Inspector Abhay Kurundkar of Thane rural police, who is now accused of murdering her and was arrested last December, is a recipient of President's medal.
Ashwini Bidre-Gore, 37, an API with the Navi Mumbai police's human rights cell, went missing on April 11, 2016.
"Recently we arrested a fourth accused, Mahesh Palnikar. During his interrogation some shocking facts came to light," said an official of Navi Mumbai Crime Branch on Saturday.
Mr Palnikar and Mr Kurundkar were childhood friends, he said. According to police, Mr Kurundkar had an extra-marital relationship with Ashwini.
Mr Palnikar told police that Mr Kurundkar decided to kill Ashwini when she insisted on marriage. Investigators believe that he killed Ashwini on April 11, 2016 with the help of three others at his house at Mukund Plaza in Bhayandar, near Mumbai.
Mr Palnikar allegedly told police that after Ashwini was killed, her body was chopped into pieces. Body parts were kept in a refrigerator before they were thrown into Bhayandar creek.
"We are corroborating all this with available evidence," the Crime Branch official added.
The police would seek the help of the Navy and Coast Guard to search for the remains of the body, he said.
Police had initially registered a case of abduction against Mr Kurundkar, his driver Kundan Bhandari and his friends Rajesh Patil and Mahesh Palnikar after Ashwini went missing and her brother expressed suspicion about Mr Kurundkar.
Following Mr Palnikar's questioning, police have added a charge of murder to the FIR, the official said.
Mr Kurundkar had received the coveted President's medal for meritorious service on Republic Day, 2017, another police official said. He was arrested on December 7, 2017.