Despite the bail, Khan, 71, will not be immediately released as he is serving sentences in two other cases
British police were searching for a man suspected of injuring several people by throwing a corrosive chemical on them, while his status as someone who had been granted asylum after a sexual assault conviction added a political element to the case.
Police said they were looking for Abdul Shokoor Ezedi after a woman and her two daughters, aged 8 and 3, were attacked on Wednesday night in Clapham, south London, in a "horrific" incident which left the mother with life-changing injuries.
Three other women and one man who came to their aid suffered minor burns injuries and five police officers who responded were also injured.
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"Wednesday's attack on a mother and her two children in Clapham was appalling," interior minister James Cleverly said in a statement. "My thoughts are with them and the brave members of the public and police who intervened."
A source familiar with the case told Reuters that Ezedi had been granted asylum in Britain and had a previous conviction for sexual assault. Police declined further comment. The BBC said Ezedi was originally from Afghanistan and had arrived in 2016.
The arrival of asylum seekers is the focus of a heated political debate in Britain on how to control illegal migration. Prime Minister Rishi Sunak has made tackling the issue a key pledge ahead of an election expected later this year.
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Some lawmakers in Sunak's Conservative Party said the case underscored the need for the government's plan to send refugees to Rwanda, which is currently being blocked by the courts.
"We've recovered some significant and important pieces of evidence which will help with our investigation," Commander Jon Savell told reporters.
Police released an image from a recent sighting of Ezedi showing him at a Tesco store in north London following the attack with what appeared to be injuries to the right side of his face.
Authorities said it was reported that Ezedi had thrown a child to the ground and that the chemical used in the attack was alkaline.
Despite the bail, Khan, 71, will not be immediately released as he is serving sentences in two other cases
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