Police arrested an Indian consular official and treated her as a common criminal, which arguably she may be. Perhaps they were legally within their rights, but was it smart to embarrass India? I think not.
I would have declared her persona non grata and quietly sent her home, while making it perfectly, albeit privately, clear to India's Foreign Office why the action was taken and how any future offenders would also be ejected. See this Slate article for details of the case.