Delhi minister Satyendar Jain was arrested by the Enforcement Directorate on Monday in a money laundering case, with his Aam Aadmi Party calling it a political move ahead of the Himachal Pradesh assembly polls.
He was taken into custody under criminal sections of the Prevention of Money Laundering Act after a few hours of questioning, ED officials said.
They alleged he was "evasive" in his replies.
The minister is expected to be produced before a designated court on Tuesday.
The arrest has been made by the federal agency in connection with alleged hawala dealings.
Reacting sharply to the arrest, Delhi Deputy Chief Minister Manish Sisodia said Jain has been arrested in an eight-year-old "fake" case as he is the AAP's incharge for the Himachal Pradesh assembly elections and the Bharatiya Janata Party is afraid of losing the polls.
"A fake case has been going on against Satyendar Jain for eight years. He has been called by the ED several times so far. The ED had stopped calling him for some time because it did not find anything against him. Now it has again started because he is the incharge of Himachal Pradesh elections," Sisodia said in a tweet in Hindi.
"The BJP is afraid of losing the elections and hence he was arrested to prevent him from going to Himachal. He will be released soon as he has been arrested in a fake case," Sisodia added.
Jain, 57, is the minister for health, industries, power, home, urban development and water in the Arvind Kejriwal-led government.
The Himachal Pradesh assembly polls are slated for later this year. The AAP is looking to make inroads into the state after its stupendous victory in Punjab earlier this year.
The ED had said last month that assets worth Rs 4.81 crore of Jain's family and companies "beneficially owned and controlled" by him were provisionally attached as part of a money laundering probe against him.
In a statement issued then, the ED had said it issued a provisional order under the PMLA to "attach immovable properties worth Rs 4.81 crore belonging to Akinchan Developers Pvt. Ltd.; Indo Metal Impex Pvt Ltd; Paryas Infosolutions Pvt. Ltd.; Manglayatan Projects Pvt. Ltd.; J.J. Ideal Estate Pvt. Ltd.; Swati Jain, wife of Vaibhav Jain; Sushila Jain, wife of Ajit Prasad Jain; and Indu Jain, wife of Sunil Jain."
The probe found that "during the period 2015-16, when Satyendar Kumar Jain was a public servant, the companies beneficially owned and controlled by him received accommodation entries to the tune of Rs 4.81 crore from shell (paper) companies against cash transferred to Kolkata-based entry operators through the hawala route."
"These amounts were utilised for direct purchase of land or for repayment of loan taken for the purchase of agricultural land in and around Delhi," the ED said.
The persons named in the attachment order are associates and family members of Jain, the officials said.
The money laundering case against the Delhi minister stems from an August 2017 FIR filed by the CBI against him and others on charges of alleged possession of disproportionate assets (DA).
A charge sheet was filed by the CBI in December 2018 stating that the alleged DA was to the tune of Rs 1.47 crore, about 217 per cent more than his known sources of income, during 2015-17.
The income tax department had also probed these transactions and issued an order attaching "benami assets" allegedly linked to Jain.
Delhi Chief Minister and AAP National Convenor Arvind Kejriwal said in February that he had learnt from sources that the ED was going to arrest Jain just before the Punjab assembly elections and accused the Centre of targeting the AAP after realising the BJP "would lose" the polls.
Centre grants sanction to prosecute Delhi minister Satyendar Jain
CBI quizzes Satyendar Jain's wife in money laundering case
'AAP won't be finished because people are with us'
Delhi's unaccountable Raja Kejriwal