Shabir Shaik, a bidding contractor in the multi-billion rand arms deal, was arrested in Durban early this morning by the elite investigation unit, the Scorpions, said Sipho Ngwema, spokesman for the National Directorate of Public Prosecutions.

Shaik was later released on R1000 bail in the Durban Regional Court.

In an interview with the SABC, Ngwema said Shaik was found in possession of classified documents, including Cabinet minutes.

"We take it very, very seriously that classified information can be stolen... we want him to explain in court."

Shaik is a shareholder in African Defence Systems (ADS), of which the majority is owned by the French pan-European defence company, Thales, previously known as Thomson CSF.

ADS is a partner in the South African Corvette Consortium, that is building four corvettes for the SA Navy.

Shabir Shaik's brother Shamin "Chippy" Shaik is the head of acquisitions in the Department of Defence.

Shabir Shaik told SABC that his brother had not lied about recusing himself from certain meetings during the negotiation, "he operated within the guidelines".

He emphatically denied his brother helped him secure any deals.

"The Scorpions are stinging up the wrong tree."