The deceased, identified as Govind, was stabbed by his friend Pawan after the former refused to pay the Rs 180 he had lost during gambling on Diwali night, police added.
Both were daily wage labourers.
Police said Govind, a resident of Adarsh Nagar, had come to Subzi Mandi to celebrate Diwali with his friends.
"Pawan joined them later. Govind lost Rs 180 to Pawan in the gambling, but refused to pay him. Govind and his friends also beat up Pawan, following which he took out a knife and stabbed Govind on his chest," police added.
"Pawan has been arrested and a case of murder has been lodged in the matter," police said.