Joshi is lodged in a Bhopal jail since September 15, 2015. He and his wife Tinoo Joshi, also a dismissed IAS officer, are facing charges of amassing assets disproportionate to their known sources of income.
Justice S Kemkar asked him to surrender his passport.
Joshi's lawyer Pratul Shandilya told the court that his client was suffering from blood cancer and needed immediate treatment.
Lokayukta counsel Pankaj Dubey opposed the bail application stating that Arvind's permanent address was not available and, in case he absconded, it would be difficult to trace him.
According to the charge sheet filed in the trial court by Lokayukta, the Joshis had acquired ill-gotten wealth of more than Rs 41 crore.