Khobragade, who is currently working as Deputy Consul General for Political, Economic, Commercial and Women's Affairs at the Consulate General of India in New York, was arrested on the street while she was dropping her daughter to school.

The Official Spokesperson in the Indian Ministry of External Affairs, Syed Akbaruddin termed US behavior as “unacceptable” as it amounted to “humiliation of a woman publicly.” He said India would use all possible diplomatic channels and international conventions to resolve the issue.

Khobragade, aged 39 years has two young daughters. She was arrested on the orders of Indian-born Manhattan's top federal prosecutor, Preet Bharara who said Khobragade had presented false documents for getting visa for the woman who worked as a babysitter and housekeeper at her home from November to June, and lied about her wages.

Bharara alleged that the woman, Sangeeta Richard, who worked for Khobragade, had been exploited and made to work for 'less than fair' wages as per American law. She was paid less than $4 an hour.

The charges against Khobragade carry a maximum sentence of 15 years in prison.

Khobragade was later released on bail for a $250,000 bond before a federal judge in New York for her arraignment.

India has asked the US to resolve the matter with 'sensitivity', taking into account Khobragade's diplomatic status. In a statement, the Indian embassy in Washington said Sangeeta Richard had been 'absconding since June' and faces an arrest warrant for cheating and extortion.

Sangeeta Richard has alleged that she was to be paid $ 4,500 per month according to the employment contract furnished for her visa, but Khobragade later changed it to $ 537 a month. She also complained that she was forced to work more than 40 hours a week.

Khobragade's lawyers argue that with her own salary of $ 4,000 a month, she can hardly pay her help more than that. They also said her arrest on the street, without being given a chance to explain, was 'shocking and unprecedented.'

According to the allegations in the criminal complaint in Manhattan federal court, Khobragade prepared and electronically submitted an application for an A-3 visa, which is a US visa for domestic workers and servants, through the website for the US Department of State's Consular Electronic Application Center for an Indian national who was to be the personal employee of Khobragade beginning in November 2012 in New York.

The Visa Application stated that the Indian worker employed by Khobragade was to be paid $ 4,500 per month.

According to an employment contract, Khobragade would pay the domestic help the prevailing or minimum wage, whichever is greater, resulting in an hourly salary of $9.75.