Why did the management suspend him? Was that suspension made prior to his arrest? What was the ground on which the employee was placed under suspension? Is there any connection with his arrest?
You can not suspend an employee for a reason that he was arrested for any criminal misconduct happened outside the office or while he was not on duty and for a reason that has no connection with his office work. Naturally, when is he under judicial custody, he will not come to office nor could apply for leave. Even if he applies for leave, what reason can he show? Even if he shows the reason, the real reason that he has been under police custody, it is upto the management to decide whether the leave should be approved or not. You should reject to approve the leave on the ground that leave is taken not for any genuine reason. Then it will be treated as leave without pay only. If he does not apply for leave, then also it will be leave without pay. Continuous absence without proper leave will lose his lien on employment and then you can take a call, whether to terminate him or not. Till then you can mark his absence as leave without pay and no salary needs to be paid for that period.
By suspending the employee, I would say that you have done a mistake. First, there should be a reason for suspension and that reason should have some connection with the employment. Of course, if you have a mention about "any arrest/ judicial custody would be treated as a misconduct" under your certified Standing Orders, you can initiate a disciplinary action. But when you know that the employee is under judicial custody why should you start it?
If suspended you should pay him subsistence allowance. For that you have to get an undertaking from the employee that he has not been gainfully employed during the period of suspension. Since the person is in custody, he cannot give that undertaking. Therefore, you can delay the payment of subsistence allowance until he comes in person and gives such undertaking.