Five illegally purchased auto-rickshaws have also been seized, police said.
Police first arrested a rickshaw driver and based on his interrogation, rounded up an RTO agent, who dealt in procurement of rickshaws through bogus documents.
The duo was identified as Baleshwar Gupta (41), the driver, and agent Nitin Shinde.
According to police, a few days ago a rickshaw driver noticed that another rickshaw bearing the same registration number as that of his vehicle was being driven in Ghatkopar at eastern suburbs.
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"Rickshaws with similar registration numbers can be used by terrorists or anti-social elements while committing crimes. Considering this, police immediately started a probe," said DCP (Zone VII) Vinay Rathod.
When Gupta was questioned, it came to light he neither had permit to drive rickshaw nor documents showing its registration with Regional Transport Office (RTO), said police.
"Despite not possessing documents required to purchase and drive rickshaw, Gupta had managed to get the vehicle and drive it. This led us to Govandi-based Shinde," said Shankar Dhanawade, Senior Inspector of Pant Nagar Police Station.
More arrests are likely in the case, police said, adding they are also trying to find if any RTO official was involved in the racket.