Sewri metropolitan magistrate's court released Kaskar on bail on a cash surety of Rs 50,000.
The court accepted his lawyer's argument that Kaskar's custody was no longer required. The court, however, also said that he must report to the concerned police station as and when called.
The court had earlier remanded Kaskar in judicial custody till February 20, although police had sought his further custody to investigate his links with Dawood and the latter's involvement in the case.
J J Marg police station registered a case against Iqbal Kaskar after a real estate agent, Mohammed Salim Shaikh, filed a complaint alleging that Kaskar and his men assaulted him and demanded Rs 3 lakh. Kaskar and two others were booked under IPC sections 385 (extortion), 323 (causing hurt) and 34 (common intention).
Kaskar was deported to India from United Arab Emirates in 2003 as he was wanted in a murder case and the `Sara Sahara' illegal construction case. However, he was acquitted in both the cases in 2007.
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