updated 12/21/2004 10:53:11 PM ET 2004-12-22T03:53:11

The Delhi High Court on Tuesday granted bail to the head of eBay’s Indian subsidiary, an American citizen who was jailed in connection with the online auction of a sex video involving teenagers.

Avnish Bajaj, the CEO of Baazee.com — India’s most popular shopping portal, now owned by California-based eBay Inc. — was arrested Friday after the sale of images showing classmates at a New Delhi high school engaged in oral sex. His arrest drew rebuke from industry officials and legal experts and also the interest of the U.S. State Department.

In granting Bajaj bail, Judge Vikramjit Sen asked him to surrender his passport and not leave the country without the court’s permission, the Press Trust of India reported.

Police say they arrested Bajaj because he violated India’s Information Technology Act of 2000, which makes a criminal offense “publishing, transmitting, or causing to publish any information in electronic form, which is obscene.”

But eBay, which bought Baazee.com for $50 million in June, said it was “outraged” by the police action. The sex video sale took place without the knowledge of company officials, it said. The seller violated the policies of Baazee.com and was deleted from the Web site as soon as the company became aware of the incident, eBay said in a weekend statement.

On Tuesday, the 17-year-old boy who made the video was ordered held for questioning in a juvenile rehabilitation center until Jan.

4. The boy, arrested Sunday, used a camera-fitted cell phone to film himself and his girlfriend having oral sex and then circulated the images to his friends.

Police believe his arrest will help track how the video clip reach its seller, a student at India’s most prestigious engineering college in the eastern city of Kharagpur. He was arrested a week ago.

Meanwhile, industry officials and legal experts demanded that the government clarify the country’s Information Technology Act. The law is ambiguous about who should be held responsible for such offenses.

In Washington, State Department spokesman Richard Boucher said Monday that American consular officials were providing help to the Indian-born Bajaj, a Harvard Business School graduate.

“It is a matter that we are paying quite a bit of attention to,” Boucher said. “This situation is one of concern at highest levels of the U.S. government.”

Some say Bajaj may have been the victim of overzealous Indian police, who wanted to appear on top of the case in the face of the widespread public outrage.

“This sounds like a gross overreaction,” said Peter Morici, professor of international business at the University of Maryland in College Park, Md.

Morici, former director of economics at the U.S. International Trade Commission, said law enforcement agencies and the courts may have been responding to demands from wealthy Indians whose children attend the school where the scandal erupted.

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