Shiva as Nataraja, Lord of the Dance.

Shiva as Nataraja, Lord of the Dance.

The Indian government has demanded Australia return a dancing Shiva statue reportedly stolen from an Indian temple and now on display in the National Gallery in Canberra.

The National Gallery of Australia bought the statue in 2007 from New York dealer Subhash Kapoor who has been charged with trafficking stolen antiquities and was extradited back to India in 2011, the ABC reports.

His case is still before Indian courts.

Aaron Freedman the manager of Kapoor's Art of the Past gallery has pleaded guilty to six criminal charges of trading stolen art and has confirmed the $5 million statue was stolen from a temple at Sripuranthan.

Arts Minister George Brandis said the Indian and Australian governments are in talks over whether the statue should be returned.

"The due diligence standards of the (gallery) which are very high, in fact are world's best practice, were not in my view sufficiently complied with on this particular occasion," he told ABC Four Corners.

He said there was a sufficient doubt about the provenance of the statue and the decision to buy it was "incautious".

The program cited independent legal advice, from Shane Simpson, that the gallery received before the purchase warning that there was no evidence providing any clue to the origin of the object.

"There are four likely possibilities: one of which was it was stolen from the original source eg. a temple."

"I am unable to determine whether or not the object was legally or illegally exported from India."

Gallery council chairman Allan Myers maintained the usual processes of investigating provenance were undertaken.

"They're very detailed and they were adhered to in this case," he said.

He said India's request for the statue's return would be dealt with under a special legal treaty.

AAP