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Qayyum is believed to have fled to Dubai around 15 years ago and is wanted for seven cases registered in Mumbai, a majority of them related to extortion. He was arrested at Panjrapole on Sion-Trombay Road on Tuesday afternoon, Deputy Commissioner of Police (Detection) Dhananjay Kamlakar told reporters in Mumbai.
"Acting on a tip-off, we laid a trap for him at Panjrapole junction where he was said to be coming to meet some of his associates," Kamlakar said.
A Crime Branch official said Qayyum used to handle the accounts of the Dawood Ibrahim gang but did not say when the gangster had returned from Dubai.
According to the CBI, Qayyum allegedly sold a 9 mm pistol to actor Sanjay Dutt at the instance of Dawood's brother Anees Ibrahim in September 1992.
In his confession, Dutt revealed that he first met Qayyum on the sets of a film in Dubai. The gangster later met him in a studio in Mumbai and sold the pistol to him for Rs 40,000, the actor said.
Qayyum, a resident of Mahim in northwest Mumbai, was arrested in a case registered under the Maharashtra Control of Organised Crime Act in Juhu police station in 2000.
That case related to some persons firing at a businessman named Pujara and injuring him. Three people were convicted and two were acquitted in the case.
"It's a case of extortion and attempted murder," Kamlakar said.
Six other cases have been registered against Qayyum under the Arms Act and Explosives Act at the police stations in Mahim, Gamdevi, MIDC, Oshiwara, D N Nagar and Vakola between 1983 and 2000, Kamlakar said.
In many of these cases, members of Qayyum's gang burst firecrackers at the victims' premises to extort money from them. They also shot the victims in some cases, he said.
"We can extract a lot of information regarding the Dawood Ibrahim gang from Qayyum as he handled critical activities for the gang and was in hiding at Dubai for over 15 years," he said.
Kamlakar said Qayyum is also wanted for the 1993 bomb blasts in Mumbai that killed 257 people and it is up to the CBI, the agency investing the case, to get his custody and interrogate him.
Welcoming the arrest, Special Public Prosecutor Ujjwal Nikam, who is handling the 1993 blasts case, said, "The arrest should not affect the progress in our case nor can it make any difference to actor Sanjay Dutt. It will act as a vital clue to investigators."
Qayyum is to be presented before a local court on Wednesday.
After the deportation of 10 aides of Dawood's key lieutenant Chhota Shakeel on November 21, 2006, there was speculation in a section of the media that Qayyum allegedly detained by authorities in Dubai in connection with the murder of a diamond merchant-cum-bookie - would also be deported.
However, a Crime Branch official who was part of the operation, denied that Qayyum was deported from Dubai. "We nabbed him in a special operation in Mumbai," he said.