The development brings the possibility of their being released and returned home nearer, with the judge setting a September 12 date for giving a verdict in the case.
Dubai-based businessman S P Singh Oberoi deposited the money on behalf of the Indian community as compensation in the Sharjah Appeals Court hearing the case of the 2009 murder.
The development came during the 16th hearing of the case, with Rs 40.47 million (3.39 million dirhams) being submitted as the blood money.
According to the office of the Consulate General of India here, a representative of the deceased named Ramadan, signed the ''Tanazul'' or release document which was then accepted by the judge.
"The process of a mutually agreeable understanding led by the Indian community, in particular, S P Singh Oberoi, reached a closure. The Hon'ble Judge Abdullah Al Shamsi has now convened the court on September 12, 2011 to deliver a judgement in this matter," a statement from the Consulate General said.
"Today's developments in the Sharjah Appeals Court were the most significant since April 2010 when the appeal process was initiated by the Government of India-appointed defence lawyers," it said.
Speaking to PTI earlier, Oberoi had said that he had already submitted a portion of this money at a previous hearing. "We first persuaded the victim's family through Ramadan into accepting compensation, which was critical to this case," he said.