The arrest of Nirmal Singh Bhangoo comes 17 months after market regulator Sebi (Securities and Exchange Board of India) ordered PACL to return money to millions of investors, saying the company was running an illegal investment scheme.
The scheme promised depositors returns on investments in agricultural land, the regulator said.
PACL has argued it was selling land to customers and not investment schemes, and so was not subject to Sebi regulations.
Reuters did not get any response to phone calls to PACL's head office in New Delhi on Friday.
PACL founder Mr Bhangoo and three other company officials were arrested on Friday as part of the ongoing investigation into allegations of criminal conspiracy and cheating, said R K Gaur, a spokesman for the Central Bureau of Investigation.
The case involves alleged collection of about Rs 45,000 crore ($6.8 billion) from roughly 55 million investors across the country, Mr Gaur said, terming it a "Ponzi scheme case".
Regulators have stepped up scrutiny of unregistered investment products over the past two years, plugging regulatory loopholes that had long allowed unregulated entities to raise billions of dollars from small investors. Many people ended up losing their life savings in these schemes.
Subrata Roy, founder of conglomerate Sahara India, has spent the last 21 months in jail for not complying with a court order to return $5.4 billion (around Rs 36,000 crore) to investors who put money in a 2008-11 time deposit plan that was later ruled illegal.
Sahara's business empire includes overseas hotels such as the New York Plaza and a Formula 1 racing team.
($1 = Rs 66.6721)
© Thomson Reuters 2016