Sunita Narian, director of the Centre for Science and Environment, said a "deadly cocktail of pesticide residues" was found in 12 leading brands marketed by Coca-Cola and Pepsi in India, accusing the companies of using polluted source water.
"The laboratory test results were shocking. We bought three bottles each of 12 leading brands sold in Delhi and found they all contained dangerous organochlorine pesticides," Narian told a press conference here.
"Interestingly enough, we bought bottles of the same soft drinks from the US market and found they were free of toxic residues," she added.
However, in a rare show of solidarity, competitors Coca-Cola and Pepsi closed ranks to hold a joint press conference where they threatened legal action against the environment watchdog for making "absolutely wild allegations."
"We are selling world class products in the Indian market and we have no double standards. There is no difference in the quality of a bottle of cola sold here and the US," said Sanjeev Gupta, the chief of Coca-Cola's Indian operations.
"Wild allegations like this calculated to spread consumer panic should just be disregarded," chairman of PepsiCo India Rajeev Bakshi told the press conference.
The study found that Pepsi, Mountain Dew, Diet Pepsi, Miranda orange, Miranda lemon, Blue Pepsi, 7-Up, Coca-Cola, Fanta, Limca, Sprite and Thums Up all had the deadly insecticide lindane which damages the body's central nervous system and is a carcinogen.
"In the popular Coca-Cola brand lindane concentration was 0.0035 milligram per litre -- a level of concentration which is 35 times higher than the European Economic Commission (EEC) limit," said the study.
Similarly, highly toxic DDT residues, almost 45 times higher than EEC limits, were found in Pepsi's Miranda lemon.
The study said repeated exposure to pesticides such as DDT, malathion and lindane could cause severe harm, ranging from cancer, liver and kidney damage, to birth defects and damage to the immune system.
The environment watchdog accused the US cola giants of not doing enough to filter toxins found in India's highly contaminated groundwater supply.
It said the firms did not use sufficient treatment technology to purify water and found a direct link between contamination levels of source water and bottled soft drinks products.
"Despite their staggering bottomlines, the two US firms are not making the investments to use safe water in their bottled soft drinks. We all know that commonly used insecticides in Indian agricultural fields contaminate the groundwater table," said Narain.
"These corporates are simply tapping into largely underpriced groundwater for manufacturing their cold drinks without giving so much as a thought for consumer health."
Cola-makers get a one-time license to operate in India from the ministry of food processing which includes certification from the local government and a water analysis report from a public health laboratory.
"How can a one-time certificate doled out to soft-drink makers be enough of a consumer safeguard?" asked Narian, who added that the group would present its findings to the Indian government.
In February, India launched a crackdown on the country's flourishing bottled water industry following complaints from the Centre for Science and Environment that 12 leading firms including Coca-Cola and Pepsi were selling pesticide-laced water in the guise of pure mineral water.
Factories of Pepsi and seven other companies were raided to check for irregularities in production following the health warnings.
"To maintain the sanctity of our products sold in 220 countries we test our brands very regularly in top-grade international and Indian labs. There can't just be a trial by media based on mindless allegations," said Gupta.
"We are considering a legal recourse to these allegations this time. We have to put an end to this smear campaign," he added.
Pepsi and Coca-Cola are almost neck-to-neck competitors in India and between them dominate the growing 270-million-case per year carbonated soft drinks market.