The accused are employees of two private engineering audit firms which were appointed by the Brihanmumbai Municipal Corporation (BMC) to inspect the road works by contractors.
The 10 accused had allegedly prepared and submitted the reports in favour of the contractors, police said.
Last year, Mumbai Mayor Snehal Ambekar had written to BMC chief Ajoy Mehta complaining about the poor quality of newly constructed roads in the city, police said.
In this regard, a case was lodged at Azad Maidan police station on April 27 last year, after the BMC's internal inquiry found that over two dozen roads in the city were of poor quality, police said.
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DCP (Operations) Ashok Dudhe confirmed the arrests which were made on Wednesday.
"More arrests in the case are possible and further probe by the police is on," he said.
The accused, identified as Santosh Kadam (42), Pavankumar Shukla (26), Ashfaque Sayyed (26), Milind Kumavat (26), Premanand Dhanawade (37), Rakesh Merwade (34), Mangesh Talekar (33), Dheeraj Phooljhele (40), Rahul Shinde (29) and Dhauryashil Patil (33), were arrested by a Special Investigating Team (SIT) formed under Assistant Commissioner of Police, Colaba Division, Rajendra Chavan.