(Adds U.S. State Department, paragraphs 10-11)
By J.J. Robinson
MALE, Feb 14 (Reuters) - Former Maldives President Mohamed Nasheed will stay in the Indian Embassy in Male until a caretaker government is formed, his party said on Thursday, despite a government assurance he would not be arrested if left.
Nasheed, the Maldives' first democratically elected leader, who left office last year in contested circumstances, entered the Indian High Commission in the capital on Wednesday as police tried to arrest him in connection with a court case.
His supporters, who say Nasheed was ousted last February in a coup, clashed with police outside the mission, the latest such unrest in the Indian Ocean archipelago which is best known as a luxury holiday destination.
A court had ordered Nasheed's arrest after he missed a Feb. 10 court appearance in a case relating to accusations that he illegally detained a judge during the last days of his rule.
But a government spokesman said on Thursday Nasheed no longer faced arrest.
"Nasheed's arrest warrant has ceased and he won't be arrested," Imad Masood, spokesman for President Mohamed Waheed Hussain Manik, told Reuters.
"The court will now announce a fresh date for the hearing and Nasheed can appear without being arrested," Masood said.
However, Nasheed's Maldivian Democratic Party (MDP) said he would remain in the embassy because of the danger he faced.
"Until we find a transitional arrangement, he will be there," MDP spokesman Hamid Abdul Gafoor told Reuters.
In Washington, State Department spokeswoman Victoria Nuland issued a statement urging "all sides to remain calm, reject the use of violence, and avoid rhetoric that could increase tensions."
"Former President Nasheed must be accorded due process under the law regarding his pending court cases," she added.
If Nasheed is eventually found guilty in the case he faces, he could be barred from standing in a presidential election on Sept. 7. His party says the trial is an attempt to exclude him from the contest and has challenged the court's legitimacy.
India's External Affairs Ministry on Wednesday expressed concern over instability and called on the government of the Maldives "to adhere strictly to democratic principles and the rule of law".
Indian External Affairs Minister Salman Khurshid said he had a "useful conversation" with his counterpart in the Maldives about what he described as a "situation of unusual nature", though he offered no suggestion the deadlock had been resolved.
Nasheed says he was forced from power at gunpoint after opposition protests and a police mutiny. A national commission last August said the toppling of his government was not a coup but a transfer of power that followed the constitution, a ruling that triggered several days of demonstrations.
"An interim, caretaker government should be established that can lead the Maldives to genuinely free and fair elections," Nasheed said in a statement, calling for President Waheed to resign.
The Maldives held its first free elections in 2008. Nasheed defeated Maumoon Abdul Gayoom, who had ruled for 30 years and was accused by opponents and international human rights groups of running the country as a dictator. (Additional reporting Shihar Aneez in COLOMBO, Annie Banerji in NEW DELHI and Paul Eckert in WASHINGTON; Writing by Henry Foy; Editing by Robert Birsel and Doina Chiacu)