Sources in the agency claimed they have evidence show that Obalapuram Mining Company was mining from areas which were not allocated to it.
"This iron ore, extracted from outside the licenced areas, was shown to from legitimate areas. By using satellite imagery we realised that conditions were violated both in terms of mining area and quantity of ore being mined," a senior CBI official said.
The agency on Sep 5 arrested G Janardhan Reddy and Managing Director of Obalapuram Mining Company B V Srinivas Reddy in connection with the case.
A 15-member CBI team from Hyderabad conducted searches at Janardhana Reddy's house and claimed to have seized Rs 3 crore in cash and over 30 kg of gold, official sources claimed.
A sum of Rs 1.5 crore was also seized from the residence of Reddy''s brother-in-law Srinivasa Reddy, they claimed.
"Janardhana Reddy and Srinivasa Reddy have been arrested under Prevention of Corruption Act and we are taking them to Hyderabad," a CBI official said.
The arrests came in connection with the cases filed by CBI against the Reddy brothers in Andhra Pradesh.