India has shifted its deputy consul general in New York Devyani Khobragade to the UN Permanent Mission in the same city to ensure full diplomatic immunity to her, TV reports said.
She was arrested last week on charges of visa fraud and underpaying a housekeeper on roadside.
The US government had justified the arrest saying her non-official functions were not covered by diplomatic immunity.
“Under the Vienna Convention on Consular Relations, the Indian deputy consul general enjoys immunity from the jurisdiction of US courts only with respect to acts performed in the exercise of consular functions,” US state department spokesperson Marie Harf said on Monday.
She was reportedly handcuffed, subjected to body searches and kept along with drug addicts in custody before being released on a $250,000 (1.5 crore) bail. Her treatment evoked a sharp response from the Indian government.
Earlier in the day, calling her arrest a “conspiracy” in which she was “virtually trapped”, external affairs minister Salman Khurshid vowed he will not return to Parliament until she is brought back and her dignity is restored.
Justifying the government decision to scrap privileges enjoyed by US diplomats in India, Khurshid said it was a matter of India's honour and the country's prestige was involved in it.
"We strongly condemn the incident...We will do the needful to protect India's interests," he said.
“It is no longer an issue of an individual, but the sovereignty of a nation is involved,” the minister added, while assuring c the country will not be let down.
Terming the US action as totally and entirely unacceptable, Khurshid said, "Today, our paramount concern is to ensure that the dignity of our officer is preserved. The tragedy is that this is not an incident in which two countries are involved. This is an incident in which individuals are involved."
"It is not illegality that she is accused of, but the illegality she refused to oblige," he said.
He said the measures against US diplomats in India were not an over-reaction because the treatment meted out to Devyani Khobragade had "not happened out of blue" and there is a "history" behind it.
"I don't think this has been ever done in the country," he said, referring to the scrapping of privileges extended to US diplomats.
Khurshid made suo motu statements in both the Houses after members expressed outrage with demands that a resolution be passed to condemn the US action.
"It is my responsibility. We will bring back the diplomat and restore her dignity. If I fail to do it, I will not return to this House," he said in Rajya Sabha.
In Lok Sabha, he said the government’s priority is to bring her out of the current situation and the talks with the US government will follow.
When members sought to know as to why India was not cancelling all defence agreements with the US, Khurshid said, "All should stand together and talk in one language and one voice for India to succeed on this issue."
Reacting to reporters queries outside Parliament, Prime Minister Manmohan Singh termed the treatment meted out to Khobragade by the US authorities as “deplorable”.
Khurshid’s account of the events leading to Khobragade’s arrest:
In June and July this year, Khobragade detected disappearance of her servant. The US authorities did not cooperate with efforts made to find her.
Indian authorities here reached out to the husband of the missing servant but he too was unwilling to cooperate.
Khobragade received a phone call from a lawyer who refused to identify himself and offered to settle the matter that would result in grant of permanent citizenship to her and a huge compensation. It became clear that this was a conspiracy and some people trapped her.
Despite filing a complaint with New York police, no action was taken and added that an FIR was registered in Delhi under Sections 420, 403, 408, 120-B IPC in Fatehpur Beri police station.
On September 23, a non-bailable arrest warrant was issued against the servant concerned and forwarded to the US State Department requesting them to arrest and repatriate her, but no action was taken.
Instead of actually paying heed to a legitimate action from a court, on December 12, the deputy consular general Khobragade was arrested by the diplomatic police in New York and handed over to New York police marshals.
Video: Vow to bring back Devyani and restore her dignity, says Khurshid
All US consulates in the country have been told their consular identity cards may be withdrawn for review no later than December 23.
All US consular diplomats and their families have also been asked to surrender airports passes by December 19.
A list of all Indian nationals working with US consulates have been sought by December 23, including domestic servants, copies of their contracts, bank accounts, salaries paid and PAN numbers.
Requests by US missions for privileges like issuance of I-cards and exemption certificates for duty free import of liquor may be withdrawn.