Justice Satish Chandra Sharma of the High Court's Indore bench granted bail to DPS principal Sudarshan Sonar.
Sonar's lawyers argued that his arrest was not legal and the mishap occurred due to negligence of the bus driver and there was no criminal responsibility of the school principal.
However, the public prosecutor opposed Sonar's bail plea saying that being the head of the institution, he could not be absolved from the responsibility of the accident.
The district court had twice rejected his bail plea.
On January 5, a bus belonging to the school had rammed into a truck at Kanadiya bypass, killing four students and the driver.
The police had arrested a DPS official and two other persons on January 7, for culpable homicide not amounting to murder, cheating and forging documents after investigations revealed that speed governor of the bus was not working.