61-year old Mirchi, who is said to manage Dawood's drug business, is wanted by India in multiple cases of murder and extortion.
Mirchi was granted bail by the Red Bridge Magistrate Court on Tuesday. He was released shortly after getting the bail. After his arrest from Romford in Essex on October 13, he was remanded to judicial custody till October 20.
The Metropolitan police have charged him with threatening to kill his 41-year-old associate Nadeem Kader. According to reports, Kader had called off the marriage between his daughter and Mirchi''s son.
A higher court will hear the case on November 10. Mirchi escaped from Mumbai in the early 1990s and has been on the run since then. He was arrested from his six-bedroom mansion where he was living for two decades.
An Interpol Red Corner Notice was issued against him in 1994. He has reportedly been moving between Dubai and London.
Mirchi, who in the past has denied being involved in organised crime or terrorism, was earlier arrested by Scotland Yard in 1995 on drugs and terrorism charges in connection with a series of bomb blasts in Mumbai in 1993.
The charges were later replaced by one relating to the murder of a former Mirchi employee, who was shot dead in India. But an extradition request was refused by magistrates who ruled there was no case to answer.