The Central Bureau of Investigation (CBI) arrested the vice chairman of a joint venture between a local firm and Abu Dhabi's Etisalat in connection to a massive telecoms scandal that has crippled the government.

The CBI said on Wednesday it had arrested Shahid Balwa, who is managing director of DB Realty and vice chairman of Etisalat DB, the telecoms joint venture between the Abu Dhabi firm and India's DB Group.

The arrest comes as the government appeared close to agreeing to a parliamentary investigation into India's biggest corruption scandal, in which the government is alleged to have lost as much as $39 billion in the award of second-generation telecoms licenses in 2008.

The telecoms scandal, the largest in a string of corruption investigations in India, resulted in the resignation last year of the telecoms minister and led to parliamentary gridlock in the most recent legislative session as the opposition called for an investigation.

On Tuesday, the government held its third round of talks with opposition parties in a bid to break the deadlock. Several members of the ruling coalition who attended the meeting said the government would likely agree to a joint investigation with opposition members and broad powers.

CBI spokeswoman Vinita Thakur told Reuters the arrest of Balwa on Tuesday night was in connection with the investigation into alleged corruption related to 2G spectrum allocation.

Shares in DB Realty were down about 20 percent in early trade after reports of the arrest.

A spokeswoman for Etisalat DB could not immediately be reached for comment, while DB Realty did not have immediate comment.

Last week, Indian police accused for the first time two Indian companies of buying mobile licences at unfairly cheap prices.

One of the companies was Swan, which has since been renamed Etisalat DB and is about 45 percent owned by Etisalat, with the remainder owned by DB Group, which controls DB Realty.

The other company named by police last week was property firm Unitech, whose Unitech Wireless joint venture is majority held by Norway's Telenor.

Unitech last week denied that it had received any favours and said it had complied with rules, while Telenor said it had no reason to believe the licenses were issued improperly.

Shares in Unitech, India's second-largest listed realty company, fell more than 8 percent in early trade on Wednesday before paring losses.

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