Mr Karia was booked under Section 216 of the Indian Penal Code for harbouring an offender after the police found an Audi car belonging to prime accused Abhijeet Mankar, co-owner of the '1 Above' pub, at his residence.
On January 10, the Bhoiwada magistrate court remanded him to police custody till January 17.
Mr Karia approached the Bombay High Court today challenging his police remand, saying that he had no connection to the fire incident.
He said since the offence was bailable, the magistrate's order remanding him to week-long police custody must be quashed.
He said he had merely kept the accused's car at his house, and should not be penalised since the "car had not committed any crime".
The Special Public Prosecutor told the court that they had "not found any material to link Karia with the main offence of the fire, or for any other offence" but for keeping the car at his residence while the owner was absconding.
The SPP, however, objected to Mr Karia's plea arguing that he was arrested in connection with the incident of fire in which several people had been killed and hence, he must be dealt with severity.
"However, if you have not found any other material against him then keeping him in continued custody for a bailable offence does not make sense. He can apply for bail as a matter of right in such a circumstance," Justice Mohite-Dere said.