Ashfaq had deposited around Rs 29.5 lakh in three bank accounts in Srinagar, Connaught Place and New Friends Colony, one of which (28552609) belonged to Kawa, said sources.
The arrest was made in a joint operation by the Special Cell of Delhi Police and Gujarat ATS.
Kawa was detained in the evening from the Delhi Airport and his questioning is underway, the police said.
However, the family of Kawa has rejected Intelligence's claims that he was involved in the Red Fort terror attack. It was also submitted before the chief metropolitan magistrate, Deepak Sherawat, that Kawa had been absconding for the past 17 years and was declared a proclaimed offender.More news: Netanyahu to embark on a six-day visit to India
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Kawa is believed to have told the police that in the past 18 years, he had changed his location frequently, but that he had been living in Jammu and Kashmir of late.
"He is needed for thorough interrogation and details of his associates need to be extracted from him, which requires lot of time", the police said.
Three people, including two Army jawans, were killed in the 22 December 2000 Red Fort attack. Mohammad Arif from Pakistan's Abbottabad, who planned the attack, and 10 others have already been convicted in the case.
"The officer submitted that the accused is one of the conspirators in the case and a thorough investigation is required to unearth the facts".