Nayak along with other farmers staged protest after a woman identified as Sunia Bai allegedly set herself afire by pouring kerosene on Diwali day over the issue.
They placed the body of the woman, handed over to them by police after post-mortemm on the road.
Police then arrested Nayak and 12 others and asked the family members of the woman to perform her last rites immediately.
District Collector Ashok Singh said that a probe was on to find out the reason behind Sunia Bai's suicide.
The agitators were demanding that the land acquired for the project so far should be returned to the farmers and also sought transfer of a tehsildar and the police station in-charge of the area for allegedly taking coercive steps to curb the agitation.
The farmers in the two villages have also set funeral pyres on their land and warned the administration that they would immolate themselves if their land is forcibly acquired.
After her arrest, Nayak told reporters that police cane-charged the protestors without warning and forced the family members to conduct the funeral.
Meanwhile, Leader of Opposition in the Madhya Pradesh Assembly Ajay Singh has reached the villages to meet the affected farmers.
JD-U President and NDA Convenor Sharad Yadav had also recently warned the administration against forcibly acquiring the land for the proposed power plant.
