Acting on a request of Rajasthan Police, Navratan Kothari, against whom an arrest warrant had been issued by a Jaipur Court, Indore Police took him into custody from a hotel, Superintendent of Police (East) O P Tripathi told PTI.
Kothari has been kept in Choti-Gawaltoli police station and Rajasthan Police have been asked to take his custody, the SP said.
The businessman had come to Indore to attend the funeral of his relative and he was picked up after the cremation was over, Tripathi said.
The scam relates to alleged illegal leasing of land around 16th century Jal Mahal, a palace located in the middle of the Mansagar Lake in Jaipur.
Besides Kothari, who owns Jal Mahal Resorts Pvt Ltd, an IAS officer of Rajasthan and two others have been named accused in the case.
The Jaipur Court in September 2011 had issued arrest warrants against them and the Rajasthan High Court had dismissed their anticipatory bail plea.
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In October last year, the Supreme Court rejected an appeal by the accused against the arrest warrants and ordered the Jaipur Court to decide the case by January 5.
The Government land adjoining Mansagar lake was handed over on lease for 99 years by Rajasthan Tourism Development Corporation (RTDC) to Jal Mahal Resorts for developing tourist facilities around the lake.
The deal got mired in controversy when objections were raised as to how the Government land could be leased out for 99 years instead of 30 years.
Rajasthan Government had given the land to Kothari's firm for Rs 2.5 crore a year to build a commercial complex, which would also have hotels and shops. The SC had ordered a status quo on cancellation of the contract last year.