Roman Catholic bishop Franco Mulakkal was arrested on September 21 after being accused of repeatedly raping and sexually abusing a nun between 2014 and 2016.
As the prosecution failed to produce evidence against the accused, the Additional District and Sessions Court II acquitted the Bishop.
The clergyman has been shifted to the sub-jail in Pala after completing his medical examination at a government hospital.
The nun alleged that she was subjected to sexual abuse 13 times.
Police had said the nun was subjected to rape and unnatural sex by the accused at the guest house of St Francis Mission Home 13 times between 2014 and 2016.
The bench observed that if a hasty investigation was conducted, the accused would be allowed to go scot-free.
The Bishop will have to surrender his passport and his entry to Kerala will be restricted.
A group of nuns of Kuravilangad convent in Kottayam district of Kerala, who have been standing with the survivor in her fight, were on the verge of tears when they said they were yet to believe such a verdict came out from the court and they did not know what has happened.
Slamming the public outcry over the alleged delay in action against Jalandhar Bishop, Auxilary Bishop of Changanassery Archdiocese, Thomas Tharayil sought to know whether declaring a person guilty without an investigation and trial was also a new Kerala model.
She alleged that by continuing in the position of Jalandhar diocese Bishop, Franco Mulakkal and his close associates "are using the wealth of the diocese to divert" the course of the police investigation.
Police have initiated action against independent MLA P C George who had levelled derogatory charges against the victimised nun.
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