"This arrest is illegal and unconstitutional, it's all political vendetta," Mamata said at a press conference in Kolkata.
"We are not going to stop, we will fight back. If required we will go to Delhi in protest," she added.
She also lashed out at the Central Bureau of Investigation (CBI) for being biased in their investigation.
"Who is CBI? What is their jurisdiction? There are so many other cases about which they're sitting quietly. They apply law on those they don't like and not on those they like?" Mamata said.
"This is a dangerous, disastrous, and unconstitutional game. We condemn all this absolutely," she further added.
In yet another setback to the West Bengal Government, the CBI today arrested Madan Mitra in connection with the Saradha chit-fund scam.
The CBI had earlier summoned him for questioning.
TMC Member of Parliament Srinjoy Bose was also earlier arrested by the CBI last month, in connection with the multi-crore scam.