He was conspiring to stage terrorist attacks in Punjab in the coming months and his six accomplices were arrested earlier, the police official said.
Police on Tuesday had arrested Balbir Singh Bhootana, 40, a suspected terrorist, after he allegedly opened fire from his revolver inside the Ludhiana railway station, killing a vendor and injuring two policemen.
"Bhootana, who was once a private security guard of Bittu, named him during the interrogation. He told police that they were getting funds to execute terror strikes in Punjab," the police official said.
"They had plans to revive militancy in Punjab and Bhootana has confessed his involvement in many criminal activities in the state. Now they were planning to assassinate Punjab Deputy Chief Minister Sukhbir Singh Badal," the police officer told IANS on condition of anonymity.
Bittu has spent nearly 10 years in jail for various terrorist attacks and was said to be associated with Pakistan's Inter-Services Intelligence (ISI).
During interrogation, Bhootana had admitted that he was involved in several recent killings in Punjab including those of Rashtriya Sikh Sangat (RSS) president Rulda Singh and Dera Sacha Sauda sect follower Lily Kumar in July.