In the biggest scandal to hit the Hindi cinema in recent years, police have arrested leading film financier Bharat Shah under the Organized Crime Act.
Police swooped as part of investigations into links between the Karachi based underworld and the makers of the film Chori Chori Chupke Chupke - a film that Shah financed. Shah, who was denied bail, is a diamond merchant and stakeholder in the B4U satellite TV channel as well as the top financier of Hindi films.
The move comes after last month's arrest of Nazim Rizvi, producer of Chori Chori Chupke Chupke. The release of the film has been blocked.
Police claim they have taped conversations between Rizvi and Karachi-based gangster Chotta Shakeel, proving that Shakeel financed the film. Shah had claimed that he had given $3m to finance the film.
The Mumbai stock markets reacted to Bharat Shah's arrest, with BSE Sensex dropping100 points to 4101.