Razauddin, a leader of the party's minority cell, owed victim Nasim Ahmed, a contractor, a sum of Rs 84,000 which he had promised to pay on Monday.
The victim went to collect the money from Razauddin but when he did not return till late evening, his family informed police.
Police officers then reached the SP leader's residence and found the Nasim's body. The victim was found shot from close range, police said.
Nasim's brother Salim filed a complaint against Razauddin following which the leader was arrested and the weapon used in the incident recovered, they said.
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