The BDJS is a key ally of the Bharatiya Janata Party (BJP) in the southern state.
Speaking to the media soon after getting bail, Vellapally said this is a fraudulent case filed against him based on a cheque which is more than a decade old.
"I reached here on August 20 for a few meetings. Before leaving from Kerala, I got a call asking me if I was willing to sell a piece of land that I own here. I said it can be discussed. When I was in the hotel, two CID's came and said that I have been arrested. He did not tell me any reason," said Vellapally, who is the convenor of the Kerala unit of the NDA.
In the 2019 Lok Sabha polls, Vellapally contested against Congress leader Rahul Gandhi from Wayanad constituency.
He said: "This case was filed by a person with whom I had a sub-contracting agreement, a decade ago, when I owned a business here. At present, I do not have any business here.
"Later, I realised he has presented a very old cheque, with a recent date. The signature on the cheque on the back side, appears to be a forged one, while at the front side, it's mine," said Vellapally.
"As soon as people heard about my situation, they including Kerala Chief Minister Pinarayi Vijayan, senior BJP leaders from Delhi got involved."
However, he has been prohibited from travelling without clearing the civil case, his uncle K.S. Vachaspathy confirmed to Gulf News.
"He is with me now," said Vachaspathy, who is also the central committee secretary of Sree Narayana Dharma Paripalana Yogam, the Ezhava community outfit in Kerala headed by Thushar Vellappally's father Vellappally Nateshan.
Vachaspathy said Thushar was held in connection with a Dh9 million cheque of his company that was closed down 11 years ago.
"We have fulfilled the conditions for securing the bail. But, he will have to clear the civil case for travelling. We are sure that he will be able to do that because this is a clear case of cheating as he had never issued any such cheque in the name of the complainant. This must be a stolen cheque or Thushar's confidante, with whom he used to keep blank cheques when he used to travel might have cheated."
Another aide of Thushar said his company was closed down after completing all legal formalities.
"An advertisement was also published in newspapers asking people who have any claims to approach the company. Nobody had made any such claims then. He has travelled to the UAE many times after the company was closed. His last visit was just two months ago."
Kerala Chief Minister Pinarayi Vijayan had written a letter to Union Minister of External Affairs S. Jaisankar seeking his help to see that all assistance is extended to Vellapally.
The complainant in the case N. Abdullah, who hails from Thrissur distirct in Kerala, on Thursday saw a few police officials arriving at his house for a "casual visit".
The BDJS chief, who contested against then Congress President Rahul Gandhi in the Lok Sabha polls, was arrested in Ajman in UAE late on Wednesday, his father Vellapally Natesan said.
He was released on bail by Ajman Public Prosecution.
Speaking to the media on Thursday morning , Natesan, who is the General Secretary of the Sree Narayana Dharma Paripalana Yogam, said his son was trapped and arrested.
The BDJS is the second biggest ally of the Bharatiya Janata Party-led NDA in Kerala. Thushar Vellapally lost his deposit when he got only 78,816 votes in the election which Gandhi won with the highest ever margin in Kerala of over 4.30 lakh votes.
( With inputs from IANS )