The mine lease holder identified as B K Mohanty was arrested from his house in Bhubaneswar and subsequently produced at the special vigilance court at Keonjhar.
"Mohanty's bail petition was rejected by the special vigilance judge Balakrushna Mohapatra," government pleader Debadutta Biswal told reporters.
Mohanty, who has been sent to judicial custody till August 12, however, claimed that he was in no way involved in the illegal mining.
"Mohanty was arrested following a series of raids on his house in Bhubneswar and at other places. We arrested him after getting prima facie evidence against the mine lease holder," said vigilance DSP S K Dasmohapatra.
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The state vigilance was assigned investigation into the alleged illegal mining at Uliburu mines following media reports which claimed that an amount of Rs 1800 crore was involved in the scam.
The sleuths yesterday raided at 10 different places in Bhubaneswar, Keonjhar and Mayurbhanj districts in connection with the multi-crore scam and had detained Mohanty for further interrogation. The sleuths had also reportedly seized some incriminating documents related to mines from Mohanty's possession.