Police arrested Lalit Goyal yesterday and handed him over to the Crime Branch, which is probing the case.
Police suspected that Goyal was a business partner of Manoj Jain, who is already in police custody.
Goyal had applied for an anticipatory bail on January 25 but his plea was dismissed by a city court that called the allegations against him "serious".
Goyal, in his plea before the court, had claimed that he was just a servant in the factory and was neither named in the FIR nor was he present in the factory at the time of the fire.
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Jain had been claiming that he was the one who was running the factory. With Goyal in their custody, police would try to ascertain the ownership pattern.
The police suspect that the accused were running the factory without any licence. The explosive materials were procured from outside Delhi.
The police will question the duo about the place from where the materials were procured and where they were supplied. It is suspected that the explosive materials were transported without permission.
The fire had started in the storage unit on the ground floor of the two-storey building on January 20 and ripped through the structure. Of the 17 killed, 10 were women. A man and woman were also injured.
An FIR was registered under relevant provisions of the IPC relating to culpable homicide not amounting to murder and negligent conduct with respect to fire or combustible material.