City police sources said that the arrest was made on the basis of an interrogation to a lawyer S Riaz, who was arrested earlier.
During interrogtion Riaz told police that Ali was paid Rs 30 lakh to settle the matter.
Ali, who was already shifted from the Shakespeare Sarani police station, was today summoned to the city police Headquaters at Lalbazar and was arrested.
The situation turned violent as the occupant Mamata Agarwal, who runs a Montessori school at the disputed site, along with one of her security guards, fired on a group of people belonging to the rival claimant, who came that day with their lawyer to take possession of the property.
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Soon after they entered the site, Agarwal and one of her associates opened fire killing two persons and seriously injuring another one, police said.
Since long there was a rivalry between the occupant and another claimant of the property, he said, adding the police were investigating into the incident.
About 18 persons were arrested in this connection so far and two arms were seized, sources said adding that Ali would be produced before a city court tomorrow.