"Hafiz Saeed was in custody and the evidence against him could not hold in a court of law. We have said even now that we will be happy to look at any evidence against him that holds in a court of law," Khar told a TV news channel.
Asked if Pakistan will act if India provides evidence against Saeed, she replied: "Yes, there will definitely (be action). He was already in custody. The evidence against him was not enough and he was released from custody for this reason."
Saeed, who now heads the Jamaat-ud-Dawah, was placed under house arrest for less than six months after the UN Security Council declared the JuD a front for the LeT in the aftermath of the Mumbai attacks in November 2008.
He was freed on the orders of the Lahore High Court.
The LeT founder was subsequently detained for incidents that occurred in Pakistan but let off again.
Though the US offered a 10-million-dollar bounty for him earlier this year, Saeed lives openly in Lahore and has organised a series of rallies and gathering at which he has spoken out against the US and India.
During the interview, Khar said that the "environment with India became very bad" after the Mumbai terror attacks.
"We passed through a difficult phase," she acknowledged.
However, the Pakistan government had "improved that environment in a massive way," Khar said. "We tried to build trust. We made a policy decision, which no one had made in 40 years, to begin moving on the track of trade normalisation."
Khar noted that the move to normalise trade had been a "very good confidence-building measure."
India and Pakistan had helped each other in securing non-permanent seats in the UN Security Council while Delhi had given a waiver at the WTO to trade concessions granted to Pakistan by the European Union, she said.
Noting that regional groupings were driving economic development around the world, Khar asked: "In this region, should be we only backing fighting, quarrels, divisions and terrorism?"
A beginning could be made if India and Pakistan began to trust each other "a little" because "total trust will take lot of time," she said.
The two sides would have to start by working on "less divisive issues" before taking up issues like the Kashmir problem, she added.
"We could not solve it (the Kashmir issue) militarily in 60 years. Hostility and animosity and hatred couldn't solve it. Can't we give peace a real chance and can't we try and create the circumstances, opportunities, atmospherics and environment to try and settle all these issues at the dialogue table?" she asked.
Asked about the possibility of Prime Minister Manmohan Singh visiting Pakistan, Khar sought to play down the issue and said Islamabad should not be defensive about making a goodwill gesture such as inviting Singh for a visit.
The Indian side had repeatedly said that Singh was "keen to come" and that it was his "personal desire" to visit Pakistan, she said.
Asked if the visit would take place before the Pakistan People's Party-led government completes its tenure in March, Khar replied: "Let's hope so."