Chhota Rajan, the gangster who is rumoured to be an Indian informer, has been arrested in Bali -conveniently not long after the ratification of an extradition treaty and a week before a VIP visit to Indonesia during which the pact is scheduled to be operationalised.

Indonesian police have said Rajan, who had apparently been used by the intelligence apparatus when it was headed by current national security adviser Ajit Doval to gather information on Dawood Ibrahim, would be "deported", probably this week itself.

Rajan was caught at Ngurah Rai airport in Denpasar, Bali, on an Interpol red-corner notice while he was about to start his vacation after travelling from Canberra in Australia, with which also India has an extradition agreement. But Rajan was living in Australia under an assumed name and the Interpol alert probably got activated when he used his Indian passport to fly to Indonesia, sources in Delhi said.

Indonesian police said Rajan was arrested yesterday but sources in Mumbai police claimed that he was detained last Wednesday.

Indian authorities had issued an arrest warrant in the name of Mohan Kumar alias Rajendra Sadashiv Nikalje alias Chhota Rajan in 1994 and the Interpol notice was issued on July 9, 1995. According to the Interpol website, he is wanted in several cases of murder, extortion and drug smuggling.

Rajan has been hitting the headlines in India occasionally, largely because of one of the longest running feuds in Mumbai's underworld. Rajan is locked in an internecine war with his former boss Dawood and both had mounted a series of assassination attempts on each other as well as their aides. The dons have survived till now, some of their closest aides have not.

Two theories have been doing the rounds on the law-enforcement circuit since Rajan's arrest.

One, the arrest is part of a larger operation under which Rajan will be given protection in India (probably in a jail) as it tries to target Dawood in Africa, where he is said to be stepping up his activities and where the environment is not as "friendly" as in Pakistan or some Gulf countries.

The NDA government can also hope to reap some political dividends if Rajan spills "Dawood-related dirt" on some politicians from Maharashtra who have been sitting on the fence. "Whether Rajan's arrest will ensure the capture of Dawood Ibrahim or not, I cannot tell. But Rajan will be a super political weapon, holding as he does secrets that can damage some very influential satraps," said a former joint commissioner of Mumbai police.

Rajan, 55, would not mind a "home-coming". The gangster is diabetic and recently developed kidney ailments, which require frequent dialysis, according to sources. He has a wife and three children.

AFP reported from Bali that the Australian Federal Police had confirmed in September that Rajan was living in Australia under another identity and had been in discussions with Indian authorities.

Two, the Indonesians caught Rajan because of the notice, which activated Interpol procedures before Indian agencies could intervene and the arrest became public knowledge, following which everybody is claiming credit. The proponents of this theory suggest that the Dawood gang may have alerted Indonesian police to embarrass Rajan's Indian handlers.

But several sources said they would go with the first theory because of the timing of Rajan's holiday in Indonesia. The extradition agreement was ratified in August, and Vice-President Hamid Ansari is expected to be in Indonesia next week when the documents are scheduled to be exchanged, signifying the operationalisation of the pact.

"Arrangements have been made by the central government with the government of the Republic of Indonesia for service or execution of summons or warrant in relation to criminal matters on any person in the Republic of Indonesia," according to a gazette notification issued by the Indian home ministry on August 21, this year.

Not that Indonesia cannot deport Rajan before the operationalisation of the deal. Since the extradition agreement has already been ratified, the nature of bilateral ties can fast-track deportation or repatriation even before the operationalisation.

It is unlikely Rajan would have been unaware of this and would have accidentally chosen a holiday destination from where he could be deported to India - especially since the gangster seems to have been keeping tabs on visa rule changes.

For his trip to Bali - a favourite holiday spot for Australians despite a devastating terror attack in 2002 - Rajan availed himself of a visa-on-arrival facility which was started only on October 1 by the Indonesian government for Indian citizens.

Rajan has apparently told Indonesian police that he "used the facility because it meant less scrutiny".

Indonesian news agencies quoted a spokesperson for the Australian Federal Police as saying that the Interpol in Canberra had alerted Indonesian authorities "who apprehended Nikalje at the request of Indian authorities".

BJP leader Subramanian Swamy added fuel by tweeting: "Chhota Rajan arrested. Two days ago I phoned Gen V.K. Singh (junior foreign minister now) and found that he was speaking from Indonesia. Has he negotiated something?"

Sources said a team from the Research and Analysis Wing, the external security agency, along with other officials would fly to Indonesia to make a formal request for deportation and the process was expected to be completed soon.

Rajan's arrest is certain to swivel the spotlight back on a decade-old controversy in which the name of Doval, the former Intelligence Bureau director, also figures.

It is well known in intelligence circles that an operation was planned to use Rajan's sharpshooters to eliminate Dawood during his daughter's wedding in July 2005 - five months after Doval retired from the Intelligence Bureau.

Retirement need not come in the way of some field operations, especially if the planning started much earlier, the task is "unofficial" and may have to be disowned officially.

Two hitmen from Rajan's gang were reportedly trained and readied for the "mission". However, both the would-be shooters were arrested by Mumbai police - when one was arrested, Doval was allegedly found sitting in a car with him. The same hitman is now said to be based in Africa - Dawood's new hunting ground - and is reportedly married to a former Bollywood starlet.

A WikiLeaks cable had said: "Accompanying Malhotra (the alleged hitman) was Ajit Kumar Doval, former head of the Indian Intelligence Bureau (IB). Doval was allowed to go free...." Doval later denied any role in the reported incident.

The Mumbai police operation was initially considered a typical - and familiar in the world of skulduggery - case of the right hand not knowing what the left hand was up to. But later it emerged that sections of Mumbai police may have deliberately blown the operation to help Dawood. The last word has not been said on the subject yet.

Former CBI director Joginder Singh told The Telegraph that the story behind Rajan's arrest was yet to unfold. "This didn't happen in an hour. Wait... for the whole story to unfold," said Singh.

PTI quoted Singh as saying: "These things cannot be discussed publicly. If somebody is willing to help us, we accept his help."