Islamabad (IANS): Celebrations erupted across Pakistan as the government on Monday buckled in to agitating lawyers and restored the Supreme Court and high court judges sacked in 2007, prompting opposition leader Nawaz Mr. Sharif to call off the 'long march' that had raised the spectre of political instability.

"On March 21 when Abdul Hamid Dogar retires as the chief justice of Pakistan, Iftikhar Mohammad Chaudhury will become the chief justice of Pakistan," Prime Minister Yusuf Raza Gilani announced in a nationally televised address.

"All the other judges who were sacked in 2007 will also be restored," he added.

Officials here said the decision was taken at an early morning meeting between President Asif Ali Mr. Zardari, Mr. Gilani and Pakistan Army chief Gen. Ashfaq Parvez Kayani.

The decision was conveyed soon after to Nawaz Sharif, who promptly called off the 'long march', saying its objective had been achieved.

As the day progressed, the 'long march' turned into a victory procession in Islamabad as the lawyers took to the streets to celebrate. Similar processions were also taken out in other towns and cities.

India reacted cautiously to the developments.

"It is essentially an internal affair of Pakistan but it is in the interest of the democratic government there. We hope the internal confrontation will come to an end," External Affairs Minister Pranab Mukherjee told reporters in New Delhi.

Former Pakistani military strongman Pervez Musharraf had sacked Mr. Chaudhury and some 60-odd judges of the Supreme Court and the High Courts after they refused to take fresh oath under the Provisional Constitutional Order (PCO) that he promulgated along with the emergency Nov 3, 2007.

Mr. Chaudhury had led a similar 'long march' last June and while the lawyers did not succeed in getting their demand acceded to, the agitation saw Musharraf quitting office.

Mr. Gilani also announced that the 1,500-odd activists who had been arrested in Sindh, Balochistan and Punjab in a bid to thwart the agitation would be immediately released.

The government also lifted orders banning the assembly of five or more persons in Punjab.

"Our late leader Benazir Bhutto had promised that the chief justice will be restored. I had also made the promise after I took over as prime minister," Mr. Gilani said during his address.

"The time has come to fulfil this promise. I have advised the president and he has agreed to reinstate chief justice Iftikhar Chaudhry from March 21," the prime minister added.

Also on Monday, the government filed an appeal in the Supreme Court against its order barring Mr. Mr. Sharif and his brother Shahbaz Mr. Sharif from contesting elections.

The verdict had led to the fall of Shahbaz Sharif's Punjab government and the imposition of Governor's Rule in the province. This had prompted Nawaz Sharif to jump onto the bandwagon of the previously announced 'long march'.

Thus, from a two-point demand for the restoration of the sacked judges and the repeal of the 17th amendment, the 'long march' acquired a third: the lifting of Governor's Rule in Punjab.

While this demand has not been addressed, it is likely to be once the Supreme Court hears the appeal on the Sharif brothers' verdict.

Should this be overturned - which in all likelihood will happen - the younger Sharif can reclaim his Punjab job.

The demand for repealing the 17th amendment has also not been addressed but given Mr. Chaudhury's judicial activism when he was in office, the Supreme Court could well take this up suo moto.

The agitating lawyers had simultaneously set off from Sindh, Balochistan and Punjab Thursday vowing to stage a sit-in at Islamabad till the sacked judges were restored.

The government began talking tough on Saturday, warning that the marchers would not be permitted to enter the federal capital and asking the army to remain on standby, even as it invited the lawyers to the negotiating table.

Mr. Nawaz Sharif rejected the demand Saturday night, prompting the government to place him under house arrest.

Undeterred by this Mr. Sharif defiantly declared that the march would continue.