FIFA had banned local oil tycoon Arifin Panigoro, who launched the breakaway Indonesian Premier League (LPI), and Army Chief of Staff George Toisutta and warned the PSSI electoral appeal committee last week they faced "severe sanctions" if the duo were reinstated.
However, appeal committee chairman Ahmad Riyadh said new evidence had come to light and that the pair would be allowed to stand in the May 20 election.
"Arifin and George have never broken FIFA's or PSSI's statutes," Riyadh told local Indonesian media.
"We understand that this decision will not please all parties, but this is our final decision and we believe that this is the right decision so Indonesian football can move forward into a better era."
"WRONG FACTS"
"We found several (pieces of) evidence that previous PSSI officials were manipulating facts about George and Arifin," Riyadh said.
"Those officials sent the wrong facts about them to FIFA, which of course influenced FIFA's decision to ban them from the election."
The Jakarta Globe quoted Halim Mahfudz, a spokesman for Panigoro and Toisutta, saying the pair would take their case to sport's highest tribunal, the Court of Arbitration for Sport (CAS), should FIFA prevent them from being able to stand.
"FIFA statutes say only a criminal can't run the (PSSI) and George and Arifin are not criminals," Mahfudz told the paper.
The developments and the possibility of a CAS hearing are likely to delay the elections with a suspension jeopardising Indonesia's participation in 2014 World Cup qualifying.
