Several Congress leaders, including the party's communications in-charge Randeep Surjewala, Kapil Sibal and Abhishek Singhvi, spoke out against Karti Chidambaram's arrest.
It was a "classical diversionary tactic" to hide "corruption scams, mal-governance and mal-administration that have marred this government", Mr Surjewala said.
"The Congress party will not be deterred by unleashing of vendetta against Mr P Chidambaram or his family. We will continue to speak the truth. We will continue to expose the Modi government s corruption and we will continue to hold them accountable to people of the country," he told reporters.
Senior Congress leader Kapil Sibal also termed the arrest "malafide" and said it was done to harass P Chidambaram.
"This is complete vendetta politics, this is completely malafide," he said.
Mr Sibal challenged the agencies to produce evidence against Karti Chidambaram. "They are always misusing the law," he said.
Karti Chidambaram was arrested at Chennai airport around 8 am when he returned from the United Kingdom.
An FIR filed by the CBI on May 15 last year had alleged irregularities in the FIPB clearance to INX Media for receiving overseas funds to the tune of Rs 305 crore in 2007 when Chidambaram was Union finance minister.
It is alleged that Karti Chidambaram received funds to the tune of Rs 10 lakh in the case, officials said.
He cited the cases of designer jeweller Nirav Modi and his uncle Mehul Choksi, Rotomac and Durga Das Seth jeweller to say that fresh scams were being unearthed everyday but the prime minister was keeping quiet.
According to party spokesperson Mr Singhvi, Karti Chidambaram's arrest showed the government's "double standards". While Nirav Modi and Vijay Mallya were not stopped from fleeing the country, Karti Chidambaram was arrested even when he returned from a foreign tour, he said.
He also questioned the timing of the arrest, asking if it had anything to do with the Karnataka elections and whether it was aimed at deflecting attention from the Nirav Modi fraud case. The nation, he added, was questioning the Centre on "Chhota Modi".
"Fantastic double standards. Amazing selectivity. Nirav; Lalit and Mallya not stopped from fleeing; Karti arrested on arrival, returning after repeated foreign trips. Few lakhs become 80 crore in few months in Jai Ho case no raid no arrest, instead gag order. 10 lakh allegation and arrest!" he said on Twitter.
"FIR recently filed in PC case. Allegations exist in public domain for over one year with many appearances for questioning; how can sudden custodial interrogation be justified. If no flight risk, no tampering, available for questioning, how and why arrest? Karnataka elections?" he added.
AICC general secretary Ashok Gehlot said Karti Chidambaram was arrested to divert attention from the big issues and the bank scam facing the NDA government.
Mr Gehlot said on Twitter, Mr Karti Chidambaram was arrested when he landed at Chennai airport, he was not trying to escape from India like Nirav Modi then arresting him on his arrival at airport is funny. Karti Chidambaram was cooperating with the CBI, the CBI could have summoned him."