Peer was arrested by the Crime Branch of the state police after he presented himself for questioning for the fourth day in a row, a senior police official told PTI.
Peer is the prime suspect in the alleged scam related to the sale of question papers for Common Entrance Test (CET) 2012, conducted by the BOPEE, when he was the chairman.
The Crime Branch sleuths had conducted raids on Peer's residences at Hazratbal (Srinagar) and Sidhra (Jammu) earlier this week and recovered some documents.
Investigations showed the question papers were sold for as much as Rs 20 lakh per candidate.
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Some 12 students had managed admissions in various professional colleges of the state after purchasing the question papers last year, the police official said.
The Crime Branch began investigating the case after some of the toppers in the CET 2012 flunked internal tests in the professional courses conducted by the colleges early this year.
The investigating agency has widened the scope of the investigations to include the CET conducted in 2010 and 2011 also.