Shabir Shaik, a bidding contractor in the multi-billion rand arms deal, was arrested in Durban early on Friday morning by the elite investigation unit, the Scorpions, said Sipho Ngwema of the national directorate of public prosecutions.

In an interview with the SABC, Ngwema said Shaik was allegedly in possession of cabinet minutes in which the arms procurement was discussed, and also correspondence between the departments of public enterprises and defence.

Ngwema said Shaik was a bidding contractor, competing with other contenders, yet he had inside information.

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

Shaik will be charged under the Protection of Information Act.

Scorpions investigating unit head in Durban, Clifford Marion, said Shaik would appear in the Durban regional court.

Asked if the state would oppose bail, Ngwema said that would emerge in the court hearing.

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."

With acknowledgement to Sapa and Independent Online.