The Court of Appeal has quashed the conviction of a former police chief who was found guilty by a jury of framing a man.

Former Scotland Yard Commander Ali Dizaei was jailed for four years in February 2010 for abusing his office after a row in a London street with Waad al-Baghdadi, who was the main prosecution witness.

The court of appeal has ordered a retrial.

Lawyers for Dizaei told the court of appeal the conviction was no longer safe because Baghdadi had lied to secure thousands of pounds of benefits, as well as in his court evidence.

On Monday appeal court judges decided the conviction was unsafe.

Dizaei's 25-year police career ended after his conviction, when he was drummed out of the Metropolitan Police in disgrace.

The appeal court heard Baghdadi had lied to the pension and benefits departments to pretend his father was alive so he could collect his £100-a-week pension, plus an allowance for caring for him. Thousands of pounds in benefits went into bank accounts controlled by Baghdadi, said Michael Mansfield QC, representing Dizaei.

The fraud went on long after his father's death in March 2006, and he was still claiming up until February this year.

Lord Justice Hughes, after hearing the evidence, declared on the first day of the hearing: "There is a clear prima facie case of benefit fraud."

Baghdadi was arrested by police on 6 March and bailed until May.

In all, Baghdadi claimed £18,000 from an attendance allowance for his dead father, a carer's allowance and a pension, as well as income support. There was also an application to the social fund for a loan bearing the signature of his dead father, the court heard.

Mansfield alleged Baghdadi had lied to get into Britain, falsely claiming he was fleeing persecution in Iraq. In fact, he had been born and raised in Iran. This falsehood was also told by Baghdadi at the original trial of Dizaei, where his accuser had also wrongly stated his name and age, as well as his nationality.

Some of the fraud, said Mansfield, was ongoing at the time of the 2008 clash with Dizaei and at the time of the trial, where the jury were told nothing of the alleged fraud and Baghdadi was presented as a witness of truth.

Mansfield said the evidence showed Baghdadi was capable of a "pattern of persistent and elaborate deceit" and in recent police interviews had still not been telling the truth.

Hughes, after accepting the "clear prima facie case he [Baghdadi] is a fraudster", told Mansfield he would have to show how this made the jury's decision to believe Baghdadi's evidence over Dizaei's testimony unsafe. "It's all very well showing this man is a fraudster, how does it affect the conviction?" Hughes asked.

Mansfield replied: "It impacts on the safety of the conviction quite dramatically," adding that Baghdadi had been pivotal to the conviction.

The crown argued that much of the material about Baghdadi's benefit claims may have been known by Dizaei at the time of the trial and thus did not count as new evidence, which is needed to overturn the jury's verdict in the original trial.

Dizaei, a former leader of the National Black Police Association, was an outspoken critic of the police on race and a key figure in a racism row that erupted at the top of Scotland Yard in 2008.

Dizaei was convicted of falsely arresting Baghdadi in a dispute over money and then lying in official statements, claiming he had been assaulted and threatened by Baghdadi.

The crown alleged that on 18 July 2008, Dizaei clashed with 24-year-old Baghdadi, who claimed the police commander owed him £600 for a website he had designed.

In 2003 Dizaei was cleared of criminal charges after a massive covert operation against him by his own force. He returned to the Metropolitan police after that acquittal, but few if any leaders in the force want Dizaei, who has been a constant thorn in their side, to return.