Blogger Jaydeep Ghosh had written an article about industrialist Jaidev Shroff who heads the firm United Phosphorous Ltd.
He was arrested from the company's office in suburban Khar recently with Rs 60 lakh in his possession, the police said.
Mr Ghosh had allegedly extorted Rs 60 lakh, which was to be the first instalment, in order to get the article off the website and also to stop publishing of at least 300 more such write-ups, senior inspector of Kherwadi Police Station Rajendra Patil told PTI.
Mr Ghosh was booked on charges relating to extortion, criminal intimidation and criminal conspiracy. Upon his arrest, he was produced before a court here which sent him to judicial custody.