Police arrested S. Kovan, 52, in Tiruchirappalli district on October 30 for two songs that criticize the state government for allegedly profiting from state-run liquor shops at the expense of the poor.
"The police appear to have arrested Kovan for sedition in a misguided attempt to shield the chief minister from criticism," said Human Rights Watch.
"A law that is repeatedly used to arrest singers, cartoonists and writers has no place in a democracy - and should be repealed," the rights body said.
The Indian government should enforce Supreme Court limitations on the colonial-era sedition law and repeal the measure, which is regularly abused by local authorities to silence peaceful dissent, Human Rights Watch said.
Kovan is a member of the "Makkal Kalai Ilakkiya Kazhagam" or People's Art and Literary Association, which has long used art, music and theatre to educate marginalized communities and raise issues of corruption, women's rights and rights of Dalits.
In his recent songs, he blamed the government for choosing revenue from liquor sales over people's welfare.
Koyan's family alleged that plainclothes police officers, who refused to show identification, came in the middle of the night to arrest Kovan.
Kovan's lawyer told Human Rights Watch that the police officers violated legal procedures, refusing to tell the family where they were taking him.
To know Kovan's whereabouts, his lawyer filed a habeas corpus petition in the Madras High Court, which told the police to follow legal guidelines.
Kovan was then produced before a magistrate and was remanded in judicial custody for 15 days. The police also reportedly tried to arrest the owner of the website, vinavu.com, on which the songs were first uploaded.
Local rights groups and opposition political parties condemned Kovan's arrest, and his songs were widely shared on social media and republished on some news web sites.
Section 124A of India's Penal Code prohibits any words either spoken or written, or any signs or visible representation, that can cause "hatred or contempt, or excites or attempts to excite disaffection," toward the government.
However, in a landmark 1962 ruling, Kedar Nath Singh vs State of Bihar, the Supreme Court ruled that unless the accused incited violence by their speech or action, it would no longer constitute sedition, as it would otherwise violate the right to freedom of speech.
That ruling has been upheld in numerous judgments since, but the police continue to file sedition charges.
India's sedition law is also contrary to the country's international human rights obligations, Human Rights Watch said.