"The former militant Mohammed Jaffar Sheikh was trying to extort money from one Nazir Ahmed Lone an employee of NHPC," a police officer said.
He said that the former militant had threatened to kidnap Lone's son if he failed to give the money.
He said that on the complaint of the victim a case was registered and the accused arrested.
"Further investigations have been initiated," he said.
The official said the accused was associated with the dreaded Harkat-ul-Mujahideen militant outfit from 1992 to 1997 when he surrendered before the police.