The wife of Mombasa tycoon Ali Punjani and four other people were released on Thursday following their arrests on Tuesday amid a drug trafficking probe.
Shanzu Resident Magistrate David Odhiambo released Ms Karki Sushmita, her nephew Bashyal Shiva Prasad, his Indian friend Ram Manoj and two of their workers - Lucy Njeri Njane and Bonface Maelo.
They were arrested when police raided the tycoon's palatial home in Nyali.
The magistrate released the suspects after the prosecution sought to close the file for lack of evidence to prefer charges against them.
"It is now apparent that the prosecution was not ready to charge the respondents. You can go out, look up at the sky and thank God that your fundamental rights have been upheld by the law," Mr Odhiambo told the suspects.
Prosecutor Shakwila Ayekha told the court that they could not charge the suspects since they had not completed the investigation.
"We wish to close the miscellaneous file so that they may be released on police bond," Mr Ayekha said.
He told the court that a duplicate file concerning the case has been sent to the Director of Public Prosecutions in Nairobi for further advice.
Through lawyer Jared Magolo, the suspects told the court they had no problem with closure of the file.
"This file should not have been opened in the first place. The prosecution should apologise for wasting the respondents' time in custody," said Mr Magolo.
The magistrate ordered police to release the suspects since the prosecution did not intended to proceed with the case.
On Wednesday, the prosecution sought seven days to hold the suspects to complete investigations but the court gave it 24 hours to either charge or release them.