Justice Muzaffar Hussain Attar, while allowing Bhat's plea challenging the latest of the detention orders under Public Safety Act, held his detention illegal on several grounds.
Kashmiri separatist leader Masarat Alam was freed from Baramulla district jail.
Police blamed activists of hard line faction of Hurriyat Conference led by Syed Ali Shah Geelani and Muslim league headed by underground separatist leader Masrat Alam Bhat for carrying out the incidents of arson as part of a pre-planned conspiracy to disrupt Eid celebrations.
Hardline Hurriyat Conference leader Masarat Alam Bhat, who had been in custody under the Public Safety Act since April 2015, was released from Kathua district jail but subsequently re-arrested in another case.
