In a letter to Team Anna member Arvind Kejriwal hours after the allegations were levelled, Krishna reminded that the matter referred to was sub-judice and the Supreme Court had put a stay on it.
Sources close to Krishna said he would file a defamation case against Kejriwal if there was no satisfactory reply.
"I am surprised by the allegations made by you in some matter which is subjudice," Krishna said in the letter.
"The allegations made are wrong and baseless. Any action by you before public forum as threatened by you will be overreaching the judicial process," he said.
He said the matter was inquired into by Karnataka Lokayukta and the report presented by it on July 27 last year has not named him, nor referred to him or attributed any wrongdoing by him.
Krishna told Kejriwal that the issues raised by him were subjudice in the Supreme Court.
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"You have adverted to the order of Karnataka High Court as if it is operational which in fact is not so as the inquiry has been stayed by the Supreme Court on 27-1-12," the letter said.
The Minister noted that Prashant Bhushan, a member of Team Anna, had appeared as counsel in the matter before the Supreme Court and opposed vehemently the grant of stay.
He expressed surprise that Bhushan, after appearing in the matter, is raising the issue that is subjudice.