The court asked the state government what was the need for taking the Congress leader into custody. It heard thrice the habeas corpus petition filed by Congress leader V. Narender Reddy and in the evening summoned Advocate General to record his statement.
Advocate General B.S. Prasad sought time till Wednesday to submit evidence to justify Revanth's arrest.
Earlier, the police submitted to the court that they took him into custody as his call for a shutdown in Kodangal to protest Chief Minister K. Chandrashekhar Rao's visit could have created law and order problems.
The court observed that there was nothing wrong in Revanth calling for a shutdown and asked police to provide evidence to justify its action.
Revanth was arrested from his residence at 3 a.m ahead of KCR's election rally at Kosgi in Kodangal constituency, which was represented by the Congress leader in the dissolved Assembly.
After KCR's rally in the evening, police released Revanth Reddy. The Congress leader alleged that the Telangana Rashtra Samithi (TRS) had hatched a plan to create disturbances in Kodangal in the next 48 hours. He claimed that KCR was using police to suppress the opposition and using the money to influence the voters.
Revanth had called for a shutdown in Kodangal to protest against police raids at his house last week.
The Election Commission had also issued a notice to Reddy over his threat. A police officer said a case was booked against Revanth Reddy on a complaint by the Electoral Officer.
The Congress party strongly condemned the arrest of its leader and lodged a complaint with the Election Commission. It said with just a day for the campaigning to come to an end, their leader was denied an opportunity to campaign.
Congress president Rahul Gandhi tweeted that Revanth's arrest is a proof of KCR's autocratic rule. In the comments in Telugu on his Twitter handle, the Congress leader said the arrest cannot stop the Congress' march. He further wrote that the time has come for the end of the anti-people rule of TRS.
Senior Congress leader S. Jaipal Reddy condemned the manner in which police arrested Revanth. He said the fear of election defeat has gripped KCR.
State's Chief Electoral Officer Rajat Kumar, however, denied the allegations that they are biased. He said they treat all political parties equally.
Elections to the 119-member Telangana Assembly are scheduled for December 7.
(With inputs from agencies.)