Judge Shira Scheindlin ruled Devyani Khobragade had diplomatic immunity at the time of her indictment on visa fraud and underpaying her housekeeper.
Devyani Khobragade, who has since left the US, said through a lawyer she felt the rule of law had prevailed.
India demanded an apology after Devyani Khobragade was arrested and strip-searched.
Delhi said it was “shocked and appalled” at the manner of Devyani Khobragade arrest, and ordered a series of diplomatic reprisals against the US, including the withdrawal of a US diplomat from India.
Uttam Khobragade, the diplomat’s father, welcomed the ruling by the US judge.
US Attorney Preet Bharara said Devyani Khobragade was afforded courtesies most Americans would not receive during an arrest and said the search, done by a female agent, was a standard practice.
Devyani Khobragade was detained in December on suspicion of visa fraud and making false statements, after being accused of paying her Indian maid below the US minimum wage.
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