Gurmeet Singh - alias Jagtar "Tara" Singh - was arrested in the eastern province of Chon Buri yesterday after raiding a house owned by a Pakistani national, Thai National police spokesman Lt Gen Prawut Thawornsiri said.
A 37-year-old former member of the Babbar Khalsa International Sikh separatist group, Singh had entered Thailand in October.
He escaped from a high-security prison in 2004 in Chandigarh before being convicted for life in 2007.
During the raid, officers also arrested Pakistani national Ali Alat, the owner of the house. Alat, 48, said he was not aware of Singh's criminal background.
The duo have been taken to Nong Phreu police station for interrogation.
"We had been following him for a while, but at one point he slipped off the radar," Prawut said.
Singh could have been travelling on a fake passport as the police said the "Pakistani" terrorist faces extradition to India, sources here told PTI.
Last week, the national police chief had announced that a special unit would be set up to target transnational criminal gangs operating in Thailand or using the country as a shelter.
Some foreign criminals and gangs consider Thailand to be a haven, including paedophiles, financial con men, electronic card skimmers, robbers, drug traffickers and terrorists.
Pol Maj Gen Nitipong Niamnoi, head of Chon Buri police, said Indian authorities had sought cooperation from Thailand, to help apprehend the suspect.
Beant Singh, who came to power as chief minister of Punjab in 1992 and began crushing the Sikh militancy, was killed in the blast claimed by the Khalistani Sikh terrorists.
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