The Mumbai police are investigating a case of corporate espionage after they arrested an employee of Tata-owned VSNL, suspecting him of leaking crucial information to a rival telecom company.

Prashant Indulkar, 37, was secretary to VSNL's Managing Director N Srinath and was picked up by the Dadar police on February 1 after VSNL filed a complaint alleging that he had siphoned off funds.

"We are investigating all angles, including leakage of corporate information," Assistant Commissioner of Police Balakrishna Bhange told Business Standard, adding, "The court has given us remand till February 8 for further interrogation."

Indulkar's computer has been sent for forensic analysis. "After we get the forensic report, we could make more arrests," said Bhange. "We are looking into the IP addresses of e-mails sent by Indulkar. We will have more evidence to nail the suspect under the Information Technology Act, 2000," he added.

In a statement, a VSNL spokesperson said, "Our internal checks detected some concerns, based on which we have shared certain details with the Mumbai police. We have no further comments to make at this stage."

According to the FIR filed by VSNL under Section 408 of the Indian Penal Code (criminal breach of trust by an employee), Indulkar had siphoned off $19,323 or Rs 8.7 lakh from the company. But police say the company suspects that it was Indulkar who leaked minutes of VSNL board meetings to a rival company.

Police sources say Indulkar's mobile phone records reveal that he was in constant touch with a leading Mumbai-based telecom company.

Cops also raided Indulkar's residence to collect more evidence and say they would call all employees from competing companies who were in touch with Indulkar over phone and by email. Indulkar, say police, was unable to account for the money which he used to pay off bank debts.

Meanwhile, VSNL's rivals, Bharti, Hutch and Reliance ADA have denied that any of their officials were involved in the VSNL corporate espionage case.

The IT Act bars transmission of any documents, information or correspondence without the consent of the person concerned. The maximum sentence under Section 408 of IPC is of seven years, while under the IT act, the penalty for breach of privacy and confidentiality is a sentence of two years and a fine of Rs 1 lakh or both.

VSNL insiders say the company's brass, including group chairman Ratan Tata, is in shock. "He (Indulkar) was the last person who could be suspected of espionage," they said. "Our organisation has some strong systems and procedures on information security and that is why we managed to catch this person," an executive said.