(Adds details And background on case and investments)
NEW DELHI, March 26 (Reuters) - India's Supreme Court has agreed to release the head of the Sahara conglomerate from custody, but only after the group deposits $1.7 billion in cash and bank guarantees.
Sahara Chairman Subrata Roy was arrested on Feb. 28 and has been held in a Delhi jail since March 4 after failing to appear at a contempt hearing in a long-running legal battle between the group and the Indian securities regulator over the refund of billions of dollars to investors in outlawed bonds.
In its ruling on Wednesday, the Supreme Court ordered unlisted Sahara to deposit 50 billion rupees ($826.7 million) in cash with the securities regulator as well as provide bank guarantees for another 50 billion rupees.
Sahara officials did not immediately comment on the court's ruling.
Sahara's lawyers asked the court to give the group access to some of its bank accounts that have been seized by authorities and expect a decision at a hearing on Thursday, Keshav Mohan, one of the lawyers representing Sahara, told Reuters. He declined to comment further.
The core business of Sahara, which owns New York's Plaza Hotel and London's Grosvenor House and is the former main sponsor of India's national cricket team, includes selling financial products, largely to small investors in towns and rural areas.
Two such products were ruled to be illegal and the Supreme Court ordered Sahara in 2012 to repay billions of dollars it had raised in the schemes.
While Sahara says it has repaid most investors and its total liability was less than the 51.2 billion rupees it has deposited with the securities regulator, the regulator and the court disputed that.
The court had asked Sahara to come up with a concrete and acceptable proposal to repay the money, while ordering its chief to be held in jail. Roy has not been charged with any crime.
It had previously rejected Sahara's proposal to give bank guarantees of 225 billion rupees within three to six months, as well as a subsequent proposal to pay a total of 174 billion rupees in six installments through July 2015.
($1 = 60.4800 Indian rupees)
(Reporting by Suchitra Mohanty; Writing by Devidutta Tripathy; Editing by Tony Munroe and Matt Driskill)