Bradford Council's internal auditors have been pulled out of a full-scale investigation at a crisis-hit training centre.
The probe cannot proceed following a meeting of the regeneration committee last night.
Tory councillors successfully moved the whole issue should go to the full Council on July 14 for consideration. The committee had been expected to give the go-ahead for the probe at Metrochange House to continue.
But in a shock twist after the meeting, Council lawyers ruled the authority's auditors could not continue in the meantime without authorisation.
Today, committee chairman Councillor Dave Green hit out at the Conservative group over the delay which could now affect anxious students.
Already, more than 40 students have been told their National Vocational Awards in business administration are invalid, and another 80 others have been notified their work is not up to standard. They will all have to start again almost from scratch.
External investigations being carried out by the Government's Qualification and Curriculum Authority and the examining body, the London College of Commerce and Industry, are not affected by the committee decision because they are outside bodies.
Coun Green said it was vital to carry out the probe thoroughly in as short a time as possible to enable the NVQ courses to get back on schedule.
He said: "I will take further legal advice today to see if we can rescue the students from the mess they have got into. We are talking about real people's lives and resolving their problems."
The irregularities were discovered after a complaint was made by a member of the public to the QCA.
Council officer Mick Binns told the committee: "A great deal of work will now have to be done to put right the major failings at Metrochange House and to restore confidence so we can ensure that all of our provision is of the highest quality."
Coun Richard Wightman (Con, Rombalds) said: "It is an appalling tale of errors and omissions." Coun John Ryan (Lab, Bowling) said urgent action was needed on the students' concerns. And Coun John Cole (Lib Dem, Baildon) said: "It's deplorable."
The NVQ training courses can continue with existing students during the inquiry, but examinations cannot be taken.
Probes into alleged irregularities have also started at the Council's I Tech and Mitre Court training centres.
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