Spanish football club Real Madrid has suffered a setback in its quest to undertake a €440m (US$505m, £328m) redevelopment of its Santiago Bernabéu stadium.

A ruling by the High Court of Madrid overturned an earlier approval that the club had secured for its ambitious plans, which would result in a retractable roof being installed at the venue and the capacity increased from the current 85,500 to 90,000.

In a statement, the club said: "The High Court of Madrid has overturned the agreement from 15 November 2012, issued by the community of Madrid's Governing Council, which approved the specific modification of the Madrid general development plan, a decision that affects the Santiago Bernabeu.

"Following this ruling, Real Madrid will work with the city council and the community of Madrid to address those aspects that require attention in order to make the Santiago Bernabeu reform project viable."

The plans – by German architects GMP – which have now fallen foul of the local courts, include creating a new “skin” of LEDs around the stadium, which would operate as a huge TV screen to air the club’s greatest moments in history.

Expected to take six years to complete, the redevelopment works would be linked to another, major infrastructure project planned by the club.

Plans for a Real Madrid theme park – separate of the stadium redevelopment – were first touted in May when club president Florentino Perez confirmed confidential meetings with an “American company” to scope out plans for the project.

The club plans to build the attraction on a 90 hectare (222 acres) site in Valdebebas – an urban development in Madrid which will have homes for 40,000. The site is adjacent to Real’s training facility.

• Real Madrid previously had plans for a US$1bn (£632m, €756m) theme park complex to be built in Ras al-Khaimah in the UAE, but those plans fell through last year when Madrid accused the project’s organisers of defaulting on payments.