Before court appearance, Katule, who is also Councillor for Ikimba Ward was held at Kyela Police Station with his co-accused Furaha Burton.
Both the accused pleaded not guilty and are out on bail and the case was adjourned to April 27 this year.
Speaking with this paper on Wednesday after he was released on bail, Katule said he was arrested by six policemen on Tuesday after emerging from a seminar on loans to 110 vulnerable groups the Council planned to provide them with.
"When we were emerging from the seminar a police vehicle with six armed policemen was waiting outside and I was told to get in, but I told them to tell me the reason for my arrest. They said I was being arrested for fraudulently obtaining 15m/- from the District Commissioner,” he said.
Katule asked them that he would follow them in his Council vehicle but refused saying they have been summoning him several times but did not turn up.
"When I arrived at the police station I was out in a cell after I gave a statement in which I denied any wrongdoing, and later I was bailed out,” he added.
For her part, Kyela DC Claudia Kita said she received reports of the arrest of the district Council Chairman Katule’s arrest in a telephone call from Kyela MP Ally Mlagila from Dodoma.