Denying all allegations, the Karmapa had said the money seized during the raids on his monastery was given by his devotees and he had not done anything to harm India's interests.
A police team, led by Una's a`dditional superintendent of police K.G. Kapoor, arrived at the Gyuto Tantric University and Monastery near here to question the Karmapa, Ogyen Trinley Dorje, about the nearly Rs.70 million worth of unaccounted foreign and Indian currency recovered from his premises. He was quizzed Friday as well.
"He is knowingly hiding some facts by showing feigned ignorance about the foreign currency and other cash," Inspector General of Police P.L. Thakur said.
"Quite possibily, he will be interrogated again in the next few days," he said, adding that "even some more staff of the monastery would be grilled".
Another police official said the Karmapa sidestepped some of questions relating to financial dealings.
"The staff (earlier interrogated) admitted that the entire financial dealings were in the knowledge of the Karmapa," he said.
The Karmapa's sister and other close aides were also being questioned, officials said.
Police believe the money was meant for some "illegal" land deal in Dharamsala in Kangra district with the involvement of the Karmapa's aide Rubgi Chosang, also known as Shakti Lama. He is now in police custody.
Kapoor said a volley of questions was asked to the Karmapa and he denied all allegations. He said the money recovered was the money given by the devotees.
"But we are not happy with his replies and he is likely to be questioned again," he added.
Soon after the Karmapa was questioned, a spokesperson for the Tibetan religious leader denied allegations against him, stressing he was not a Chinese agent.
"The Karmapa has not done anything wrong to undermine and harm the interests of India," Karma Topden, the spokesperson, told reporters.
"The Karmapa has got offerings from all over the world. The cash was donated money. There is no 'hawala' link to money," he said.
On his China links, Topden clarified: "His very escape from Tibet and arrival in India clearly shows Tibetan people are being suppressed by the Chinese." He also cited reasons for the Karmapa's escape from Tibet, which included the Chinese putting pressure on him to go against Tibetan spiritual leader, the Dalai Lama, and also completing his spiritual studies.
Naresh Thakur, the Karmapa's counsel, told reporters here that the central government has already been informed about the offerings the monastery is getting from the devotees, including the foreigners.
"The monastery authorities have even sought permission from the state to buy land near the monastery," he added.
A string of government agencies is involved in the investigation into the seized currency, particularly the 1.1 million (Rs.7 million) in Chinese currency and over $600,000.
In a related development, Dharamsala businessman and hotelier K.P. Bhardwaj and D.K. Dhar, manager of the Corporation Bank in Ambala in Haryana, were Sunday brought for interrogation to Una, 100 km from the Karmapa's monastery.
"Bhardwaj was arrested last (Saturday) evening as an unaccounted Rs.1 crore was seized from two of his men on Jan 25 at Mehatpur in Una district," Thakur said.
Bhardwaj had claimed that the Rs.1 crore recovered from the men was a payment made by the Karmapa's trust to buy the land.
It was after the seizure of this Rs.1 crore that the Karmapa's monastery was raided.
Dhar, the Corporation Bank manager, was also arrested Saturday night for allegedly facilitating a transaction of Rs.1 crore to Bhardwaj, said Superintendent of Police Santosh Patiyal.
The Karmapa is the spiritual head of the Karma Kagyu school, one of the four sects of Buddhism. He is considered the third most important Tibetan religious head after the Dalai Lama and the Panchen Lama.
The Karmapa fled Tibet and sought refuge in India in January 2000. Ever since, he has mostly lived in the monastery in Sidhbari near Dharamsala - the seat of the Tibetan government-in-exile.