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If an indian national wanted to apply for dual citizenship and a British passport who would they apply to
1. british embassy in India
or
2. indian high commission in london
his grandfathers held a british passport
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First the person would need to have lived in the UK for five years before they can apply for citizenship (and thus a passport). On the face of it this person would be able to get an ancestry visa ( www.ukvisas.gov.uk then search for ancestry, inf 9 is what you want) that lasts for four years and then would need to be renewed. After five years is up they can then apply for british nationality ( http://www.ind.homeoffice.gov.uk )
However the Indian Government does not allow dual citizenship. hence the applicant would have to renounce Indian citizenship before applying for any British passport that he/she qualifies for. Indian government only allows for a document that denotes person of indian origin and that is valid only for entry to india.
Flurfl is correct with regards to ancestry visas. You will need a copy of grandfathers passport or right to British passport to qulaify for the ancestry visa.