Special CBI court Judge C R Thakkar rejected Syed's plea seeking regular bail on medical grounds.
On March 18, the CBI court had issued a notice to the CBI, seeking its response to the bail plea filed by I A Syed.
During arguments of the case, Syed relied only on medical grounds, while the CBI opposed his plea referring to his role in the alleged fake encounter.
Nair has also pressed that Syed, who has been in jail since December 2012, suffers from multiple ailments including heart and kidney diseases.
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"Relevent medical documents suggest that he has been suffering from old age related diseases," Nair said, assuring the court that Syed would not thwart the investigation or tamper with evidence.
Countering the arguement, the CBI had contended that the accused cop played a crucial role and being a senior police officer, he had committed serious offences.
According to the Gujarat police, Sadiq was a terrorist who had entered the city on a mission to eliminate Gujarat Chief Minister Narendra Modi and Vishwa Hindu Parishad (VHP) leader Pravin Togadia.
In 2011, the Gujarat High Court had handed over the probe into the case to CBI after a petition was filed by Sadiq's brother Shabbir Jamal.
On December 21, 2012, the CBI had filed its charge sheet against eight accused.