to GMR.
A GMR spokesperson, responding to the development, said: “We are still studying the oral order passed by the Honourable Singapore Court of Appeals. We would be able to comment only after studying the final written order.”
The two sides have not yet agreed on terms of compensation.
The standoff over the project threatens to cloud foreign investor sentiment towards Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated an agreement with GMR last week, rattling its relations with India.
The government of the Maldives, a tropical island chain south-west of India famous for its luxury beach resorts popular with honeymooners and scuba divers, cancelled the 2010 agreement, the largest foreign investment in the country, saying that it was not valid.
The cancellation follows a year of political turmoil that saw the ousting of its former president and months of unrest.
The contract to upgrade and operate the airport and build a new terminal came after a global tender overseen by the World Bank and signed under former president Mohamed Nasheed's administration.
The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad.
However, Nasheed's rivals filed legal action saying the contract was invalid as it contained a $25 airport development charge per outgoing passenger which was not authorised by parliament.
Copyright Thomson Reuters 2012