Tyagi, 72, who was interrogated by CBI in its custody for seven days, has been asked by special CBI judge Arvind Kumar to furnish a personal bond of Rs 2 lakh and one surety of like amount as pre-requisites for his release on bail.
The court asked Tyagi not to leave the National Capital Region without its permission and ordered him not to tamper with the evidence or try to influence the witnesses.
"Accused was arrested after about three years and nine months, LOC was withdrawn by CBI, his accounts were defrozed after the agency gave 'no objection' and accused was allowed to travel abroad," the court, in its order, said.
It noted that Tyagi has joined the investigation as and when CBI called him and it was not the case that he either tampered with evidence after registration of the FIR or influenced witnesses in the case.
While granting the relief, the court took note of Tyagi's advancing age and his health conditions and said no purpose would be served by keeping him behind the bars.
Tyagi, who retired in 2007, his cousin Sanjeev Tyagi and lawyer Gautam Khaitan were arrested on December 9 by CBI in connection with the case which relates to procurement of 12 VVIP choppers from UK-based firm during the UPA-2 regime.
said her client "could not be deprived of freedom if the investigation is taking time to complete".
She claimed that in last four years after registration of the FIR, CBI has never been able to confront Tyagi with any incriminating evidence till date.
Additional Solicitor General Tushar Mehta, appearing for CBI, had opposed the bail pleas of the accused, saying if set free, they might influence witnesses and hamper the "multi- layered probe by various agencies in more than one jurisdictions involving several countries".
"We have evidence where the meetings unofficially took place for the purpose of crime. At this stage, please do not entertain their bail pleas. Let the probe be completed," he said, seeking dismissal of the bail pleas of all the three accused and adding the matter has "tarnished country's name".
Advocate Pramod Kumar Dubey, counsel for Khaitan, had also countered CBI's argument, claiming that the agency was trying to sensationalise the matter and there was no allegation that his client had not joined the probe or tried to influence it.
Sanjeev Tyagi's counsel Manav Gupta also opposed CBI's contention saying there was no reason to claim that if granted the relief, his client would hamper the probe.
The court had on December 17 sent all the three accused to judicial custody till December 30.
The CBI had said it was a "very serious" and "a very high-profile" case requiring interrogation to unearth larger conspiracy as the "interest of the nation was compromised".
Tyagi's counsel had earlier claimed that the decision to procure VVIP choppers from AgustaWestland was a "collective" one and Prime Minister's Office (PMO) was also a part of it.
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