The Chairman, Naresh Sharma, was caught while accepting the money from the contractor, Praveen Singh Solanki, Lokayukta SP Arun Mishra said.
Sharma had allegedly demanded the bribe to secure permission for Solanki from the civic body for constructing a commercial complex in the town in Khargone district, around 75km from here, Mishra said.
The contractor lodged a complaint with Lokayukta Police which thereafter set up a trap and caught Sharma as he was allegedly accepting the money at the Jaora Compound here, he said.