The corporator Pawan Chandrakant Pawar threatened Deepak Bhatia twice and demanded money from him, they said.
Pawar, a resident of Shivaji Nagar area in the city, is a corporator from ward no 35 (A) of the NMC.
According to police, he demanded Rs one lakh from Bhatia last night and again today, following which the victim lodged a complaint against the accused.
Further investigations are on, police added.