India's diamond trade halts in protest over arrest of exporter

In this story: Producer, assistant also arrested Shah hospitalized RELATED STORIES, SITES

From staff and wire reports

NEW DELHI, India -- India's diamond trade ground to a halt Wednesday as thousands of merchants, dealers and diamond cutters stayed away from work, protesting the arrest of one of the country's biggest diamond merchants.

Bharat Shah was arrested Monday, accused of having links to organized crime. Police say Shah, a major diamond exporter, used dirty money to finance the film industry.

VIDEO CNN's Nandini Kochar reports India's diamond trade ground to a halt after the arrest of one of the country's biggest diamond merchants Play video (QuickTime, Real or Windows Media)

"Our brother Bharat has always helped us in difficult times," said diamond dealer Narendra Sharma. "He has taken care of everybody. So ... we are protesting" his arrest.

The protest is costly for the world's largest diamond industry, which has daily revenues of nearly $70 million.

Shares of Indian media stocks fell for a second straight day on Tuesday amid fears that Shah's arrest could expose links between India's entertainment industry and the underworld.

Police in Mumbai recently alleged Shah's latest film, "Chori Chori Chupke Chupke" ("Stealing Stealing Quietly Quietly"), was funded by money from organized crime

Producer, assistant also arrested

Shah, one of India's biggest film financiers, was charged under the Control of Organized Crime Act.

Police in the city of Mumbai (formerly known as Bombay) contend Shah funnels underworld money into the film industry.

Last month police arrested movie producer Nadeem Rizvi and his assistant, Abdul Khan, under the same act. They say Rizvi's movie, "Chori, Chori, Chupke, Chupke" -- which translates as "Stealing, Stealing, Quietly, Quietly" -- was financed by Shah using money from organized crime.

Shah denied any of the financing came from organized crime, saying that he invested $2.5 million of his own money in the film.

Police say they have a 75-minute recording of a telephone conversation between Shah and a man whom the Indian government says is a major organized crime figure in Dubai.

Police also say Shah has intimidated actors into signing to work in films and to accept reduced fees for their work.

Mumbai turns out an average of one Hindi film every two days

Shah hospitalized

Mumbai churns out an average of one Hindi film every two days, most of them melodramas with song and dance routines and hugely popular with the country's 1 billion people.

But until a few years ago, despite its importance, the industry was refused official recognition.

Traditional lending institutions shied away because its finances seemed opaque, and police say that organized crime exploited the opportunity, considering films a lucrative and glamorous outlet for their funds.

Shah, who had financed more than 100 films in India's "Bollywood" industry, was admitted to the intensive care unit of a Mumbai hospital on Tuesday after complaining of chest pain.

CNN New Delhi Producer Nandini Kochar and Reuters contributed to this report.