The central probe agency, official sources said, will soon move for his extradition to India through diplomatic channels.
"Gerosa has been held in Italy few days back on the basis of an Interpol notice activated by the ED last year. The global police has informed the agency of his detention and an extradition request is being moved," a senior official privy to the probe said.
The official said Gerosa was arrested when he was coming from Switzerland to Italy.
A joint team of the ED and the Central Bureau of Investigation (CBI) is now working on this case, the official said.
Gerosa, 70, is one of the three alleged middlemen wanted in this case and his interrogation and statement is very important for both the Enforcement Directorate and the CBI who are probing the case.
The ED has notified a Interpol red corner notice (RCN) against Gerosa and two others -- British national Christian Michel James and Italian Guido Haschke -- last year.
An RCN, according to the Interpol, is issued "to seek the location and arrest of wanted persons with a view to extradition or similar lawful action" in a criminal case probe.
The ED, in its second charge sheet filed in the case last year, had said the three middlemen "managed to" make inroads into the Indian Air Force (IAF) in order to influence and subvert its stand regarding reducing the service ceiling of helicopters from 6,000 m to 4,500 m in 2005 after which AgustaWestland became eligible to supply the dozen helicopters for VVIP flying duties.
Service ceiling is the altitude at which a helicopter can fly.
It had said investigations found that remittances made by Michel through his Dubai-based firm Ms Global Services, FZE to a media firm he floated in Delhi, along with two Indians, were made from the funds which he got from Ms AgustaWestland SpA through "criminal activity" and corruption being done in the chopper deal that led to subsequent generation of proceeds of crime.
The ED's probe under the PMLA (Prevention of Money Laundering Act) had found that AgustaWestland CEO Bruno Spagnolini was allegedly paying "kickbacks" to Michel and the other two middlemen (Gerosa and Haschke) in the guise of numerous "consultancy contracts".
Michel alone received Euro 30 million in his Dubai company accounts and others under this arrangement, according to the investigation.
The agency has also detected that the media firm floated by Michel in Delhi was nothing but a "shell company" to "launder the proceeds of crime".
The probe in the deal gathered pace last year after a Milan-based court sentenced Italian defence and aerospace major Finmeccanica's former chief Giuseppe Orsi and Spagnolini on corruption charges in the sale of the helicopters to India.
The Milan court order also mentions the name of former Air Force chief S P Tyagi at several points.