Police in southern Tamil Nadu said they arrested Pastor Gideon Jacob on Saturday after he arrived from Germany and he has been charged under trafficking and juvenile justice laws.
Denying the allegations, Mr Jacob's lawyer said that his client had voluntarily appeared before the police and was cooperating with the investigation.
The Moses Ministries home in Tiruchy, run by Germany-based Christian Initiative for India that was founded by Jacob in 1989, housed 89 children, all said to have been rescued from female infanticide from Usilampatti in neighbouring Madurai.
However, the home had no proper records of the children, all of whom are now aged 18 years and above.
In December 2015, the home was taken over by the social welfare department after a court directive.
A wave of claims by people saying they were the children's parents prompted a local court to rule that all the children should undergo DNA testing to establish their real families.
In 2016, DNA results showed at least 32 matches. None of the girls, however, have yet been reunited with their families. "We have been counselling the girls, who have known no other life since they were babies," said Tiruchy district head Kuppanna Gounder Rajamani.
More than 40 percent of human trafficking cases in India in 2015 involved children being bought, sold and exploited as modern-day slaves, according to government crime data.