It was by declaring he was a person of interest after the Glasgow airport bombing last year, the Australian police had set off a chain of events that showed them in poor light. It also drew charges of racism.
The Glasgow bombing took place on June 30, and the young doctor was arrested at Brisbane airport on July 2, 2007 as he was about to board a plane to India.
At the time the 28-year-old Mohamed Haneef from Karnataka in southern India was working at the Gold Coast Hospital in Brisbane, Queensland.
The police said he was under a cloud as his mobile phone SIM card had been recovered from those charged in the failed terror attacks in London and Glasgow.
Commonwealth Prosecutor Clive Porritt alleged that Haneef had, on leaving the UK after a stint a year earlier, had left the card with his cousin Sabeel Ahmed.
The latter had, in turn, passed the card on to his brother Kafeel, the driver of the "fireball" jeep that crashed into the Glasgow airport, and the card was found in the wreckage. That was the police version at the time. However it emerged that the SIM card was actually seized by police eight hours later when Sabeel Ahmed was arrested in Liverpool.
Just that and nothing more, still it was enough to trigger international frenzy, the matter becoming complicated further by the active interest shown by the then Conservative Australian federal government.
But a shamefaced police had to admit in the courts that it had overreacted, and Haneef was allowed to return home.
Still it took over a year before the police could finally bring itself to finally clear Haneef of all suspicions.
In March last, an inquiry commission was appointed to go into "the arrest, detention, charging, prosecution and release of Dr Haneef, the cancellation of his Australian visa and the issuing of a criminal justice stay certificate..."
The Commission is to be led by John Clarke QC. Obviously the new Labour government wants to fix responsibilities for the goof-up.
But civil liberties activists want the government to go further and upgrade the Clarke inquiry into a royal commission.
"The AFP's announcement highlights yet again the inadequacy of the current Haneef Inquiry which is not a full blown properly constituted royal commission," Australian Council for Civil Liberties President Terry O'Gorman told AAP.
"There's been a lingering suspicion which has firmed up... that the AFP, in maintaining the investigation against Dr Haneef for the last 12 months has really been engaged in a smoke-screen back protection exercise and there's been no reason for Dr Haneef to be kept under investigation," he said.
A royal commission, if granted, should look at all aspects of the AFP's behaviour in the Haneef matter, not just leading to his arrest, he said.
"What the inquiry should look at is how much money, what resources has the AFP used in the last 12 months and has there been a legitimate line of inquiry it has been following or has it simply been parroting that line as a back protection exercise?"
The council had been critical of the structure of the Clarke Inquiry since it was first set up, O'Gorman said.
"Quite inexplicably, the Rudd election campaign promised to set up an inquiry, it turned out to be a mickey mouse inquiry because it's not conducted under the provisions of the federal royal commissions act.
"It is not a royal commission, it is not sitting in public, it can't force the AFP among other agencies to produce witnesses or produce documents, it can only ask them to.
"It's been a joke from the start," he said.
A spokesman for Attorney-General Robert McClelland told AAP when McClelland announced the Clarke Inquiry would take place, it was "the most effective way" of investigating the Haneef matter.
The spokesman said former NSW Court of Appeal judge John Clarke, QC, was also given the option of asking the government for extended powers and if that request was made McClelland would consider it.
Dr Haneef's Brisbane-based lawyer Peter Russo has confirmed the doctor will pursue compensation once the report into the inquiry is handed to the federal government by September 30.