A British arms dealer of Indian origin Hemant Lakhani has pleaded not guilty to charges that he tried to sell missiles to terrorists to shoot down American airliners and plotted to procure a 'dirty bomb'.

Lakhani, 69, being held without bail since his arrest in August last year, did not speak during the ten-minute hearing and the 'not guilty' plea was entered on his behalf by his lawyer Henry Klingeman as his wife Kusum watched from the public gallery.

The US District Court judge in Newark in neighbouring state of New Jersey fixed April 26 for pretrial oral arguments in the case.

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The Federal Bureau of Investigation arrested Lakhani from a hotel near Newark International Airport during a sting operation in which its agents allegedly posed as terrorists seeking missiles to shoot down commercial.

He is charged with procuring a missile from a Russian, who he believed was a disgruntled officer but in fact a government agent. The arrest came after the missile, which was a dud, had been imported into the United States.

He is also allegedly to have said that the best way to terrorise Americans would be to shoot down 10 to 15 commercial airliners simultaneously.

Originally, Lakhani was charged with trying to sell the shoulder-fired missile to an FBI agent who, he believed, belonged to a Somali terrorist group.

Later, prosecutors added several other charges, including that he offered to procure anti-aircraft guns, tanks, armoured personnel carriers and radar systems besides the 'dirty bomb'.

The prosecution has not given details but a 'dirty bomb' could be used to spread radioactive or chemical or biological agents.

The charges carry prison terms from 2 to 20 years and a fine of $250,000. If convicted on a single charge of providing material support to terrorists, he could get up to 15 years in prison.

Outside the court, Klingeman said Lakhani was 'far from being a terrorist'. "He is a Hindu born in India who traded in women's clothing from London for last 40 years."

The government, he said, is under 'enormous pressure' to fight war against terrorism and claimed has concocted the case of his client.

But US attorney Christopher Christie described Lakhani as an 'arms dealer' who wanted Americans to be attacked and killed.

Two other men, Yehuda Abraham and Moinudden Ahmed Hameed, who prosecution says were financial middlemen but unaware of illegal arms deal, are also charged in the case.