Justice Suresh Kumar Kait dismissed the bail on the grounds that after being a member of the Bar and of Parliament, "there is a chance that he may influence the witnesses".
However, the court observed that Chidambaram is not at flight risk and is not likely to tamper with the evidence.
Kait dismissed the order after hearing the arguments from both the sides.
During the course of hearing, Solicitor General Tushar Mehta stated, "We are at a stage where we have exposed our evidence to him as we have confronted the accused and hence, the risk of tampering and influencing is much higher."
He submitted, "Some people are in so powerful position that their mere presence can influence the witnesses."
"To say that I am a responsible and respected citizen is not an argument altogether. Those who have fleeced the country are the ones who are respected and responsible and having business empire and what not," the Solicitor General observed.
Sibal opposed the claims of the prosecution and said that Chidambaram is not at flight risk, there is no evidence of him tampering with evidence.
"After spending 40 days in prison, he will flee? They have to justify each day of incarceration. What is it that you cannot do outside jail but can do inside it," said Singhvi on behalf of Chidambaram.
Chidambaram and his son Karti Chidambaram were named in the case by Peter and Indrani Mukerjea, who are currently in jail in Mumbai in connection with the murder of Indrani's daughter Sheena Bora.
The ED too had filed a money laundering case against Chidambaram in this regard in 2017.
( With inputs from IANS )