Those killed were escorting ballot boxes for counting
Mr Ratwatte, the uncle of President Chandrika Kumaratunga and one of the most powerful figures in the previous administration, was arrested at his house and flown to a court in the central town of Teldeniya.
He was remanded in custody until 4 March - but shortly after his appearance, he was admitted under guard to a government hospital.
However, hospital officials would not disclose what was wrong with him.
The court also ordered the arrest of Mr Ratwatte's two sons, who have absconded.
Poll violence
The police investigation relates to an incident in the central district of Kandy during the general elections.
Ten Muslims were killed when a grenade was thrown into their vehicle as they were escorting ballot boxes to a counting station.
The police found two vehicles allegedly involved in the crime both of which were said to belong to Mr Ratwatte.
The victims were supporters of the opposition United National Party, which went on to win the elections and form the next government.
Denial
Thousands of people took to the streets the day after the election to demand Mr Ratwatte's arrest
Mr Ratwatte was one of the main campaign organisers for the ruling People's Alliance.
He has denied any involvement in the killings, saying it is part of a plot to implicate him.
As the former deputy defence minister, he was effectively in charge of the war against the rebel Tamil Tigers.
He is now an opposition MP, although his niece is still president.