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Sarabhai had filed a PIL in April 2002 in which she contended that the state administration and Modi were 'complicit' in the 2002 riots in the state.
"Chief Minister Narendra Modi had called the then State Intelligence Bureau chief R B Sreekumar and another Indian Police Service officer Sanjiv Bhatt, who was his deputy in SIB at that time, and asked them to pay my lawyers Rs 10 lakh to derail the proceedings of PIL filed in the Supreme Court by me," she alleged.
Sarabhai provided to the media, copy of an affidavit filed by Sreekumar recently before the G T Nanavati and Akshay Mehta Commission probing the riots in Ahmedabad.
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"I then went to the (Nanavati) Commission and asked them if I could cross examine Sanjiv Bhatt and whether Sreekumar was also involved," Sarabhai said.
"The Commission turned me down and I then wrote to them saying that Sreekumar should be asked to file an affidavit about this. The Commission gave me the permission and I requested Sreekumar, on behalf of the Commission to file an affidavit, which he filed on Friday," she said.
"The day after Sreekumar took over as the chief of IB and a couple of days after I filed my PIL in the Supreme Court, Sanjiv Bhatt and Sreekumar were called to the chief minister's office," Sarabhai said, sharing contents of the affidavit filed by Sreekumar.
"As soon as they entered the chief minister's office according to Mr Sreekumar's affidavit Modi asked him 'do you know about Mallika's case?' and Sreekumar said 'no I don't'," she said, quoting the affidavit.
"So the chief minister said 'the PIL she has filed is extremely dangerous for the government and I have sanctioned Rs 10 lakh that can derail this, Sanjiv Bhatt knows about it, please give him Rs 10 lakh from your secret fund'," she added.
"To which Sreekumar said that there was no money in the secret fund. So the Chief Minister told him, 'I will see that the Chief Secretary arranges this money and Sanjiv has all the information about it'," Sarabhai said.
"Mr Sreekumar states that he went to the then director general of police K Chakravarthi and asked for written orders. Mr Chakravarthi called him back later and said, 'written orders are not necessary, the money has been arranged, sign a receipt to put it down in your register that this transaction has happened'," she said.
"And Sreekumar says that it is there in his register," the danseuse said.
"He (Sreekumar) asked Sanjiv Bhatt what was going to happen and Bhatt told him that my lawyers Krishnakant Vakhariya and Co and my advocate on record in Delhi were going to be bribed by the chief minister of the state to derail the PIL in the Supreme Court," Sarabhai said.
The whole operation was carried out by then member of Legislative Amit Shah, she alleged.
"Sanjiv Bhatt went and gave the money to Amit Shah who in turn, I believe and am told by my sources, gave it to Tushar Mehta in Krishnakant Vakhariya's office, while Krishnakant Vakhariya claims that he knows nothing about this but his junior Tushar Mehta," Sarabhai said.
"It is believed and my resources have proof of this that this money was then either shared between Mr Mehta and my lawyers on record in Delhi Aggarwal & Associates or given entirely to Mr Mehta or to Aggarwal and Associates," she said.
"So that all the strategy planning that we did was immediately reported to the chief minister, who could then brief the government's advocate, who were fighting the case against me in the Supreme Court," she said.
Sarabhai alleged that Modi was not only using public funds to bribe, but also indulged in a criminal activity of bribing anyone to officially derail something that is under court's process.
"This is contempt of court, because this was an investigation going on in the Supreme Court," she said.
The Gujarat government's reaction to Sarabhai's allegations was not immediately available.