The Enforcement Directorate has arrested a Maharashtra businessman in a money laundering investigation connection with a Rs 1,034 crore land scam in Mumbai.

Pravin Raut, a former director of a company called Guru Ashish Construction Pvt Ltd, was arrested following his questioning at the ED office in Mumbai.

The ED said Guru Ashish Construction Pvt Ltd was involved in re-development of Patra chawl in suburban Mumbai's Goregaon area. The chawl had 672 tenants in tenements on 47 acres of land belonging to the Maharashtra Housing Area Development Authority (MHADA).

Raut was produced before a special Prevention of Money Laundering Act (PMLA) court in Mumbai on Wednesday that sent him to ED custody for eight days till February 9, the agency said in a statement.

"Pravin Raut was found involved in the offence of money laundering and to unearth the money trail and the siphoning of funds running into more than 1,000 crore, he was arrested,” the statement added.

Guru Ashish Construction Pvt Ltd is a subsidiary company of the Housing Development Infrastructure Ltd (HDIL).

 HDIL is being investigated for Rs 4,300 crore fraud at the Punjab and Maharashtra Cooperative (PMC) Bank.

The ED said the Guru Ashish company had entered into a tripartite agreement with the tenants and the MHADA to re-develop the chawl.

"Pravin Raut along with Rakesh Kumar Wadhawan and Sarang Wadhawan, directors of Guru Ashish Constructions Pvt Ltd, in connivance with others illegally sold FSI (floor space index) to various builders for Rs 1,034 crore.

"This was done without constructing the rehab flats and flats to be handed over to MHADA, which was the pre-requisite," it alleged.

"In addition to ₹ 1,034 crore received from various builders, they had also obtained bank loans," the agency stated.

The ED alleged that Raut, in 2010, received Rs 95 crore in his bank account in the guise of sale of equity and land deal though the company was not able to complete the project and had not generated any income.

The Mumbai Police economic offences wing (EOW) had first filed an FIR to probe these allegations made in the re-development of the chawl.

The ED had also questioned Shiv Sena MP Sanjay Raut's wife Varsha Raut last year in connection with the PMC Bank case and her purported links with Pravin Raut's wife.