SYDNEY (AFP) - Australia's national art gallery said on Thursday it is suing a New York-based art and antiquities dealer over a Shiva statue stolen from an ancient Indian temple for which it paid US$5 million (S$6.32 million).

The National Gallery of Australia (NGA) confirmed it is taking Subhash Kapoor, his firm Art of the Past, and former manager Aaron Freedman to New York's Supreme Court over the 2008 purchase of the Shiva as Lord of the Dance (Nataraja), a bronze statue dating from the 11th-12th century Chola dynasty.

According to the NGA's affidavit, filed in the US last week, Kapoor and his company "fraudulently induced" the Canberra-based gallery to buy the statue through forged certifications about its provenance and history.

Kapoor claimed the statue had been sold to him by the wife of a diplomat.

It was not until US federal agents raided Kapoor's Manhattan apartment in July 2012 over stolen Indian artifacts, including several Chola period statues worth tens of millions of dollars, that NGA said it became aware that its Shiva could have been illicitly obtained.

"It also came out at about this time that in October 2011 Kapoor had been detained by officials in Germany and was being extradited to India to face criminal charges for allegedly running a smuggling ring involving religious idols stolen from ancient temples in Tamil Nadu," the NGA's affidavit states.

A major break in the case came in December last year when Freedman pleaded guilty to six charges in New York related to trafficking in stolen art, including the NGA's Shiva.

"The Shiva was owned by the central government of India and was stolen from the Sivan temple in India's Ariyalur district," the NGA said of information obtained in Freedman's criminal case.

The statue is one of 21 items Australia's premier art gallery purchased from Kapoor - comprising a third of all the India works on its books.

It is seeking a refund of the $5 million or "in the alternative, damages for fraud breach of contract, contractual indemnification and/or restitution for unjust enrichment" for at least that amount.

"The Shiva has lost its financial value and its clouded title and notoriety means the work cannot be promoted as a key work of art in the gallery's Indian collection, nor in current circumstances be lent or toured to other museums and galleries," its affidavit said.

It would also be hard to sell, it added.