The 32-year-old man, identified as Sofiane B., was arrested last month following a complaint from a city art dealer. He was charged with a number of offences and placed under judicial supervision on a hefty bail after a 48-hour detention.
Based in the working-class northern quarter of Saint-Ouen, where the city's most famous flea market is located, Sofiane B. took advantage of Husain's advanced age to get him to sign paintings done by others, police believe.
He then attempted to sell them in Britain and France and succeeded in offloading two of the fake paintings to a Paris art dealer for more than 100,000 euros ($130,000) in 2010.
"This is a case of fraud and counterfeit," said a source close to the probe.
Maqbool Fida Husain, dubbed the "Indian Picasso", was a former Bollywood poster artist whose career took off after Indian independence in 1947.
He was forced to flee his country in 2006 after death threats from Hindu extremists and died in London in June last year at the age of 95.
Hindu ultra-conservatives including the regional Shiv Sena party in Husain's home state of Maharashtra -- whose capital is Mumbai -- denounced his works as pornographic, blasphemous and an affront to national values.
The controversy over his naked depictions of Hindu gods and goddesses however failed to dampen the enthusiasm of overseas collectors.
In 2008, one of his paintings, influenced by Hindu epic The Mahabharata, fetched $1.6 million at Christie's in London.
The Paris art dealer to whom Sofiane B. had sold the paintings became suspicious when he contacted the London auction houses Sotheby's and Christie's to sell them and they cast doubts on their authenticity, according to Le Parisien newspaper.
The seller then asked the dealer to proceed to Dubai, where Husain spent the last years of his life and had a studio, to authenticate the works.
He even gave the dealer 15 other water colours purportedly done by Husain and they too turned out to be fakes.
Paris police suspect Sofiane B. had been selling fake Husain works around the world since 2004.
Husain's departure from India followed attacks on his home and galleries showing his work, death threats and the placing of an $11.5 million bounty on his head.
He said in 2008 he was homesick and longed to return to Mumbai, where he trained at the Sir J.J. School of Art, but accused the government of not being prepared to provide him with the protection he needed.
Husain, who often went barefoot and was once thrown out of a Mumbai private members' club for not wearing shoes, accepted Qatari citizenship in 2010, admitting that his advancing years made it impossible to fight his detractors.
Indian ministers had tried unsuccessfully to tempt him home.
The artist always said that nudity symbolised purity, insisting that naked goddesses were a long-established part of the country's iconography dating back to antiquity.
Many saw him as a victim of the fierce communalism that gripped India in the 1990s and early 2000s and of the socially conservative country's tough censorship laws.