The Delhi High Court in India has granted bail to Avnish Bajaj, chief executive of Baazee.com India, a subsidiary of eBay.
Delhi police arrested Bajaj in connection with the sale of a pornographic video CD on Baazee.com's online auction portal. He was remanded to seven days judicial custody at the request of police investigating the case.
In granting bail to Bajaj the judge of the Delhi High Court asked him to surrender his passport and provide two collateral payments of 100,000 rupees (£1,200).
Bajaj's arrest has been criticised by legal experts and industry groups since he was apparently unaware that the video had been put on sale and had been cooperating with police. He was arrested under Section 67 of India's Information Technology Act, which relates to the transmission of obscene material through electronic media.
Baazee.com has argued through its lawyers that it was unaware of the content of the clip and that it removed it as soon as it was found to be pornographic.
The multimedia messaging service (MMS) clip of two Delhi schoolchildren engaged in oral sex was allegedly recorded on a mobile phone by one of the participants in the act and forwarded to his friends. A student of the Indian Institute of Technology put it up for auction on Baazee.com.
EBay applauded the Indian court for its quick decision to release Bajaj on bail. The case raises issues that are important for the internet's growth in India and eBay hopes to work with the Indian government to clarify the responsibilities of online service providers, it said.
John Ribeiro writes for IDG News Service