Sharma was granted bail on Thursday by the Gujarat High Court in a money laundering case being investigated by the Enforcement Directorate.
Sharma was first detained from outside the jail for questioning and then he was formally arrested in the afternoon in a corruption case lodged against him at Bhavnagar on Friday, Gujarat ACB's Assistant Commissioner of Police D P Chudasama said.
As per the FIR lodged by the ACB Friday morning, the officer had allegedly demanded and accepted Rs 25 lakh from a contractor when he was holding the additional charge of managing director of state-owned ship-building company, Alcock Ashdown (Gujarat) Ltd in Bhavnagar.
"During its probe against Sharma, the ED took the statement by one Sahayraj Savrimatthu, who told the officials that the suspended IAS officer had taken a bribe of Rs 25 lakh from him to clear pending bills when he was the MD of Alcock Ashdown between 2007 and 2008 in Bhavnagar," Mr Chudasama added.
"Based on the information passed on to us by the ED, we have registered a case against Sharma this morning at Bhavnagar. He has been booked under various sections of the Prevention of Corruption Act. In the afternoon, we detained Sharma from outside the jail and then formally arrested him," said the official.
The FIR alleges that he not only accepted Rs 25 lakh bribe, but also extended substantial monetary benefits to that contractor by misusing his powers as a government officer, Mr Chudasama said.
Sharma will be produced before the ACB court in Bhavnagar on Saturday, he said.